When someone asks for the difference between Bitcoin and Bitcoin Cash, what immediately comes to mind is “hard fork”. Hard forks are important to the ever increasingly popular cryptocurrency ecosystem, even as many share different views about the concept.

Some people feel that a hard fork is a disruptive force because it often comes as a split that may mean disaster to virtual currencies, while others consider it as an interpretation of vibrancy and advancement of the cryptocurrency sphere, and as such, should be greatly embraced. Whatever view you share on hard forks, it is essential to understand the features of a hard fork as well as its effects on the cryptocurrency sphere.

What Is A Hard Fork?

Hard forks usually occur when the original blockchain protocol of a coin experiences an update in its software codes in order to enhance its features. For example, the software updates to the blockchain protocols of Bitcoin (BTC) lead to the first hard fork or creation of Bitcoin Cash (BCH) on August 1, 2017. So one wouldn’t be wrong to say Bitcoin is the parent of Bitcoin cash.

Made up of continuously growing blocks of data, blockchain is a public and distributed ledger that shows records of transactions relating to a cryptocurrency. The blockchain serves as a framework and core technology of Bitcoin, which is the pioneer, largest and most popular digital currency.

Therefore, any upgrades or improvements to features of the blockchain would require a modification in its underlying codes since the framework and rules have been encoded in its software.

Going further, the initiation of a hard fork will lead to the permanent splitting of the blockchain as a new set of enhanced codes and rules governs the new chain based on its software. Notably, there are various kinds of hard forks in cryptocurrency.

Types of Hard Forks

Types of Hard Forks

1.Planned Hard Forks

A planned hard fork involves the initial establishment of a protocol upgrade whereby the split would have been scheduled from the launch. It is an upgrade to boost the features and functionalities of the blockchain. A planned hard fork is similar to the continual updates that our smartphones or computers usually require. Notably, no new currency will be created because there is no support for the old chain, which becomes extinct after the new upgrade.

Ethereum’s Metropolis is an example of planned hard forks. It was introduced to enhance the privacy, security and scalability of the Ethereum network.

2. Contentious Hard Forks

As the word “contentious” suggests, this kind of hard fork is usually due to differences among founders or stakeholders of a blockchain on how to go about the management of the protocols.

This disagreement would later result in one faction of the community, creating a new chain by introducing key modifications to the code and its protocols of the blockchain, with the thought of being the better one.

Contentious hard forks involve making changes to the underlying rules of the software code, however, there is usually little or no upgrades to other features and capabilities of the blockchain. For instance, the hard fork that led to the creation of BCH from BTC by some members of the bitcoin community when they increased the block size in an attempt to solve Bitcoin’s scalability issues.

3. Spin-Off Coins

The open-source nature of Bitcoin means that anybody can make changes to its public codebase with the aim of launching a new coin with unique features. These software code updates are usually made to launch a new project that comes with advanced functionalities and features. They do not come as a result of differences within the community as is the case in contentious hard forks.

A good example is Litecoin (LTC), which was created by changing Bitcoin’s original codebase. The software changes resulted in improved features in Litecoin such as quicker confirmation intervals and increased availability of LTC supply.

A Good or Bad Idea?

Depending on the various type of hard forks and for different scenarios as mentioned above, one can say that hard forks can both be a good and bad idea. In the case of contentious hard forks, the turn of events that lead to a split in the community may come out as the best way forward in some cases, it may also lead to chaos in the case that one faction gets considerable domination over the other.

A research released in September 2018 showed that hard forks endanger the price stability of cryptocurrencies. According to Benjamin Trump, a researcher from Oak Ridge Institute Education;

"Hard forks are a threat to maintaining a stable and predictable operating platform that is essential if cryptocurrencies are to be adopted for daily financial transactions."

However, transparency and decentralization are laudable features of the blockchain technology, which the open-source nature of most crypto projects clearly demonstrates. Transparency affords all crypto stakeholders unlimited access to the dealings and transactions regarding a particular currency; this is where hard fork becomes an innovation Decentralization empowers participants by allowing them to choose how to run a project within the crypto community.