What is a Coin Fork? An Inside Look at Coin Forks
Before we start speaking about hard, soft, and other implicating words. I think it’s best I explain a few things about a coin fork. Generally, the price of a cryptocurrency goes haywire when it approaches a “fork”. These events can either be positive, resulting in higher prices. Or negative, resulting in lower prices. If you play it smart, you can still make a profit, irrespective of which direction the market is sent in.
What is a Coin Fork?
‘Forking’ or a ‘Fork’ refers to a software/network update. The feature that separates the different types of coin forks is backward compatibility. Forks can arise from two different events. Accidental forks happen when a coin has an update that isn’t truly compatible. This means that people using different versions of this software/coin will create two different ledgers. The old version will have its own blockchain. The new version will get a brand new blockchain. In this case, the coin developer is tasked with quickly elimination all bugs causing these incompatibilities before merging the two blockchains.
SegWit is essentially a hard fork disguised as a soft fork. It strips the regular block out of most meaningful information and moves it to the extension block.
A hard fork occurs when the developers of a cryptocurrency decide that changes are overdue. If these changes will create incompatibilities between the old version and the new version, a hard fork occurs. Once this happens, all users of the old coin have t2o update all of their applications and software in order to continue using their type of coins correctly. An example of this would be Microsoft Word. If you were to make a word document with Word 2007 and sent it to your friend to edit it with Word 2013, you could have problems reading that file. In this case, you have created a fork in your document.
The current situation, war is the main cause of the dump. But literally the day before the #hardfork, everything can change dramatically. #BCH#fork #btc #free #coin #token #airdrop #bounty #altszn #altcoins #poloniex $ALTS $BCH pic.twitter.com/jPVLpFiNIv
— cryptomoonboyz🚀 (@cryptomoonboyz) November 13, 2018
Are Coin Forks Bad?
Coin forks often come hand in hand with anxiety and a small amount of panic. This is because with cryptocurrency if two different blockchains exist, only one is ultimately correct. As a result, any coin transactions found on the ‘wrong’ blockchains face the risk of being lost. Thus, in the event of a cryptocurrency coin fork, people are reminded not to transact until the fork is successfully complete.
For companies that depend on cryptocurrency; if their cryptocurrency forks, it can be a very painful period. With the risk of cryptocurrency falling into black holes during the fork, any companies using that cryptocurrency can’t do much until it’s over. On top of this, coin forks can cause a vast amount of work through a coin’s community. This is because everyone must update all software and hardware to support the latest coin version. Users, exchanges and miners alike must all update in order to prevent the loss of their crypto coins.
Hard forks can be very confusing. Even though, currently, most hard forks don’t change the value in a coins price. For example, Bitcoin (BTC) underwent a hard fork because of a large number of miners, and developers wanted bigger blocks. To do this, they forked bitcoin into a new version called Bitcoin Cash (BCH) on August 1st, 2017. Be that as it may, the more forks a coin goes through, the more the overall value of the coins will reduce. When a cryptocurrency forks and more coins are made–the more it resembles a fiat currency. Bitcoin isn’t supposed to be like a fiat currency that could generate you large amounts of money at will. All these new coin forks are doing is creating more coins — which inevitably means money — out of thin air.
In my opinion, coin forks can be somewhat reminiscent of fiat currency. A coin fork isn’t a simple change to a blockchain or the creation of a new cryptocurrency. A coin fork represents a fundamental change to the underlying framework that handles all transactions of that currency. The simple fact that a majority or even all of the nodes that operate and secure a network must agree to change their operating rules in preparation for a hard or soft fork. In essence, this makes the process of change implementation a democratic process.
No one knows how a coin fork will turn out until it happens. The value of the coin could either go up or go down all within a day. To simple users of cryptocurrency for purchases etc, this may not be of much a problem. But for miners and investors, keeping an eye on every detail of their cryptocurrency’s incoming hard fork is essential. Money can be lost in several different ways when a hard fork is incoming, so it’s best to stay informed.