The bitcoin fork is an updated version of the blockchain with new rules. This is the division of the chain into two independent branches, making changes to the cryptocurrency code. The purpose of the new fork is to improve the characteristics of the existing virtual coin, to create a more efficient product. The event itself caused a stir in the cryptocurrency world, and the developers were repeatedly reproached for releasing «empty» coins. What are bitcoin forks and how to earn on them, let's analyze below.
What is a bitcoin fork?
In English fork means fork. In a normal case, the chain is straight, with all links going one after the other. When several chains lead to one link at once, we can talk about a fork of a cryptocurrency. One chain branches into two and they begin to work in parallel, that is, they do not depend on each other.
See the example of Bitcoin's hardforward, Bitcoin Cash. It is one of the prime examples of this model. In 2017, another cryptocurrency emerged after branching out. Now they work together and do not depend on each other.
The main prerequisites for the fork are congested networks, increased transaction costs, and long payment processing times.
Bitcoin forks: reasons for emergence and new opportunities
The emergence of bitcoin forks is due to several reasons:
- Comfort. When the blockchain is split up, the most active participant amends the current rules of the game, making the system work on its own terms.
- Gain.The launch of a new cryptocurrency opens ways to make money. This is the main reason for creating forks, which causes many projects to fail
The possibility of earning forks is explained by the fact that after the launch of a new virtual coin, the developers immediately start mining. Due to the minimal complexity of the network, they manage to mine a lot of coins until they have competitors to create blocks. With increasing popularity of Bitcoin willing to create «own» cryptocurrency increased, but 90% of such participants aim to earn money, not to improve the system.
The emergence of the bitcoin fork affects all virtual currency owners:
- Participants in the network accept the new terms if the created cryptocurrency is better than the existing Bitcoin.
- Many use the name Bitcoin to attract attention for their ICO. A project is not interesting until it suddenly flashes the name of a coin that the world already knows.
- The emergence of a successful fork can lead to a change in attitude toward the base virtual coin and even a drop in its value.
- Open up the chance to earn the newly emerged cryptocurrency by mining and selling the earned koins.
Bitcoin Forks
There have been many forks created during Bitcoin's existence. But most of them remain unknown, Consider the popular bitcoin forks that have been talked about a lot in the cryptocurrency community.
Namecoin (NMC) - the first bitcoin fork
It was held in 2011. The developer wished to remain anonymous. The fork is almost identical to Bitcoin, but the purpose of creation is slightly different. Namecoin is a decentralized .bit domain name base. The coin retains almost all the technical characteristics of its predecessor: hashing algorithm, maximum emission, consensus algorithm.
To use the distributed Namecoin network, it is necessary to buy a domain for 1 NMC. But because the cryptocurrency is vulnerable to cybersquatting, creating an account on the network is not always easy. That said, the registration of each domain is validated by ICANN.
Its initial fork did not attract the attention of the community, but after 2 years, interest in the project began to increase and the cryptocurrency crossed the $10 mark. in 2021 Namecoin is not in demand, and the coins are trading at $1.53.
Litecoin (LTC) is the second fork of bitcoin
The second fork of the well-known cryptocurrency took place in 2012. Litecoin aims to lead the list of the most liquid cryptocurrencies. Its developer Charlie Lee is a respected personality in the cryptocurrency world.
In the new coin, the developers replaced the encryption algorithm, quadrupled the coin issue, reduced the block generation time to 2.5 minutes. In 2017, Lightning Network protocol was integrated into Lightcoin, which made transactions on the network cheaper. A little later, SegWit was updated and atomic swaps with three cryptocurrencies were implemented.
For two years after its release Litecoin remained unknown, but then the cryptocurrency showed intense and unexpected growth. in 2021 Litecoin is ranked as the 9th most liquid cryptocurrency.
Old bitcoin fork - Primecoin (XPM)
The fork was created by an anonymous user Sunny King in 2013. The cryptocurrency offers a decentralized platform for transactions. The main difference between Primecoin and Bitcoin is in achieving consensus between nodes. In the Bitcoin network, this process is based on hash searches, while in Primecoin transaction confirmation is based on useful computations through long Kunningham chains.
PrimeCoin is characterized by the speed of creation of new blocks (1 minute), rewards that depend on the complexity of the network, and unlimited coin issuance. KRM has attracted the attention of cryptography experts because of its use of Cunninngamma chains. Primecoin has also attracted the attention of cryptocurrency experts.
For 8 years Primecoin has experienced many ups and downs. in March 2021, the coin is trading at $0.24.
Known bitcoin fork: Dash
Another famous coin that was conceived in the beginning as a bitcoin hardfork. In 2014, developer Evan Duffield proposed an upgrade for the interchangeability and anonymity of the Bitcoin network. In the first 24 hours after its release, the coin experienced an instamain, resulting in almost 2 million Dash coins being mined. This caused a flurry of criticism in the community, as a result, the developers refused to carry out a hardfork, and the cryptocurrency continued its existence.
The CoinJoin mixing protocol is integrated in Dash, which ensures the anonymity of the network. However, mixing must be done manually and transactions must be sent via Private Send, otherwise you will get a regular transaction, which is easy to trace. Dash has built-in Instant Send for instant transactions.
A number of changes were made to the Bitcoin code: SHA-256 algorithm was replaced with X11, Proof-of-Activity algorithm was implemented, DGBB ecosystem was applied, which is analogous to DAO. In 2021 Dash is among the top 50 by capitalization.
Prospective bitcoin fork - Bitcoin Gold
Popular bitcoin forks of 2017: Bitcoin Gold and Bitcoin Cash. Let's start with Bitcoin Gold, which claims to be digital gold. The unfolding took place in October 2017. The Bitcoin Gold was the first bitcoin gold to be traded.
To achieve such an ambitious goal, the developers radically changed the rules of functioning of the new cryptocurrency. The hashing algorithm was changed, after which miners were able to mine coins on GPU devices. As a result, the number of users of the network increased manifold, and at the same time, the level of decentralization increased.
Bitcoin Gold aims for absolute decentralization. This goal is pursued by all Bitcoin forks, but only a few become successful. But the cryptocurrency also has opponents. They claim that GPUs are produced by two large companies, which in the future may take control of the network. But these objections do not prevent the development of the fork. Bitcoin Gold is listed on major cryptocurrency exchanges, and trading is very successful.
Popular bitcoin fork - Bitcoin Cash
The fork took place in August 20217. In this case, we are talking about a bitcoin fork, which led to the split of the community into 2 camps and the emergence of a new financial unit Bitcoin Cash, which entered the top 10 most liquid cryptocurrencies. However, not all experts are positive about the hardforward. Many argue that its popularity is based solely on its connection to the original Bitcoin.
Bitcoin Cash is a significant financial unit.
Bitcoin Cash is significantly different from its predecessor. Its code includes additional protection against bugs during transactions, as well as increased block size to 8 MB. After the success of Bitcoin Cash, developers began to plan new forks. Which were to take place in the near future. The main goal remained the same - to increase the size of the block.
Bitcoin softfork and hardfork: what is it?
The former is a mild type of modernization of the network, the relevance of keeping old and new blocks, a daughter chain is separated from the mother chain. In softforcing, some characteristics of the coin are optimized, cosmetic improvements are made. This can be compared to the existence of an academic language and an adverb. Some people have chosen an adverb and communicate in it. However, the speakers of the academic language also understand them. The consensus remains.
There remains a hard fork of bitcoin. What it is. A hardfork involves a hard modification of the program code, all the old blocks are «forgotten» and the blockchain moves in two parallel lines. By activating it, developers effectively bury the old network. Users have to choose between the two child chains. In the past, the blockchain had to be activated.
Before SMART Bitcoin appeared, there was debate as to whether a new cryptocurrency should be created or whether it should be limited to softfork. However, bitcoin's hardforward proved to be not only an acceptable technical solution, but also a good marketing tool, which subsequently led to the creation of Bitcion Gold, Bitcoin Diamond and other cryptocurrencies.
How you can get bitcoin forks
To avoid wasting time and worrying about security, you should carefully examine the project. If it shows no signs of activity, you should not get involved with it. You should find out who launched the project, what their achievements are, what the developers were doing before. The more data you collected, the better. You should also read the project roadmap. If it does not have a clear sequence of activities and milestones, you should not consider the fork as a promising one.
When will new bitcoin forks appear
Forks can be found out online. The cryptocurrency calendar (coindar.org/en) and resources coincalendar.info, coinscalendar.com. will help in this case. In social networks and social networks, you can find out when forks will appear.
Social networks and thematic Telegram channels, news agencies devoted to cryptocurrencies also provide dates of release of new branches. So far, there is no unified portal where reliable data about forks is collected. Therefore, we will have to use disparate sources of information to track the emergence of new projects.
Comments
Post a Comment