The news is rife with stories about a looming Ethereum hard fork, so we wanted to delve into this a little in order to explore what’s going on and what might happen. As you may know, the last Ethereum Hard Fork didn’t exactly go to plan, so as investors we need to be able to understand what might happen next in order to prepare ourselves for whatever eventuality the next Ethereum hard fork brings. Firstly though, what is a hard fork?
According to Investopedia:
“A hard fork (or sometimes hardfork), as it relates to blockchain technology, is a radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa). This requires all nodes or users to upgrade to the latest version of the protocol software. Put differently, a hard fork is a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest version.”
“This essentially creates a fork in the blockchain: one path follows the new, upgraded blockchain, and the other path continues along the old path. Generally, after a short period of time, those on the old chain will realize that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.”
A hard fork is often seen as an essential update, though we must point out that not every cryptocurrency project runs updates in this way. Hard forks however are very common within projects such as Ethereum and Bitcoin Cash. When Ethereum forks, the community can be exposed to some of the potential issues that can occur within a fork. Like with any software upgrade, hard forks are hard to guarantee. Though the code and systems behind them might be strong, nobody really knows what an update will do, until it’s been completed.
There is an alternative to a hard fork, also known as a soft fork this provides a less intense method for upgrade - sometimes though the need for a hard fork will arise when a soft fork isn’t enough to pass on the updates. According to Investopedia:
“Hard forks and soft forks are essentially the same thing in that when a cryptocurrencies existing code is changed, an old version remains while a new version is created. However, with a soft fork, only one blockchain will remain valid as users adopt the update. Both forks create a split, but a hard fork creates two blockchains, and a soft fork is meant to result in one.”
In our next article, we are going to go on to explore some of the decisions that are being made for this next Ethereum hard fork.