The other day, my friends were panicking because HIVE implemented a hard fork. Different comments everywhere.
Some were scared of losing their coins and others felt their data would be lost. Oops! Much ado about nothing…
Well! I understand their concern.
The term “hard fork” may be as scary as a human eating chicken (I mean human-eating chicken) if you are hearing it for the first time.
But there’s nothing to worry about. Hard fork is normal in cryptocurrency.
It’s the way a crypto blockchain introduces new features, improves existing ones, and maximizes its efficiency.
In a nutshell, hard fork is a software update to the blockchain network. The essence is to ensure that all miners adapt the same version of the protocol.
Generally, hard forks rectify security bugs and optimize the network system.
And they break a single cryptocurrency into two parts; thus creating a new cryptocurrency with the same structure but different functions and features.
What are the Reasons for a Hard Fork?
Hard Forks don’t just happen. They are systematic and are implemented to solve certain problems in the blockchain.
Here are some of the reasons for a hard fork;
To rectify an important security risk found in older versions.
To reverse transactions.
To add new functionality.
How Does a Hard Fork Work?
Source: Julie Bang Investopedia
Blockchain and digital currency operate the same way. So, you can use a fork on any cryptocurrency and blockchain platform.
So, making hard forks involve breaking backward compatibility through the modification of source codes in the previous version.
And when the hard fork is made, all validators will need to upgrade to the new version and of course, a new crypto will be created in the process.
Final Thought
In conclusion, hard forks are implemented to enhance blockchains and the ecosystem of digital assets.
But they can make crypto prices volatile. So, every crypto investor needs to grasp digital asset information, conditions, and risks. This will help them to invest securely.