What is the forking procedure in a cryptocurrency

25 Nov What is the forking procedure in a cryptocurrency

Posted at 11:17h in General by Christian Ryan 0 Comments

The term chain refers to how its blocks are theoretically connected network (cryptocurrency blockchain), since one is connected to the immediately preceding – following through data it is as if they form a chain, where the links are connected. The way they block is related to each other regarding the data presented in each person’s head.

In particular, in the head, there is the parent block hash that connects the current block n with the immediately previous block n-1. This value is obtained through the hashing process in specific header data and using the aforementioned cryptographic algorithms to protect network data.

Modifying the Chain (Forking)

The process of making changes and implementing them with dispatch process updates is not so easy. The specific procedure in
the technological world is known as forking. The difficulty level varies. In networks that operate with permission and there are specific users, systems, algorithms, and protocols, the process can be carried out with relative ease and speed.

However, in Blockchain networks that operate without the need to obtain a license, the process is particularly difficult as the values of the corresponding characteristics reported in the networks licensed are much larger in volume.

The forks that can be executed are of two types, soft forks and hard forks depending on the type of change they are going to bring to the network. Forks are made to fix bugs, add new features to the system, or even quickly stop cyber-attacks that are carried out.

Soft Forks

Soft Forks is the process of providing changes to an application that are compatible with previous versions of the application (backward compatible). Usually, it is a simple one but essentially correcting an application bug.

After the procedure, some nodes that have not performed the upgrade will be able to communicate with the network and transact with the updated nodes. In case none or a small percentage of nodes perform the upgrade, the network will not work with the new rules but with the old rules prevailing on the network.

Hard Forks

Hard Forks, this is a completely different process. Initially, the update is not compatible with earlier versions of the application (non-backwards compatible).

The hard fork is scheduled when it is going to happen, either at a specific time or more often after creating a predefined block. Now radical changes are coming to Blockchain in the core of the application and causes a split of the chain that existed until that time. Then a new chain is created which will, in addition, the network continues to operate. It is worth noting that the old chain will also continue to exist, but no further changes are now allowed on the old chain.

There is a margin of freedom and whoever does not realize its update will be able, if he wants, to continue his participation in the old chain. In the legacy, chain changes will only be accepted by nodes running the legacy chain version.

An example of an application of a hard fork is the following:

In 2016, when and on the network Ethereum created a smart contract called Decentralized Autonomous Organization (Decentralized Autonomous Organization – DAO) in which through private funds about $150 million had been invested.

Due to security gaps that existed in using smart contracts, one group managed to mine from the network approx $50 million in the then equivalent of Ether, Ethereum’s cryptocurrency.

To combat this attack it was proposed to perform a hard fork and break the blockchain. The new chain continued to operate Ethereum as normally, while the old one was also preserved, and received the name Ethereum Classic.

Not in the new one anymore there was the security loophole and the money managed to get back to the original owners, thanks to the help of Ethereum creators.