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Top Cryptocurrency Hard Forks: A Guide to How They Affect the Market

30 Oct 2022 By : Sudeep Saxena
Southeast Asia’s Lar

Key takeaways:

  • Cryptocurrency hard forks are blockchains that split apart due to inherent differences with the blockchain code. 

  • Users get new coins as airdrops for governance and decentralization purposes. 

  • In the history of hard forks, many hard forks were revolutionary and have changed the positioning of the blockchain in the market. 

  • Blockchain hard forks also happen for security purposes. 

In the cryptocurrency world, a fork is a change to the software of the blockchain that creates new versions of the blockchain with an identical copy of previous transactions. These new versions are called "forked" blockchains and can be seen as an alternate future: They either add new features or correct existing flaws in the code. A hard fork creates a permanent divergence in the blockchain, meaning that from that point onward, there are two separate paths forward with two unique "ENDs." Read on to learn more about top cryptocurrency hard forks and how they affect the market.

What is a Cryptocurrency Hard Fork?

A new branch of a blockchain that breaks away from the parent chain. A hard fork happens when significant changes to a blockchain network cause the new network to become incompatible with the old network. 

A blockchain is a decentralized network that maintains a shared and verifiable ledger. Once a change is made to the ledger, it cannot be reversed. However, a hard fork creates a new blockchain network and token that can be used as if it were a completely new product. 

A hard fork can also be used to correct issues with the code that blockchains use to function. In some cases, a blockchain is hard forked to fix a critical error in the code.

What Happens During a Hard Fork?

When a fork happens, there are two separate blockchains. One of them will eventually become the new standard version of the blockchain, and the other will be discarded and become a minority version that is used by only a few people. 

What happens next will depend on several factors, such as the percentage of the community that chooses to use the new blockchain, how much value each blockchain holds, and how much mining power is being employed to keep each one running. 

Here are some of the scenarios that could play out during a hard fork. - One blockchain becomes dominant - If the blockchain you use becomes the standard version of the blockchain, your new blockchain will be the same as the old one. - You are forced to switch to the new blockchain - If the old blockchain's mining power disappears and the new blockchain has the majority of the mining power behind it, then it's likely that you'll have to switch to the new blockchain. - You keep everything you had before the fork - If the value of both blockchains is approximately the same, or if there are enough people who want to use your current blockchain, then you'll keep everything you had before the fork.

Which Coins Might Go Through a Hard Fork?

Blockchains with a heavily diverted miner network usually go through a fork; these issues are generally fundamental to the blockchain in talk, and the controversy leads to forks. But there are many other reasons why blockchains split; take Monero or XMR, for example. Monero developers perform hard forks on the blockchain to stave off the impact of the miners.

One another interesting case of why blockchains split because of miners' disagreement is when the Ethereum blockchain got hacked, and there was a disagreement between miners about whether to use the blockchain records before the hack happened; this is how Ethereum Classic happened. Another reason why a blockchain might split is because of a hack or an attack ecosystem on the ecosystem, just like Terra and Luna Classic.

So if your favorite blockchain is either hacked, going through some controversy, or Monero, you can expect a hard fork.

Why Do People Hold Hard Forks?

There are plenty of reasons why people hold hard forks. Some people will hold a hard fork because they believe that it will eventually become as valuable as the original blockchain. Others will have a hard fork because it's a "free" token that they got for free when the blockchain forked. Regardless, others will hold a hard fork because they want to have a more active role in the blockchain's future. 

Some people will also hold a hard fork because they want to sell it back to others at a higher price. They may hope that the new token will be used more widely in the near future, which will increase demand for it.

Bitcoin XT

Bitcoin XT is the first Bitcoin hard fork in blockchain history. This happened in 2015; the main goal was to increase the network speed by increasing the block size by 8 MB from 2 MB. If this proposal had gone through, the transaction bandwidth would have risen from 7 transactions per second to 24 transactions per second.

Unfortunately, the project led by  Mike Hearn and Gavin Andersen was a failure since only 12% of the miners supported the transition. But Bitcoin XT is still noted as one of the most important movements of Bitcoin history since this shows the world the power of decentralization the blockchain technology offers.

Ethereum - Ethereum Classic Hard Fork

Ethereum - Ethereum Classic Hard Fork was created in 2016. The fork was implemented to correct an issue with Ethereum's smart contract code, which resulted in a loss of about $89 million worth of Ether. Ethereum is a decentralized network that runs smart contracts on a blockchain, and Ethereum Classic is a decentralized network that runs smart contracts on a blockchain. 

However, Ethereum Classic chose to use the version of Ethereum's blockchain that existed before the fork that caused the loss of $89 million. Ethereum Classic's goal is to become a decentralized global computing platform that can be used to run any decentralized application, including smart contracts. After the fork, Ethereum and Ethereum Classic became two separate blockchains.

Bitcoin - Bitcoin Classic Hard Fork

Bitcoin - Bitcoin Classic Hard Fork was created in 2016. The fork was implemented to correct an issue with Bitcoin's scalability. The goal was to increase the number of transactions that the Bitcoin network can process each second; by increasing block size. The fork was a success, and the number of transactions in the Bitcoin network increased significantly. 

Despite the fork's popularity, Bitcoin Core remained the more valuable and popular version of the blockchain. However, the increased transaction volume has also led to greater use of Bitcoin Cash.

Bitcoin - Bitcoin Cash Hard Fork

Bitcoin - Bitcoin Cash Hard Fork is a hard fork that was created on August 1, 2017. The fork was implemented to correct an issue with Bitcoin's scalability and create a more flexible and scalable network. The fork was a success, and the number of transactions in the Bitcoin network increased significantly. 

After the fork, the number of daily Bitcoin transactions fell significantly. This is because Bitcoin Cash can process a more significant number of transactions, while Bitcoin can only process a limited number of transactions. However, the increased transaction volume has also led to greater use of Bitcoin Cash.

Monero Hard Fork

Monero - MoneroV Hard Fork was created on March 14, 2018. The fork was implemented to correct an issue in the Monero blockchain. The problem was discovered by someone who claimed that they had found evidence that the Monero blockchain had been exploited by hackers. The fork happened in  2018. After the split, the new blockchain will be called MoneroV.

Conclusion

The hard fork is one of the most exciting topics in the crypto space. Essentially, a blockchain splits into two separate chains after validators adopt a new rule that wasn't there before. This can be due to a change in consensus algorithms or fixing a bug in the code. There are many types of hard forks, which can be done for different reasons. For example, a change in the reward system of validators, a change in the block size, or even a change in the name of the coin. Cryptocurrency hard forks can be a great way to make money, but it's important to do your research before investing.

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