What is a hard fork in crypto?
Do you know what a hard fork in crypto is? It is a major event with a significant impact on the cryptocurrencies value. Read this article to learn more about it and be ready for it!
by Julia Bermudez
Learn everything about hard fork in crypto investing!
Do you know what is a hard fork? The crypto market is here to stay, so we better learn everything about them.
Hard fork events tend to shake the cryptocurrencies. Some investors twist the nose when they hear about one coming. Others think it is good to give things a change from time to time. That’s because a fork will change the way that miners work, and these changes make it dynamic and may bring improvements.
If you have stocks in cryptocurrencies, you better learn about hard forks and their consequences. Keep reading to learn more about the effervescent Crypto Market.
What is a hard fork event?
To start this topic, let’s make a quick explanation about what a blockchain is.
A blockchain is a system maintained across computers that are linked in a peer-to-peer network. So, you have this chain of data, where each link is made of a certain amount of data grouped. It is a decentralized storage technology.
Once a block reaches its limit of data, it is closed and attached to the rest of the chain, and it starts a new one, and so on. This keeps the system safe and makes it much harder to commit fraud because a hacker would need to corrupt all and every computer and link in the chain.
Ok, now we have the concept of the blockchain fresh in mind, let’s keep going to learn about the hard fork.
A hard fork is a change in the protocols of a specific crypto coin, a radical one that ends up splitting the chain into different directions. It depends on a software upgrade, that has to be made by all of the developers.
Why does a hard fork event occur?
Forks in blockchains can occur for a variety of reasons and have different results. A hard fork usually comes from a divergence between members and developers.
If two groups of developers strongly disagree on the paths the coin must take, a hard fork can be used to split it. Each one of them will result in a new coin.
After a hard fork, invalids chains may become valid, or vice-versa. There are also soft forks, where the changes have a minor impact and don’t result in splits at the chain.
Hard fork Ethereum
Ethereum is the world’s second largest cryptocurrency. It went through a hard fork event.
Years ago, the DAO (decentralized autonomous organization) developed a new revolutionary contract for ethereum. It would impact the way investors see the coin, and had a good acceptance, as it would improve the gains.
Unfortunately, this contract opened a gap through which a hacker was able to take $50million out of the chain. A group of members was furious about it and blamed the DAO as reckless. To correct this mistake, a huge change had to be done in the software, and a more conservative group thought it was a contradiction of the decentralized network.
The solution found was the hard fork. That way, each member of the community would have the possibility to choose between staying the same or upgrading the software.
The new currency carried the old name, Ethereum. The older one gained a new name and is now Ethereum Classic.
Hard fork Bitcoin
Bitcoin is the first cryptocurrency created, in 2009, by a mysterious developer. Since then, Bitcoin went through some hard forks.
- Bitcoin XT: The size of the blocks was increased. The number of transactions per second, which was seven, has increased to 24 transactions per second. However, this Cryptocurrency has been abandoned and is no longer available.
- Bitcoin Cash: This coin also comes from a disagreement about the size of the blocks. After some previous changes, this group of members adopted the eight megabytes size, and the hard fork generated the Bitcoin Cash. It is being successful in the crypto market and stays in the top cryptocurrencies.
- Bitcoin Gold: Right after Bitcoin Cash was created, another developer proposed another hard fork. The intention was to simplify the mining process. This developer believed that the mining process had become too complex, requiring too much of the computer’s hardware.
What happens to my coins in a hard fork?
After a hard fork, you will have the exact same amount of coins you had before. All you have to do is upgrade the software, and continue using it normally.
If you keep your coins on an exchange, you will probably have to wait some days for the system to “stabilize”. Some exchanges may decide to only operate with one of the two sides of the path, but that’s not the most reasonable choice. The exchanges with a good reputation will likely support both assets.
A hard fork will for sure impact the cryptocurrencies with a fluctuation of their values. If everyone updates to the new coin, the old one will naturally be extinguished.
And if you want to learn more about the cryptocurrency market, keep reading our article below!
Check out the crypto with the most potential in 2022, so you can start investing with confidence and reliability. The five best digital currencies are here!
About the author / Julia Bermudez
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