The blockchain industry has changed a lot since the announcement of Bitcoin. The first cryptocurrency has also underwent many transformations until it reached the current point. Let’s take a closer look at that process.
In the previous episode of Throwback Stories, we brought you closer to the relation between early Bitcoin community and an infamous whistleblower, WikiLeaks. The dilemma of supporting the website divided crypto supporters. Some of them (including Satoshi Nakamoto and Hal Finney) were afraid that involvement in the situation might be harmful to the project. This time, we’re back to a more technological topic – but still strictly connected to the community context. Let’s discuss the place of cryptocurrency forks within the blockchain industry.
Fork – an evolution of software
To describe the character of Bitcoin’s divisions (both in the meaning of the software and the community), we need to look at it from a broader perspective. Forks are standard practice in the entire IT industry, especially in the context of open-source projects. They happen when source code is copied and developed independently from the original software. In that process, we receive two separate programs that go their own ways.
However, the different character of the blockchain technology makes forks much more complicated than in any other IT branch. We should start by dividing them into two types: accidental and intentional. Accidental forks are pretty simple to describe: they occur when two or more miners find the block in the chain at the same time.
Intentional forks are more interesting since they are caused by the conscious decision of some developers. However, blockchain forks can also be divided into two further parts. The first one, called soft fork, is backward-compatible, which means that blocks created under the new protocol are recognizable for old nodes. The second, hard fork, is much more complex, and creates an entirely new ecosystem. Usually, it means the occurrence of a new cryptocurrency with a separate community.
As you can see, there is a lot of dividing in this concept – and we didn’t even get to actual examples! It is also worth mentioning that forks may also be conducted in the case of proprietary software. However, it is unlikely to be the case, and they’re usually related to free and open-source software development. And since Bitcoin is such a type of project from the beginning, some kind of splits were inevitable – both in the meaning of the technology and the constantly growing community.
Emergency on blockchain
Bitcoin has gone through a lot of forks in its history. The most famous ones resulted in creating new currencies that hold a strong position on the market. Others are now almost completely forgotten. But even if their influence over the industry has faded away, they are worth mentioning: so let’s start with them.
First forks which occurred in the Bitcoin blockchain were accidental. In the initial years of the cryptocurrency, the range of the project was still limited and bugs happened more frequently. One such situation took place in August 2010. At that time block 74638 created over 184 billion bitcoins sent to two different addresses. Rogue fragment of the blockchain was noticed by developer Jeff Garzik and caused panic among the growing Bitcoin community. Thankfully, the problem was solved quickly with the new version of the client, which consists of soft fork changes rejecting value overflow transactions.
The other example was far more dangerous because it happened in the time when Bitcoin was already widespread around the world. In March 2013, unknown miner running 0.8 version of the bitcoin client mined a block which was considered invalid in version 0.7. Due to this situation, two separate chains occurred: computers with the new version continued to extend the chain with the invalid block when the nodes with previous software began to build a new one. The lack of consensus allows the most terrifying scenario in the industry to become true: bitcoins mined after the new block were able to be spent in two ways on two separate chains.
The problem was eventually dealt with by downgrading back to version 0.7 of Bitcoin client. All nodes continued to follow that chain, leaving the rogue one with an invalid block. However, the dangerous situation made the largest crypto exchange, Mt. Gox, temporarily halt deposits in bitcoins, which might have contributed to its later fall (more about it in one of the first episodes of Throwback Stories).
Soft forks resulted from such accidents are inevitable, but the cryptocurrency industry manages with them pretty well. Maybe that’s why they didn’t get much attention. Hard forks are far more important from the point of view of the changes in the market caused by them. As we mentioned before, they result in dividing the blockchain into two separate cryptocurrencies. Moreover, they used to come along with splits in the community of affected coin. Cryptocurrency history is full of such cases, and we could make a separate series about hard forks. That’s why we’d better stay with the Bitcoin.
After all, the most notable schism in the blockchain world occurred in the community of Satoshi’s coin. Everything began in 2017 and resulted in the creation of the 5th cryptocurrency according to market capitalization. The reason for the split lies in the differences concerning the block size parameter. Part of the developers believed that the constant size of the block designed by Satoshi should remain untouched. Others, led by Roger Ver, intended to increase it. The conflict resulted in creating Bitcoin Cash (BCH) on 1 August 2017.
Hard fork resulted not only in two separate currencies. The split community began an ongoing discussion about which of two coins is the heir to Satoshi’s idea. Although Bitcoin Cash is using the altered name, its users refer to it simply as Bitcoin. Moreover, the original bitcoin.com website remains in the hands of BCH supporters.
And the process of dividing the first cryptocurrency doesn’t end here. One year after the fork, when Roger Ver proposed changes to the information storage and scaling capability, some of Bitcoin Cash supporters decided to split again. That part of the community, led by Craig Wright, decided to develop its own version of Bitcoin Cash, called Bitcoin SV, a “Satoshi Vision.”
Divided, we stand
Those are the only most known examples of forks in the cryptocurrency world. Does this situation mean that our industry is somehow endangered? Apparently, no, since forked coins manage pretty well. The diversification among the crypto community is a good sing. Part of our nature is that we may disagree with other people’s perception of the situation. As long as we are able to provide our own solutions and defend them successfully, our views are equally important.
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