Bitcoin forks are events where the currency split's into two due to contradicting opinions of the currency's developers. The forks make new versions of the currencies and promote more opportunities for the cryptocurrency market.
There are many different types of forks with different purposes. Users generally prefer one fork over the other, making some of them valuable and sustaining their market position. In this article, you will learn what Bitcoin forks are and how they impact crypto users.
What Is A Bitcoin Fork?
The technology of mining and blockchain is highly complicated. To simplify this, a fork is when two miners disagree over a protocol or set of rules that govern a particular transaction; a
single protocol is "forked" into two different sets of rules that develop different transaction histories. One can choose to follow either of them. This disrupts the original blockchain technology that Bitcoin was built on and forces the transaction fee to rise. The 2018 Bitcoin fork is an infamous example of it.
Types of Fork
There are two different types of forks.
A soft fork only introduces a varying of the Bitcoin protocol without impacting the end product. The change is backward compatible, which means the miners using the software identify the new fork within the system without going through the trouble of updating their software.
A hard fork is when the new set of protocols is not recognized by the old system, creating an entirely new currency. A hard fork is backward incompatible, suggesting that the miners have to update their system to recognize the block developed by those running the new system. However, the new system's technology remains the same as the old one due to the network building their system on the original blockchain. Bitcoin, Bitcoin Cash, and Bitcoin Gold are results of hard forks.
What Happens to My Investments If my Bitcoin Forks?
If you are a trader and your Bitcoin fork's, it will be because you have the same coins on both forks. You will have to choose between the branches that are forked. Each fork has a different protocol which results in different outcomes, so doing extensive research about each one is the ideal way to choose between them.
There is no magical way that ensures profits on your Bitcoin investment. However, you can get rich with bitcoin if you make smart decisions and put in time and effort.
An increasing number of hard forks means new competitors, which makes the Bitcoin market volatile more than ever.
In case of a fork in your bitcoin, the best way to keep your trade safe is to follow forums like Reddit and Twitter, so you can stay up-to-date about the fork events. The numbers of traders in the crypto market are ever-rising, and these communities help you stay informed about the forks and where you can find the key to find your coins in case they are forked.