The significance of Bitcoin forks to the overall crypto market

Back in 2009, a pseudonymous Satoshi Nakamoto introduced the world to Bitcoin. This was hailed as the first cryptocurrency and it has endured as the world’s biggest crypto asset since then.

In the current crypto market, Nakamoto’s initial concept is still there which is why Bitcoin is still significant. Some have taken the Bitcoin model and changed it but there is a large group of variations that stem from using Bitcoin’s concept and program.

Those variations can be traced back to the forking process. This process is one of the most important parts of the crypto market because it has led to many cryptocurrencies spawning. First, let’s talk about what Bitcoin forks truly are to know their significance for the crypto market.

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What are Bitcoin forks?

Bitcoin functions through consensus. This only may happen if your code matches with other people who are in the Bitcoin community as well. When someone wants to change their code or rearrange the protocol, there is a fork in the straight road. 

The core of Bitcoin will keep going but with this fork, other people want to go in a different direction. This has led to the creation of multiple cryptocurrencies that can trace their roots back to Bitcoin. 

On a basic level, the forks arise when people have differing perspectives. Bitcoin has become more popular than ever which has led to people showing their trust in the system. However, some people do not share the same sentiments. This has led to their desire to still support the crypto market but go in a separate direction. 

How do Bitcoin forks work?

Anyone can create a fork because, at the end of the day, no one will bother or prevent them from doing so. Democracy and differing beliefs are normal but with the open-source blockchains like Bitcoin, when a major party wants something different from the majority, proposing an update will be the right move because people will understand what they are trying to do. 

There are two types that you need to look into so you can fully understand how forks work.

Hard forks

The hard fork refers to a radical change to the protocol of Bitcoin’s blockchain. This will effectively result in two branches with the first strictly following the old protocol. For the most part, that is the Bitcoin core because they want to stay true to the original version of the cryptocurrency. On the other hand, there will be a new branch that follows the new version that some people are trying to impose. 

Essentially, they are new versions of Bitcoin that have completely split from the core or original version. This change is permanent which is why there are now different cryptocurrencies and assets on the market lists.

During a hard fork, the software that is using Bitcoin and its mining will be upgraded. When the user upgrades their software, that version will mostly reject all of the transactions from the older software.

With hard forks, certain cryptocurrencies with names similar to Bitcoin have been launched. The likes of Bitcoin Cash (BCH) and Bitcoin Gold (BTG) have become huge cryptocurrencies in their own right and they were the result of the hard fork. Among the first notable hard forks, Bitcoin XT was a big one but BCH has always been the top example of Bitcoin best forks since it has become a primary cryptocurrency for many. Let’s take a look at the most notable results on this Bitcoin forks list.

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Historical Bitcoin hard forks

Bitcoin XT - As one of the first notable events in Bitcoin forks history, XT’s launch was huge for the crypto market. Mike Hearn launched the XT software in 2014 so it can include the new features that they proposed. Since Bitcoin only allowed up to seven transactions per second, XT was aimed for 24 transactions. They increased the block size from 1MB to 8MB. XT saw success with more than 1,000 nodes but the project lost user interest which led to its sad shutdown. 

Bitcoin Classic - With XT’s decline, community members still wanted the block sizes to increase. A group of developers underwent a hard fork to create Bitcoin Classic in early 2016 which had a block size of 8MB to only 2MB. This has led to solid growth but the general cryptocurrency community looks like they have moved to other avenues.

Bitcoin Cash - As the most successful hard fork of Bitcoin, BCH allows the 8MB model for the block size which has turned out successful in the long term compared to XT and Classic. Nowadays, the Bitcoin Cash fork continues to be one of the biggest cryptocurrencies in the world and its role in the crypto market has kept growing.

Bitcoin Gold - Following BCH, Bitcoin Gold had to make big changes again. This led to Gold’s focus on restoring the mining functionality with basic graphics processing units (GPUs) because people felt that mining was too heavily favoured by people with the money to afford the hardware.

Bitcoin Unlimited - During the period of Bitcoin’s scalability issue, options were thrown into the field. Unlimited became one of those forks made to solve this issue because the miners were not restricted here. They could decide the size of the blocks which can go up to 16MB. This fork floated in the background for a while which was disappointing because it was a promising project but it never really took off.

Segregated Witness - In Bitcoin forks history, it is important to note that there are proposals that want to focus on making Bitcoin more scalable as possible by also reducing the transaction fees. Those are important to Bitcoin’s potential growth in the mainstream. SegWit was created as a soft fork at first but it eventually grew into a hard fork and led to more significant changes.

Hard forks in other cryptocurrencies and blockchains

Ethereum - The Ethereum blockchain is the only top-tier cryptosystem that has competed at the top of the market with Bitcoin. Due to its size, there have been notable forks in the Ethereum blockchain in the last few years. The most notable has to be Ethereum Classic which was launched in 2015 after the DAO hack that had $50 million in Ether lost. People voted to have the platform forked which has led to many blockchains forming including EtherGold, EtherZero, Ethereum Modification, and EthereumFog.

Litecoin - When Litecoin forked off to produce Litecoin Cash (LCC), they made the latter a fork of a fork since Litecoin split from Bitcoin in 2011. LCC did not have much love from the crypto fans because they were lacking a proper roadmap. 

Monero - Even one of the best cryptocurrencies that focus on privacy, like Monero, will still have issues because some people want change within the system. Monero V or XMV was intended to solve scaling problems by introducing new protocols. However, some users did not like the fork since the people behind XMV were not doing it for the interest of the people but for themselves only.

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Soft forks

A soft fork is a change in the Bitcoin protocol, not to the overall product. When the hard fork is recognised as an irreversible change, the soft fork is backwards-compatible. This means that the new protocol will be recognised by the old nodes within the system and there are no new products that will be launched. 

Bitcoin soft forks don’t require any nods to upgrade to maintain consensus because all of the blocks with the new soft-forked rules also follow the old ones as well which helps the old clients as well. For a soft fork to work, a majority of the mining power needs to be run by a client that recognises the fork.

These soft forks have been used on Bitcoin and Ethereum blockchains among others. This has led to people implementing new and upgraded functions which has led to it being backwards-compatible. 

This is more of an inclusive change because it does not have to resort to fully shifting people’s interests. A soft fork will be better for some people because it provides them with options that are not drastic because they still have the choice to stick with what they are accustomed to.

Are Bitcoin forks good or bad?

When there are significant proposed changes to the Bitcoin protocol, you should expect that more forks are coming soon. Whether it will be a hard or soft fork, you will see people gravitating towards a specific side. Hard forks will be harder to adjust to because they will be a new cryptocurrency to look forward to but soft forks will be much more forgiving to the old investors. 

Some people see this as a bad result but that should not be the case. Having these changes is good for the overall crypto market because it will give people options depending on their preferences. 

Bitcoin itself has already spawned loads of forks over the years. There is no assurance that every fork will work out but as long as people have the options, you can expect more people will be supportive of change. More options will make it a more competitive market which will grow the scene overall. 

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Words: Pocholo Magsino