What is a Hard Fork?
A hard fork is a type of protocol update in blockchain technology where the existing rules are modified in a way that is not backward-compatible. This creates two parallel chains: the original chain and a new one that follows the updated rules. Hard forks often occur when there is a disagreement within a cryptocurrency community or the need for a substantial upgrade to improve security, scalability, or functionality.
In the context of cryptocurrency, a hard fork can have a direct impact on users, miners, and developers. After a hard fork, holders of the original cryptocurrency might also receive tokens on the new chain, as in the case of Bitcoin and Bitcoin Cash. This is because both chains share the same transaction history up until the split. However, each chain operates independently after the fork, and the two tokens are no longer interchangeable.
For example, Ethereum underwent a hard fork in 2016 to address a hack of a smart contract called “The DAO.” The fork created two separate chains: Ethereum (ETH) and Ethereum Classic (ETC). Each version followed its own path, offering different protocols and features to its respective user bases.
Hard forks can create volatility and uncertainty but can also enable valuable upgrades to the blockchain ecosystem, addressing issues like transaction speed, fees, or network security.
