What does a Bitcoin fork mean (and what are the forked currencies of Bitcoin)

What does a Bitcoin fork mean (and what are the forked currencies of Bitcoin)

In the world of cryptocurrencies, Bitcoin has long been a market leader. The development of Bitcoin has not always been smooth, and as its community and technology have diverged, so-called "forks" have occurred. These forks not only affected Bitcoin itself, but also led to the emergence and development of other blockchains. Today, we're going to explore what a Bitcoin fork actually means and what are the major Bitcoin forks on the market. Whether you're new to cryptocurrency or a veteran, understanding the meaning of these forks and the differences between them is crucial to your investment decisions.

What does a Bitcoin fork mean?

A Bitcoin fork is a divergence in the original chain of the Bitcoin blockchain, usually triggered by a difference in technology, community or developer opinion. After a fork, the original Bitcoin blockchain is duplicated and, after the fork point, the two blockchains develop separately into two separate blockchain systems. In this way, the original Bitcoin blockchain (e.g., Bitcoin) will have different technology and rules than the forked new blockchain (e.g., Bitcoin Cash).

Generally speaking, there are two main forms of Bitcoin forks: Hard Forks and Soft Forks. A hard fork is an incompatible change to the Bitcoin protocol that makes the forked blockchain incompatible with the original blockchain. A Soft Fork is a backward compatible change to the protocol, meaning that nodes from the old version can still understand the new version of the blockchain.

Types of Bitcoin Forks

There are two main types of Bitcoin forks: hard forks and soft forks. Of these, hard forks have the greatest impact on the blockchain, as they result in a complete split of the blockchain, with the two blockchains being permanently separated. Soft forks, on the other hand, are relatively minor protocol changes that do not split the blockchain, but rather keep the new blockchain compatible with the old one. Each type of fork has a reason and purpose behind it, usually to improve the scalability, security, or other technical aspects of Bitcoin.

Hard Fork: This is when a blockchain undergoes a fundamental change and is no longer compatible with the original blockchain. Such a fork creates a new blockchain and gives Bitcoin holders the same amount of new coins at the time of the fork. For example, Bitcoin Cash (BCH) and Bitcoin SV (BSV) are both derived from hard forks of Bitcoin.

Soft Fork: This is an update to the Bitcoin protocol, usually to improve the efficiency or scalability of Bitcoin without causing a split in the blockchain. For example, Bitcoin's SegWit (Separation of Witnesses) upgrade is a soft fork that aims to improve the scalability of transactions without affecting the original Bitcoin blockchain.

What are the major forks of Bitcoin?

As Bitcoin develops and forks, a number of Bitcoin-related forks have emerged in the market. These forks are often created in response to different technical needs or community controversies, and some of them have gained considerable market share. The following are some of the more well-known Bitcoin forks.

Bitcoin Cash (BCH) : Bitcoin Cash is one of the most famous Bitcoin forks. It was born after a hard fork in August 2017.The main reason for the fork was the disagreement in the Bitcoin community on how to scale the processing power of the blockchain.The increase in block size of Bitcoin Cash from 1MB to 8MB was intended to increase transaction speed and processing power, attracting a large number of users looking to solve the problem of Bitcoin's scalability.Bitcoin Cash is the most famous Bitcoin fork in the world, and it is one of the most popular in the world.

Bitcoin SV (BSV): Bitcoin SV is a derivative fork of Bitcoin Cash.In November 2018, Bitcoin Cash underwent an internal controversy, and some of the developers chose to split it into two versions, one of which is Bitcoin SV.SV stands for "Bitcoin Satoshi Vision" (Bitcoin Satoshi Vision). SV stands for "Bitcoin Satoshi Vision" and aims to recreate the scalability and decentralization concepts of Bitcoin's original design.The main feature of Bitcoin SV is that it dramatically increases the size of the block, which theoretically allows it to handle more transactions.

Bitcoin Gold (BTG): Bitcoin Gold was forked from the Bitcoin blockchain in October 2017, and it aims to change the mining mechanism of Bitcoin. The mining algorithm used for Bitcoin is SHA-256, while Bitcoin Gold changed to the Equihash algorithm, so that ordinary users can also use their graphics cards to mine without the need for specialized ASIC miners. This design makes Bitcoin Gold more decentralized and avoids monopoly of mining pools.

Litecoin (LTC): Although Litecoin is not directly derived from a hard fork of Bitcoin, it was inspired by Bitcoin. Litecoin was founded by Charlie Lee in 2011 and has been tweaked in terms of block times, total supply, and other adjustments with the primary goal of providing faster transactions and lower transaction fees. Litecoin is considered by many to be the "silver" version of Bitcoin, which is the "gold" version.

The Impact of Bitcoin Forks on Investors

For Bitcoin investors, forks present certain opportunities and risks. In the case of a hard fork, users who originally owned Bitcoin will often receive a proportional share of the new forked coins. This is an opportunity for investors to get new coins for free, but it may also present new market risks. The price of many Bitcoin forks is volatile and investors need to be cautious.

Forks may also have an impact on the security and stability of the Bitcoin network. For example, a fork may cause a split in the community when certain developers have different views on Bitcoin's protocols, which in turn may affect the value of Bitcoin. In such a case, investors need to pay attention to the community's reaction and market dynamics in order to make timely adjustments.

Frequently Asked Questions Q&A

Q1: How will a Bitcoin fork affect my Bitcoin?

A1: After a Bitcoin fork, you still have your original Bitcoin. In the case of a hard fork, you will usually receive a corresponding amount of forked coins based on the number of Bitcoins you have. However, be aware that the value of the forked coins fluctuates a lot and you should be careful.

Q2: How do I get a forked coin?

A2: In the event of a hard fork of Bitcoin, you can hold Bitcoin at the time of the fork and receive fork coins on an exchange or wallet that supports the fork. Please make sure your exchange or wallet supports the fork.

Q3: Will a Bitcoin fork affect the price of Bitcoin?

A3: Forks can affect the price of Bitcoin, especially when there are disagreements between the community and the developers. Market sentiment and investor confidence will be affected, so price volatility is usually higher.