What are forks and what are they
In programming, fork is called the use of the source code of an existing product to create a new one.
The fact is that in most cryptocurrencies, the source code of the cryptocurrency is open and is in the public domain. This is done so that the crypto community can check the source code for vulnerabilities. It is important for cryptocurrency developers to prove to people that cryptocurrency is absolutely safe, it is impossible to crack, there are no vulnerabilities. And important evidence is openness. Anyone can check the source code.
Also, anyone can use the source code of an existing cryptocurrency to create their own coin. You do not need to invent anything new, just use the code of an existing cryptocurrency and change several parameters of the existing coin, for example, the block size and processing speed of the block and create a new cryptocurrency.
It is not surprising that now there is a huge number of cryptocurrencies that do not carry any semantic loads, but simply duplicate each other, having slightly different characteristics from each other.
Why is this done
Theoretically, forks are created to make the main cryptocurrency better, to test new technologies and capabilities on it. Fork has the basis of the already existing critical currency, only some of its characteristics have been changed. In the future, it develops independently, new opportunities are introduced. As a result, the fork can turn into something unique, which no longer looks like the main cryptocurrency. This is a theory. In practice, more than one fork has not bypassed in popularity and has not become better than the main cryptocurrency with which it was copied. A copy, do not change its parameters and characteristics, continues to be a copy.
In fact, the creators of the forks often pursue purely mercantile goals. They want to make money on the fork, without creating anything new. The easiest and most common way is to earn money by manipulating courses.
For this, Pump & Dump tactics are used. This tactic came from the stock market. But the fact is that now all classical exchanges are strictly regulated and it is practically impossible to apply such tactics on the classical market. And in the field of cryptocurrencies, everything is possible.
Developers create a fork, begin to actively advertise it and display it on exchanges. On the exchanges themselves, the benefit of the new cryptocurrency coins is in abundance, they begin to buy their own coins, creating excitement around them. Articles appear in the press about a new promising coin. There is increased demand for it, bidding is actively ongoing. Ordinary investors and miners begin to peer at the coin. Developers no longer need to buy coins from themselves. The crypto community picked up a coin, it looks so promising. At the peak of popularity, developers sell all the coins purchased from themselves and stop advertising. Investors and miners who managed to mine cryptocurrency are left with a coin that has fallen in price, which no one needs.
This tactic is used very widely. Now many cryptocurrency exchanges are trying to fight this, but so far not successfully. Therefore, forks are so popular.
Varieties of forks: soft forks, hard forks
Until 2017, there were just forks – copies of successful and popular cryptocurrencies that differed from the main cryptocurrency only in certain characteristics: block size, block processing speed, mining algorithm, change in hashing complexity, etc.
In 2017, two new concepts entered the circulation of the crypto community: soft fork and hard fork.
This is a soft code change that does not change the operation of the main protocol. At the same time, a new cryptocurrency is not formed, and changes are made to the old cryptocurrency that do not significantly affect the operation of all nodes and do not require the configuration of new software. Changes are introduced sequentially, gently, while not affecting the work of users with cryptocurrency, as well as the state of the cryptocurrency infrastructure. Everything continues to function in an operating mode.
Typically, cryptocurrency developers themselves make such changes. They should be supported by the crypto community and the entire ecosystem of the coin. After all, if they do not support it, then the new changes will not be applied. At the same time, those who did not support the changes may work the old fashioned way.
An example of a soft fork is the implementation of the SegWit protocol. Soft fork occurred in the summer of 2017. SegWit technology allowed to increase the block size in Bitcoin from 1 Mb to 2 Mb. At the same time, 38% of all transactions are currently processed using SegWit technology. Other miners prefer to mine “the old fashioned way”.
As a result of the hard fork, a new cryptocurrency appears. At a certain block, there is a branch from the main cryptocurrency chain, as a result, a new cryptocurrency appears, which is already starting to live according to its new laws. The old cryptocurrency also continues to work as before. If soft fork changes the main cryptocurrency, then hard fork does not affect the main cryptocurrency in any way, as a result of it a new cryptocurrency is formed.
All coins mined in the main cryptocurrency at the time of the hard fork are also mined in the new cryptocurrency. Therefore, users of the main cryptocurrency receive hard fork coins for free. To do this, they only need to give a private key to the wallet on whose accounts money was stored in the main cryptocurrency.
Many users, in the weather for free money, forgot to withdraw all money from their wallet first. As a result, they provided the hard fork developers with private keys to the wallets where the money is in the hope of getting free coins. But as you know, they did not receive any coins, and they lost money from their wallets.
Thus, many hard forks were compromised. Gradually, the critical community faded from interest in hard forks, since most of them did not bring any new and interesting ideas to the cryptosphere.
Bitcoin’s most successful hard fork is Bitcoin Cash. This hard fork was widely accepted by the crypto community, received support and service on many exchanges and cryptocurrency wallets, and exchangers are actively changing it. Bitcoin Cash has proposed increasing the block size to 8 MB to increase the speed of payment processing and to “avoid” network congestion. Bitcoin Cash is currently trading at $ 800, while Bitcoin is priced at $ 8,000.
Fork in the context of cryptocurrencies
Fork is the use of the code of an existing cryptocurrency to create a new one.
Forks and Altcoins
In the field of cryptocurrencies, there are Bitcoin, the first cryptocurrency, and all other cryptocurrencies are altcoins.
It is believed that all other altcoins are a fork of Bitcoin. But it is not so. A fork is the use of existing code from one cryptocurrency to create another. But not all cryptocurrencies used the Bitcoin code when creating it. The developers of some cryptocurrencies decided not to copy anything, but to create something of their own and unique. Examples of cryptocurrencies that are not fork of Bitcoin are Ethereum and Ripple.
The developers of these cryptocurrencies have proposed their own unique approach, which is not similar to anything that was used earlier. And this approach turned out to be very successful and useful for society. That is why these cryptocurrencies are so popular.
The most successful fork of Bitcoin LiteCoin currently occupies the 7th position by capitalization. Thus, even the upgraded copy turned out to be worse than the original.
Are all cryptocurrencies a fork of Bitcoin
Thus, it is clear that not all cryptocurrencies are forks of Bitcoin. Some cryptocurrencies decided to go their own way and create something unique. Not always this unique was a success. Nevertheless, the first three positions in capitalization are occupied by unique cryptocurrencies, the creators of which did not copy anything, but came up with something of their own. Moreover, these cryptocurrencies have become so successful that they also make forks using their source code. After all, you can copy the code not only Bitcoin, but also any other cryptocurrency, whose source code is in the public domain.
The consequences of hard forks
The declared goal of the hard fork is to make the original cryptocurrency from which the hard fork separated better. The end of 2017 exacerbated Bitcoin-related problems. Bitcoin has not stood the test of popularity. Network congestion led to the fact that confirmation of payments had to wait for several days, and commissions increased to $ 100. Bitcoin’s small payments have become meaningless.
The entire crypto community began to unanimously solve existing Bitcoin problems. Hard fork time has come. Based on the source code of Bitcoin, new cryptocurrencies were created, the developers of which promised to come up with a new solution and solve all existing Bitcoin problems, make it better, safer, and payments faster and cheaper.
Most users liked the hard forks. Indeed, a new hard fork meant giving away coins. Holders of the main cryptocurrency, from which the hard fork was separated, received free coins of the new cryptocurrency.
Hardcore fashion has been exploited by numerous scammers. Indeed, in order to receive free coins, it was necessary to provide a private key to the wallet, on which the coins of the main cryptocurrency were previously stored. By giving the private key, users provided full access to the wallet. And if money remained on the wallet by that time, then many users lost it. Thus, many scandals and accusations of hard fork developers of stealing user funds appeared around hard forks.
Large cryptocurrency forks
Of all existing Bitcoin hard forks, the most successful Bitcoin Cash hard fork coin is now trading for $ 800, which is 10 times lower than the price of Bitcoin. Another well-known bitcoin hard fork Bitcoin Gold is currently selling for $ 30. Nobody even remembers or remembers their names about the other Bitcoin hard forks.
But there are very successful hard forks. Not Bitcoin. The most successful hard fork occurred with the Ripple cryptocurrency. The Ripple hard fork called Stellar currently ranks 6th in terms of capitalization and trades at $ 0.31, while Ripple itself trades at $ 0.45.
At the moment, not one hard fork has surpassed its original.
Of the old forks, the most famous fork of Bitcoin LiteСoin by capitalization takes 7th place. LiteСoin appeared in 2012 and has already proved its worth by time. And although LiteCoin is perceived by the crypto community as the “younger brother” of Bitcoin, it confidently feels in the crypto community. The LiteCoin network successfully tests many new technologies that are planned to be used in Bitcoin in the future. So SegWit technology is successfully used in LiteCoin.
The future of cryptocurrency forks
Thanks to the existence of forks, there are so many cryptocurrencies. Indeed, in order to create your own cryptocurrency, you do not need to have special knowledge. It is enough to change some parameters of the cryptocurrency, for example, the block size or the processing time of the block and copy the source code of an existing cryptocurrency.
Despite the large number of forks of scams that have no useful purpose, but are created exclusively for the enrichment of developers, sometimes good forks appear that are widely used by the crypto community, are actively traded on exchanges and have a powerful infrastructure.
So far, no fork has surpassed its original. But still to come. Perhaps someday a fork will appear that will be better than the original and this will give a new direction and a powerful incentive for the development of hard forks.
The most successful hard fork Stellar has every chance of overtaking its original Ripple. Will he succeed or not will only show time. However, Stellar clearly demonstrates that fork does not mean bad.