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When Bitcoin was discovered by a developer under the pseudonym Satoshi Nakamoto, its primary goal was to expedite and simplify sending money, buying and selling things. Trading systems and international payment transactions are made easy and secure.
The concept of bitcoin gained interest from many other developers and adapted its program based on the initial concept but has a different version. This idea gave birth to creating different variations of bitcoin and went through a procedure called forking.
Through the forking process, it has discovered different variations of bitcoin, Bitcoin Cash, Bitcoin X, Bitcoin Gold, and Bitcoin Satoshi’s version, to name a few. The developer commences that the change in network blockchain or the community can be a total alteration or just minor changes.
Another reason behind the creation of the fork is a system slowed down due to the increased number of users. As it becomes widespread, its operations are experiencing delays which hinder its smooth operations and the transaction fees from increasing its cost.
And due to this deceleration, Bitcoin developers needed to find a quick fix to address the issues. Thus the creation of forks radically escalated the number of users purchasing the product.
How Bitcoin Forks Work
A few moments after the release of bitcoin, its developer, Satoshi Nakamoto, mined the first blockchain and called it the Genesis block, which is the foundational block of cryptocurrency. Satoshi successfully changed the bitcoin process, which has exponentially increased its margin.
Soft Forks
A soft fork evolves Bitcoin protocol, but there are no changes with the end product and no new item to launch. People may use it to set new features and functions, but it does not create new rules that have to be followed by the blockchain. Often, changes brought by soft work are only in a level of programming.
A soft fork transition can only validate a single blockchain, only the most recent version. Users adopt the newest and make the old protocols invalid.
Hard Forks
We must have a clear grasp of blockchain technology before thoroughly apprehending a hard fork. A blockchain consists of massive data blocks that form a chain. This chain keeps digital records of transactions, and new blocks are only binding after receiving authentication from the network validators.
Mining operations and software implementation undergo a significant upgrade for hard forks. And once it happens, the latest version will invalidate all the transactions from the previous software, creating a new division of the blockchain that is different from the previous one.
A hard fork is a permanent separation from the most updated blockchain version since some nodes are no longer unanimous. The two versions are different; thus, the network runs independently.
What is the Reason for a Hard Fork?
Apart from the primary reason for the older version getting delays and slowing down the process that results in a more expensive transaction fee, there are more reasons behind the alteration. Grounds to the changes such as an upgrade in security to mitigate the risks that can threaten the olden version recently developed functionality or reversal of transactions. Developers also use bitcoin to resolve an issue when a disagreement in a community happens.
Bitcoin Hard Forks
Bitcoin XT
Mark Hearn initiated the program in 2014 with various new features making it the first remarkable bitcoin. He announced a Bitcoin Improvement Proposal or BIP 64 on June 10, 2014, and launched a new version arising controversy among developers with its attempt to increase the block size cap.
As explained, compared to the previous bitcoin, which can send seven transactions per second, the Bitcoin XT targets send more by increasing the block size. Gavin Andersen made known BIP 101 on June 22, 2015, requesting an increase in block capacity.
It was a success initially but lost customer interest and was left by its users later on. Bitcoin XT is no longer functioning, and its website is left obsolete.
Bitcoin Classic
With the fall of Bitcoin XT, some community members still wanted to pursue the block size increase because of its promising potential. This led to the creation of Bitcoin Classic in 2016. But contrary to the initial objective of Bitcoin XT to expand up to eight megabytes, Bitcoin Classic opts for an increase by only two megabytes.
Following the path of Bitcoin XT, Classic shows popularity during the initial launch with its 2000 nodes for many months in 2016. A vast number of developers continue to support Bitcoin Classic; that is why it still exists up until this moment.
Bitcoin Unlimited
This fork has created paradoxical events among the developers since its launch in 2016. Bitcoin Unlimited gives authorization to the miners to determine the size of the blocks they prefer, with a threshold of 16 megabytes.
Bitcoin Unlimited is a pursuit to upgrade Bitcoin Core and its limited one-megabyte block size. To prevent Denial of Service or DoS attack to Bitcoin Unlimited, Satoshi Nakamoto put on a one-megabyte block size for the time being. It has restricted the network performance to three transactions per second.
But due to its enigmatic systems, Bitcoin Unlimited failed to stay longer in
the business.
Segregated Witness or SegWit
SegWit is a soft fork protocol that changes Bitcoin’s transaction composition. Having the Bitcoin Improvement Proposal or BIP 141, Pieter Wuille, a Bitcoin Core developer, introduced this concept in 2015.
It raised an issue with the developers concerning its transaction malleability. Which happens when you spend a bitcoin, and the transaction is invalid due to a transaction signed out without checking the validity of the signature. Without validity, it will change transaction reference, thus creating the disturbance in malleability.
The solution he formulated was encrypting the witness data in a separate blockchain while the root code retains in the primary cryptographic ledger. SegWit launched two new script types: sending and receiving bitcoin and an encoding program called Native SegWit Bech 32.
Bitcoin Cash
Bitcoin Cash was created in 2017 and aimed to answer the issues related to SegWit. So the developers launched a hard fork, Bitcoin Cash, to avert updates in the previous protocols.
It is the most successful hard fork of the main cryptocurrency. It is considered the eleventh largest virtual currency as of June 2021. Bitcoin cash goes through a hard fork and is split into Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Version). Bitcoin Cash ABC pertains to Bitcoin Cash now.
Bitcoin Gold
Bitcoin Gold or BTG is a cryptocurrency that uses the basic principles of Bitcoin. Miners use basic GPUs or Graphic Processing Units instead of ASICs or Application-Specific Integrated Circuits. GPUs aim to let anyone do mining like before and decentralized bitcoin again, unlike ASICs where only the big player takes control.
Soon after its launching, Bitcoin Gold came into a DoS attack and received chastisement by Coinbase and Bittrex for having poor security. In May 2018, Bitcoin Gold received another attack again more severe than the previous. The attack manipulated the blockchain ledger wherein the transactions were recorded and took 388,000 BTG or US$ 18 Million. This resulted in removing Bitcoin from Bittrex since the latter refused to help pay the damages.
Conclusion
Over the years, Bitcoin has created many forks, where others failed, and some have gained a triumph. And as cryptocurrency continually grows, its processes will become more complex. With its increasing popularity and growing users, it might encounter more soft and hard forks moving forward.