Fork (Blockchain)
A blockchain fork is a divergence in the chain of blocks that makes previously valid transactions invalid, or vice versa. In other words, it’s when two different versions of the same blockchain come into existence due to a disagreement among miners on how the protocol should be updated. Forks can occur naturally and intentionally.
Types of Blockchain Fork
Soft Fork: A soft fork is a type of software protocol upgrade where only one set of rules are followed by all nodes on the network regardless if they have upgraded or not. This means that users who do not upgrade will still be able to use their existing version to transact with those who have upgraded but at an increased risk as some features may no longer work for them. It also means miners must update their mining software in order for new blocks to be accepted by all participants in the network.
Hard Fork: A hard fork is a type of software protocol upgrade wherein there are now two sets of rules – one set from before and one set from after the split was initiated – which both exist simultaneously on two separate blockchains until one eventually dies out due to lack of support or user adoption over time. This means users must upgrade their wallets in order to participate in transactions using either version while miners need new mining hardware and software that supports both versions simultaneously until it can determine which will eventually become dominant within its own framework based upon market forces such as hash power distribution and user sentiment/adoption levels amongst others factors like fees associated with using each version etc..
Advantages & Disadvantages
Advantages: One advantage is that forks allow developers more freedom when making changes without having consensus from every participant on the network itself thus creating more innovative projects with less restrictions overall compared against traditional systems like banks etc.. Additionally, this could potentially lead to faster development cycles since upgrades would no longer require full agreement between people nor need long drawn-out debates about what should be done next as decisions can simply be made unilaterally through code updates instead depending upon how much control developers want over their respective networks/applications themselves.. Finally, forks could also help reduce centralization since multiple stakeholders could contribute towards developing various aspects related towards improving any given project rather than relying solely upon just one group alone (i.e., major corporations).
Disadvantages: One disadvantage is that forks can cause confusion amongst users since they might not know which version they should use or trust especially during contentious times when multiple chains are running concurrently and trying desperately vying for dominance amongst its peers as well as causing potential financial losses if investments were made into coins prior too early without thorough research first being conducted beforehand – something investors definitely don’t want happening! Another downside is that these types events often result in high transaction fees due higher demand placed onto certain blockchains leading up until resolution has been achieved thus meaning greater costs incurred by companies wishing utilize cryptocurrencies within day-to-day business operations ultimately resulting lower profitability margins overall compared against traditional payment options available today such credit cards etc…
