December 4, 2017
If you have been following cryptocurrencies like Bitcoin and Ethereum, you may have encountered of a lot of conversations regarding ‘hard forks‘. So what does hard fork mean and what potentials as well as threats may it bring? This article may provide you a basic knowledge to this hot issue.
In contrast to a soft fork, in which all nodes (whether upgraded or not) will continue to recognize new blocks and maintain consensus on the blockchain (backwards compatible), a hard fork is a software upgrade that introduces a new protocol to the network that isn’t compatible with the older version. Hard forks can be thought of as an expansion of the rules. For example, adding new feature sets, changing a core metric of the protocol, such as increasing the maximum block size to be 2MB instead of 1MB would require a hard fork.
Nodes that continue running the old version of the software will see the new transactions as invalid. Thus, to switch over to the new chain and to continue to recognize valid blocks, any participants running a node in the blockchain network would absolutely need to upgrade their software.
One of the outstanding benefits that make people become advocates of the hard fork is the increase in blocksize parameter. With bigger blocks, the network can handle more transactions. This should drive average fees down and have transactions confirm faster. Or it should at least make it more expensive for attackers to spam the network with bogus transactions, if they do try to drive fees and confirmation times up.
What’s more, if a hard fork were to result in two incompatible blockchains, people believe that whichever blockchain has more hash power dedicated to it is the “real” blockchain. Or, at least, they’ll maintain that the blockchain with the most hash power dedicated to it will be the more secure and functional blockchain,” and thus the one that people will want to use.
The extreme risk in implementing a hard fork is that nodes running the new software are separated from the previous version. So half of the nodes will be running the latest version and mining blocks, and the other half will be running the older version and mining a different set of blocks. The Ethereum DAO hard fork was a perfect case study of how a community can split over rules. Now, we have two blockchains using a variant of the software – Ethereum and Ethereum Classic, both of which boast a different ethos and a currency.
The problem comes when some sort of political impasse arises, and a portion of the community decides to stick by the old rules no matter what. The hash rate, or network computing power, behind the old chain is irrelevant. What matters is that its data (and ruleset) is still perceived to have value, meaning miners still want to mine a chain and developers still want to support it.
How consensus is both achieved and maintained is absolutely crucial. If the developers are unable to “sell” new changes to the miners, then the miners may choose not to upgrade their software and remain on a previous version.
Whether a hard fork should be performed and how it should be done and what should be focused on is causing controversies. Many believe that only increasing a block size is not great enough of a reason to perform such action which could potentially make whole sets of bitcoin investors lose value on their commodity. However, we can say that a Bitcoin hard fork is inevitable and there are many positive reasons on why it should be performed. Besides, everything has to be set in place appropriately in order to maintain network reliability.
Infinity Blockchain Labs is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects.
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