Forking, when it comes to blockchain technology, really only made its way into the general conversation for cryptocurrency enthusiasts recently, after the ongoing scaling debate led to one of the most well known forks of Bitcoin – Bitcoin Cash.
Bitcoin Cash came into existence after a sector of cryptocurrency enthusiasts decided to create a new blockchain. It has the same legacy as the original Bitcoin chain, but with changes to its protocol and how it works – in this case, mostly to do with the size of the blocks.
While the Bitcoin Cash fork is far from the only one on the Bitcoin blockchain, it gives insight into the use, manner, viability and reason for forking a blockchain as a primary case study.
However, beyond Bitcoin Cash and its high profile fork, there is a lot to delve into to decide if forking a blockchain is a good idea, or even if it is a viable option to accomplish a number of different things on what is essentially a new chain.
What is a Fork?
Before we can understand what a fork on a blockchain is, it is prudent to break down the different types of forks that can occur and how they come about.
A hard fork is a permanent divergence from the original blockchain with nodes on the new blockchain not interacting with or acknowledging nodes or transactions on the old blockchain. This leads to a new chain being created, that has the legacy of the old chain, but there is no transaction compatibility between versions – transactions on the old chain are not recognized on the new one, and vice versa.
A soft fork is different in that after the fork, the new nodes will still recognize the old transactions, but if nodes that have not been changed by the soft fork continue to mine blocks, the blocks they mine will be rejected by the upgraded nodes. Thus, for a soft fork to succeed, it needs the majority of the hash power.
Forking, be it hard or soft, thus enters a new chain into the equation. With that new chain can come new rules or protocols, and that is one of the main reasons why forks occur in blockchains.
Essentially, a fork allows for changes in the blockchain to be enacted by a development team that are dissatisfied with certain aspects of the blockchain project. However, difficulty comes with where the decision to fork comes from.
It can be initiated and guided by the core development team, which is fairly straightforward. However, if it comes from a group of developers wanting to change certain aspects of the project, it quickly becomes a governance issue. This is because forks are, by their nature, open-source and democratic, with Bitcoin Cash’s emergence a key example of this.
Examples of planned forks with no governance issues include Ethereum’s Byzantium fork in October last year, which was part of an upgrade for scalability and to enable private transactions. Another is Monero’s hard fork to introduce RingCT as a superior means of privatising transactions.
“Verge was forced to fork after it was hit with a 51% hack this year.”
While forks are predominantly a means of upgrading or changing parts of the blockchain, they have also been used in emergency circumstances. Threats of the dreaded 51% attack have seen coins fork in order to protect their blockchain. This happened in 2014 when ASIC miners were introduced for Scrypt (the PoW hash algorithm used by both Litecoin and Dogecoin).
The problem was that most of the mining power was being focused on Litecoin, leaving Doge susceptible to a 51% attack once even more powerful ASICs were made available, or if an existing mining pool was hacked and its hashing power redirected.
Forking allows for a change in the mining algorithm to avoid the attack, but not all coins have been so lucky. Verge, for example, was forced to fork after it was hit with a 51% hack this year.
Is Forking a Good Thing?
Forking clearly has important and functional uses for blockchain projects. It is a way to resolve disputes, add new features, upgrades and functionality to a chain, and a way to protect the chain. It has even been used to reverse transactions, such as in the Ethereum DAO hack which saw a transaction rollback, while the remaining who did not support the hard fork stayed with Ethereum Classic.
“In January, it was predicted that as many as 50 [Bitcoin forks] would come to bear in 2018.”
However, forking has also become a bit of a ploy and a way to cash in on a name in recent times. Last year, 19 forks of Bitcoin were recorded. However, in January, it was predicted that as many as 50 would come to bear in 2018.
The issue is, while some forks like Bitcoin Cash are accepted to be serving a purpose, there are some more obscure ones. Forks like Bitcoin Gold, Bitcoin Diamond, Bitcoin God, Bitcoin Platinum, Bitcoin Dark and more, only look to be attempting to cash in on the fact that they have Bitcoin in their name.
What is interesting to note is the opinion of some top cryptocurrency leaders at the time of the Bitcoin Cash fork and how those opinions have faired, now a year on from the creation of that hard fork.
Aragon co-founder Luis Cuende said he thought it “will positively impact Bitcoin.”
But, he also added that Bitcoin Cash might fail in the short-run, because of a bug in the forked software. “Probably a fatal bug will crash the whole network (it already happened with Bitcoin Unlimited, Cash’s predecessor) or people will just lose interest in a currency engineered to look decentralized while being totally centralized,” Cuende added.
“While the markets will ultimately decide, I think there is little chance that Bitcoin Cash will be successful in the long-term. It may have increased capacity, but several issues remain,” said Ryan Taylor, CEO of Dash Core.
His argument is that Bitcoin Cash didn’t solve Bitcoin’s scaling issues and that it isn’t really forking. This is a key point for forking as, for it to be viable, it needs to be constructive and functional - there must be a reason for it and it has to solve something, or else it becomes another cash grab.
A Question of Viability
The problem with forking is that it serves a legitimate purpose. It is thus viable in its execution only when performed properly and for the right reasons.
The example of Ethereum after the DAO hack sounds like a good reason for a fork. Because of the democratic nature of it all, though, the fork did not end up killing off the original chain. Thus, the old Ethereum chain, with its captive $50 million, still existed and exists to this day under the name of Ethereum Classic.
“The viability of forking is in the eye of the developers proposing the fork, as well as the community accepting it.”
Even the Bitcoin Cash fork has a few sticky issues around it. Those who owned Bitcoin suddenly inherited equal amounts of Bitcoin Cash – it was a freebie, and a bonus of what those in the Bitcoin Cash community thought to be a solution.
However, now with multiple Bitcoin forks emerging, those same freebies exist, and many will initiate forks simply to receive equal amounts of the new coin. It also then calls into question the miners for the new fork as, if it is a “proof of work” blockchain like Bitcoin, it needs the miners to keep it going – and keep it viable.
Really, the viability of forking is in the eye of the developers proposing the fork, as well as the community accepting it. There are forks, and then there are forks, and it depends on the nature and necessity of them to prove if they are truly viable.
Criticism of the Bitcoin Cash fork is widespread amongst proponents of the original Bitcoin blockchain, with Charlie Lee claiming that “Bitcoin Cash is trying to scale everything on-chain but this doesn’t work for a decentralized system. Bitcoin Cash is also miner-controlled and miner-centralized. It’s pretty much all sorts of wrong.”
This is reflected in a recent Financial Times piece which claims that not actually very many people are using Bitcoin Cash. It seems odd, then, that developers increased the maximum block size to 32MB in May, around 640 times its previous average. Someone aptly tweeted about the increase, saying ‘If no one is using an 8 line highway, upping it to 32 lanes won’t solve that.’
Illustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]