Understanding Blockchain Forks
A hard fork in blockchain technology is a change in the protocol of a network that renders previously invalid blocks and transactions valid, or vice versa. This means that nodes that have not upgraded to the new protocol will be unable to validate blocks that have been created by nodes that have upgraded. Essentially, a hard fork creates a permanent divergence in the blockchain, resulting in two separate versions of the blockchain.
Bitcoin Cash The most famous example of a hard fork is the creation of Bitcoin Cash from Bitcoin in 2017. Bitcoin Cash was created due to disagreements within the Bitcoin community over the size of blocks in the blockchain. Bitcoin Cash increased the block size limit from 1 MB to 8 MB, which was seen as a way to increase the transaction throughput and reduce transaction fees. Those who disagreed with the change in protocol created a new blockchain, and those who supported the change continued on the original chain.
Ethereum Another example of a hard fork is the Ethereum hard fork that occurred in 2016. The DAO (Decentralized Autonomous Organization) was a smart contract on the Ethereum blockchain that raised over $150 million in funding. However, a vulnerability in the code was exploited, and millions of dollars were stolen. To recover the stolen funds, the Ethereum community decided to create a hard fork that reversed the transactions that contained the stolen funds. This resulted in two separate versions of the Ethereum blockchain: Ethereum (ETH) and Ethereum Classic (ETC).
Overall, hard forks can be controversial within a community, and can result in the creation of two competing blockchains. While they are necessary at times to implement changes or fix issues within a blockchain, they can also be seen as a threat to the security and integrity of the network.
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