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Blockchain – What is Forking… and how has it impacted Bitcoin & Ethereum?

Bitcoin and Ethereum are fundamentally the soundest projects in the crypto space. They have the biggest and most active communities and are the most developed

Bitcoin and Ethereum are fundamentally the soundest projects in the crypto space. They have the biggest and most active communities and are the most developed. One quirk of blockchain is the idea of forking. Forking is a process of creating new coins. Forks occur when the Blockchain of a coin is split into two to create two new Blockchains. The new split Blockchain that follows a different protocol is said to have ‘forked’ (branch out or separate) from the old Blockchain. Since these chains follow different protocols and are incompatible with each other, the fork is called a ‘hard fork’.

forking

Forking

I say forking is a quirk because it is atypical of traditional business. In traditional business, if a certain subset of the company does not agree with the approach they cannot simply just split the business in two and continue in the way they see fit. However the community orientated ethos of blockchain means things are thankfully different. Forked projects are built on strong foundations. Typically they are also carried out by informed and invested community members with a real desire to make a better blockchain. This can increase the credibility of the project in investors’ eyes.

Ethereum Classic was listed on Coinbase yesterday bringing the total number of projects listed there to 5. These constitute Bitcoin, BCash, Litecoin, Ethereum and now, Ethereum Classic. Coinbase favours the solid background of forked projects.

Bitcoin Cash

Perhaps the most popular hard fork of Bitcoin, this hard fork differs from Bitcoin on the very same issue of block size limit like the previous variants. Offering a higher block size limit of 8 MB, Bitcoin Cash boasts of greater transaction speeds and less transaction fees. It is also more miner friendly as it allows for quick change of mining difficulty (processing power needed to validate Bitcoin transactions) in response to the preference of miners. Though this makes the network less secure and more centralised, Bitcoin Cash is the second most costly cryptoasset and comes third by market cap, only next to Bitcoin and Ethereum.

The Bitcoin Cash hardfork has also created one of the most bitter feuds in the cryptoworld. There are thousands of daily tweets and entire subreddits devoted to arguing over who is correctly fulfilling Satoshi’s vision. It is unusual for a hard fork to create such vitriol and thankfully this aspect is largely absent with Ethereum and Ethereum Classic.

Ethereum Classic

Ethereum and Ethereum Classic split as a result of the DAO loss in 2016. A loophole in the Decentralised Autonomous Organisation allowed users leaving the group to enter multiple refund requests. Hackers stole over a third of the DAO’s $150m store of ether this way.

This obviously led to some redevelopment. Ethereum functions on a brand new blockchain. The vast majority of miners, users, and protocol from the previous version of Ethereum use this new version

Ethereum Classic runs on the same protocol doing a similar function. It does have some distinct differences in its community. The 10% or so people from the original Ethereum are relatively in the shadows and are loyal to the concept of the immutable ledger. ETC primarily has value because of the speculator market, much like many of the other alt-coins out there.

Ethereum , on the other hand, is more like a software company that wants to grow and could possibly have more hard forks in the future. The leaders of the ETH community are far more public in nature than those in the ETC world. ETH primarily has value due to a mix of the speculator market, but more so due to its use of case scenarios and community support. The Ethereum Alliance, for example, consists of billion-dollar firms such as Accenture, JP Morgan, Microsoft, and UBS. This support, in turn, has added credit to ETH over ETC.

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