Bitcoin wallets and hard forks: how to handle new coins?
When a Hard Fork of Bitcoin occurs, new coins may be created, leaving many cryptocurrency holders wondering, "What to do with these new coins?" If you're one of those cryptocurrency users, this article will walk you through how to deal with the branching coins created by hard forks in your Bitcoin wallet, and how to manage your assets so that you don't miss out on any value potential. Whether you are a newbie or a veteran, this knowledge is important to protect your assets.
What is a Bitcoin hard fork?
A Bitcoin hard fork is a modification or upgrade of the Bitcoin blockchain at some technical level that causes the blockchain to split into two separate chains. This is usually triggered by disagreements among the developer community over certain key designs. For example, new currencies forked from Bitcoin, such as Bitcoin Cash or Bitcoin SV, were created as a result of a hard fork. Simply put, a hard fork is like a "tech split", where the original blockchain is split into two versions. For Bitcoin holders, this means that you will own both the original Bitcoin and the newly forked currency.
What will happen to the currencies after the hard fork?
When a hard fork occurs, many Bitcoin holders automatically receive new coins, usually equal to the number of Bitcoins they had before the fork. For example, if you have 1 Bitcoin in your wallet, after a hard fork you will have 1 original Bitcoin and 1 new coin at the same time. This means that you need to manage these new coins. You have a few options: deposit the new coin into a wallet that supports it, or sell it, convert it to another cryptocurrency, or even fiat money.
Note: Not all wallets support the new coins after the hard fork. When using a Bitcoin wallet, it is best to check beforehand whether your wallet can support the storage and operation of the new coins. For example, common Bitcoin wallets such as Ledger, Trezor, etc. are regularly updated and have support for post-hard fork currencies.
How to choose a wallet that supports hard forks?
Choosing the right wallet to store the new coins after the fork is crucial for every Bitcoin holder. Depending on your needs, wallet options can be categorized as follows:
Hot wallets: such as Exodus, Electrum, etc. These wallets are usually able to support multiple cryptocurrencies and are easy to use. If the new coins from the hard fork are supported by these wallets, you can view and manipulate your new coins directly from them. Most of these wallets are free to download and use.
Cold wallets: Hardware wallets such as Ledger, Trezor, etc. offer a more secure storage method. If you are concerned about the security of your assets after a hard fork, cold wallets are an ideal choice because they keep private keys in a device that is not exposed to the network. These wallets generally cost extra to purchase, but they are effective in protecting against cyberattacks.
Exchange Wallet: Many major exchanges (e.g. Binance, OKX) support new coins after a hard fork and usually allocate them to you automatically. This makes it easy for you to withdraw the new coins without having to do anything extra. The risk of using exchange wallets is that the private keys to these wallets are controlled by the exchange and the assets are less secure.
Tip: If you're not sure whether a wallet supports a particular hard fork currency, check the official website or relevant community announcements to make sure you won't lose your assets in the event of a hard fork.
What happens to the new coins after the hard fork?
With the new currency, the next question is what to do with these new assets. Depending on the situation, there are several options available to you:
Hold: If you think a new coin has long-term value, you may choose to keep it. Many of the new coins will have a volatile market price in the early days of the hard fork, but some may increase in value over time, just like Bitcoin cash.
Trading: If you are not optimistic about the future of the new coins, or wish to take advantage of the price fluctuations for short-term profit, you can choose to sell or exchange these new coins on cryptocurrency exchanges. Many exchanges will offer trading pairs for new coins for a period of time after the hard fork.
Converting to other cryptocurrencies: If you don't like the new coins, or would like to convert them to a currency you trust more, you can choose to convert the new coins to another cryptocurrency or to fiat currencies. This way, you can minimize the risk of fluctuations in the value of the new currency.
Hard Forks and the Risks of New Coins
While a hard fork offers more options, it also brings with it certain risks. Here are some of the possible risks:
Security Issues: Some coins are not supported by all wallets or exchanges, which may result in you not being able to store or trade coins correctly, and may even be used by unscrupulous people to launch attacks. Therefore, when choosing to deal with new coins, always make sure that you choose safe and secure tools and platforms.
Value fluctuations: New coins generated by hard forks are often subject to intense price fluctuations. Some coins may experience explosive growth in the short term, while others may rapidly depreciate in value or even disappear. Therefore, the potential value of these new coins should be carefully judged when dealing with them.
Legal and Regulatory Risks: Some countries have legal risks associated with new coins generated by hard forks. Certain coins may be considered illegal or restricted, which may affect the way you handle them. Therefore, it is important to understand your local cryptocurrency regulatory policies to avoid legal issues.
Frequently Asked Questions Q&A
Q1: Will the currency be automatically deposited into my wallet after the hard fork?
A1: Not necessarily. The new coins will not be automatically deposited into all wallets after the hard fork, it will only show up automatically if your wallet supports the new coins. If your wallet does not support it, you will need to do it manually.
Q2: How do I know if my wallet supports new coins?
A2: You can check the wallet's official announcement or user community to find out if the wallet supports the post-hard fork coins. Most well-known wallets will release an update before the hard fork occurs and inform users how to handle the new coins.
Q3: What should I do with hard forked coins with unstable values?
A3: If the value of the new coins is unstable, you may choose to wait and see, or you may choose to sell or convert them in the near future depending on the market situation. In any case, it is best to make a decision based on the market trend and the future development of the new coins.
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