Bitcoin forks create a great deal of confusion in the cryptocurrency community. While forks may be complicated, they are a necessary part of the blockchain development process and are critical in manifesting the decentralized future that blockchain aims to achieve.
With the right knowledge, crypto forks are simple and easy to understand. In this guide, we’ll present the complete chronology of Bitcoin forks and explain their purposes to help you understand why forks are important.
The Creation Of Bitcoin: The Genesis Block
The history of Bitcoin began in January 2009, when the mysterious creator of the cryptocurrency- Satoshi Nakamoto- released the very first software implementation of Bitcoin. The first news release announced the “release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending”, and presented Bitcoin as “completely decentralized with no server or central authority”.
Following the first release of Bitcoin, Satoshi mined the first Bitcoin block, which is known as the Genesis Block.
The first block was mined on a 0.10 version of the Bitcoin software, which meant that Bitcoin had a long developmental journey ahead and would be constantly updated in the future. When Satoshi was the only active miner, this wasn’t really an issue.
When the Bitcoin network would grow to millions, billions of dollars would then be at stake, which causes the nature of changes to the software to become far more sensitive. As Bitcoin is designed to be free from centralized authority, there is no one person or group that decides which changes are implemented.
- Block size: 1 MB
- Algorithm type: Proof of Work (based on Sha256)
- Block mine speed: 10 minutes
- Difficulty time: every 2,096 blocks
- Transactions per second: 7 max (4.4 on average)
Bitcoin Software Development
It’s possible for anybody to submit a BIP, which stands for Bitcoin Improvement Proposal, and contribute to the development of Bitcoin. A BIP proposes an update to the Bitcoin code- which can be either the Bitcoin protocol itself or its documentation.
If the BIP is met by general community approval, it can be pushed out with the next update of the Bitcoin Core Client. At this point, nodes and miners are able to decide whether they want to update their software to the next version or not.
Most Bitcoin software changes aren’t critically important, so they don’t require a significant amount of attention. In many cases, it’s not essential for users to update their software. In some cases, however, software changes are so important that they require everybody to update their client at the same time in order for the network to continue to function.
In these cases, a “fork” is required. When a fork occurs, the temporary or permanent creation of a parallel blockchain is implemented. The new chain uses the new software, the old chain uses the legacy software. Ultimately, the longest chain will “win”.
There are two types of forks. The simplest kind of fork is a “hard fork”. When a hard fork is implemented, the new, updated version of the software will reject all transactions from the legacy version of the software. This can be viewed as backwards incompatibility.
A “soft fork” is the second kind of fork, and is backwards compatible. Making a transaction on the legacy software would reflect in the new software. The transactions that occur on the new software, however, are not understood by the old software.
The Creation of Bitcoin XT
Bitcoin XT is generally regarded as the first divisive fork in Bitcoin history. The first Bitcoin XT client was launched by Mike Hearn in December 2014, and attempted to implement a selection of new features including some of Hearn’s own BIP 64, which is still active and in use in the current Bitcoin core.
The creation of Bitcoin XT caused drama when Hearn, in partnership with Gavin Andersen, planned the implementation of BIP 101. It should be noted that both Hearn and Andersen have played major roles in the historical development of Bitcoin over the duration of its lifetime.
What Was Bitcoin XT Trying To Achieve?
The Bitcoin XT fork was proposed in order to reach 24 transactions per second on the Bitcoin network by increasing the total block size to 8 MB.
Bitcoin XT Reception
The Bitcoin XT fork was well-received upon first launch, and was run by over 1,000 nodes at the time of implementation in August 2015. Over the course of time, however, Bitcoin XT has suffered a sharp decline.
The Current Status Of Bitcoin XT
While Bitcoin XT had more than 1,000 nodes at the time of launch, the project was essentially dead by early 2016. Gavin withdrew BIP 101 when he realized that it wasn’t possible to achieve the 71% acceptance rate XT was seeking. While Bitcoin XT is still maintained, it’s now considered an extremely minor crypto. Today, there are less than 30 Bitcoin XT nodes running.
Bitcoin XT Features
- Hard fork of Bitcoin core
- 2 MB block size at inception that could be increased in response to market needs
Why Bitcoin Classic?
After the failure of Bitcoin XT, there was still a strong desire in the Bitcoin community to increase block size and thus speed up transactions. Some developers created the Bitcoin Classic fork in February 2016.
What Does Bitcoin Classic Do?
Bitcoin Classic aimed to increase block size to a moderate 2 MB. While the fork received a significant amount of support from a number of large companies, it didn’t gather a significant amount of traction. Around eight months after launch, the Bitcoin Classic fork changed direction and aimed for a market-driven blocksize.
Bitcoin Classic Features
- Hard fork of Bitcoin core
- 2 MB block size, which later changed to market-driven block size
Is Bitcoin Classic Still Relevant?
Bitcoin Classic is currently run by around 100 nodes, compared to the 2,000 or so nodes it boasted in 2016. The Bitcoin Classic project still exists, and has now adopted a long-term development strategy over the next 5 years.
Bitcoin Unlimited is still relatively popular, and currently boasts around 650 nodes at the time of this report.
Bitcoin Unlimited Fork Strategy
The Bitcoin Unlimited fork has a unique strategy. The Bitcoin Unlimited code has been released, but the platform itself hasn’t provided any direction on which type of fork to implement. A number of companies such as ViaBitcoin have offered a range of solutions that are intended to create a fork mechanism. ViaBitcoin have highlighted the fact that more than 75% of miners would need to signal in favor of the fork.
Bitcoin Unlimited Features
- A hard fork
- Miners determine block size
- Nodes and miners are able to set size limits on the blocks they accept, which is set to 16 MB but can be customized
Bitcoin Unlimited has suffered from some serious reliability issues. In one specific event, more than 70% of Bitcoin Unlimited nodes crashed due to memory leaks.
The Current State Of Bitcoin Unlimited
Bitcoin Unlimited is unique, as no coins can actually be purchased yet. Popular exchange platform Bitfinex has created Bitcoin Unlimited futures, which can be purchased and traded. It’s relatively difficult to determine, at this stage, what Bitcoin Unlimited will eventually look like. If you’re interested in the development of Bitcoin Unlimited, you can check their progress on the Bitcoin Unlimited GitHub.
What Is SegWit?
Segregated Witness, or SegWit, was first proposed during the December 2015 Bitcoin scaling event in Hong Kong by Core Developer Peter Wuille. The concept was met with a huge positive reaction, and was eventually proposed as BIP 141 by Eric Lombrozo, Johnson Lau, and Wuille.
There is no simple answer to the question of “What is SegWit?”, but it can be expressed in minimally complex terms as a “hack” that reduces the size of each individual Bitcoin transaction. Each Bitcoin transaction is composed of a number of different elements, which includes a signature.
In order to minimize transaction size, SegWit removes these signatures, which account for more than 60% of the entire Bitcoin blockchain according to Dr. Peter Wuille. Signatures are now stored on another data structure called an “extended block”.
SegWit also offers other advantages, such as a fix to transaction malleability, which is an old Bitcoin bug. These advantages are important as they facilitate the development of second-layer applications such as Atomic Swaps or the Lightning Network.
Ultimately, SegWit was introduced as a BIP 9 soft fork, and received 95% approval from miners. The SegWit fork was activated on August 24 2017.
- Soft fork
- Implements the Segregated Witness featured presented by Dr. Peter Wullie
Many Bitcoin users don’t like SegWit or the impending SegWit2x fork. When it became apparent that the SegWit fork would occur on the Bitcoin main chain, many users responded by supporting a sudden hard fork.
Why Bitcoin Cash?
The Bitcoin Cash for didn’t wait for support, and simply specified a date at which it would branch off from the Bitcoin main chain. After the 1st of August, 2017, Bitcoin Cash wallets began rejecting Bitcoin blocks and transactions.
Bitcoin Cash Implementation
The Bitcoin Cash fork received a significant amount of support from a number of major influencers, including prolific crypto investor Roger Ver and Bejing-based mining platform ViaBTC. A number of major exchanges such as Kraken decided that they would provide Bitcoin Cash to their BTC holders. Bitcoin Cash is also supported by Bitcoin XT, Bitcoin Unlimited, and Bitcoin Classic.
Who Is Mining Bitcoin Cash?
An interesting feature of Bitcoin Cash is that it’s possible for BTC Cash miners to easily switch from Bitcoin to Bitcoin Cash mining. This has created a phenomenon called “opportunistic mining”, in which miners swing between Bitcoin and Bitcoin cash depending on the profitability of each coin.
Bitcoin Cash Nodes
Bitcoin Cash is currently run by around 800 nodes, although this number fluctuates due to opportunistic miners. The number of nodes running Bitcoin Cash has remained more or less stable since the fork occurred in August 2017.
Bitcoin Cash Price Evolution
The price of Bitcoin Cash has fluctuated significantly since its creation. While it has reached as much as $900, it’s now stable at around the $300 mark at the time of this report. It’s important to remember that a significant amount of the Bitcoin Cash generated at fork has not yet been claimed, but is still incorporated into market cap calculations. If Coinbase, for example, releases the Bitcoin Cash from their BTC wallets, it will have a massive impact on Bitcoin Cash price.
- 8 MB blocksize
- No SegWit
- Emergency Difficulty Adjustment Mechanism
Bitcoin Gold And Scalability
Bitcoin Gold is an implementation of Bitcoin that possesses a fork model based on the original Bitcoin Cash fork. Bitcoin Gold aims to reduce the importance of large scale miners on the network instead of scalability.
Bitcoin Gold Status
Bitcoin Gold is currently implementing a mining framework that could potentially allow anybody with a powerful GPU to mine Bitcoin at a competitive level. We should see the release of Bitcoin Gold in the first half of November 2017. If you’re interested in Bitcoin Gold, follow the development team on Twitter.
- Hard fork
- Dynamic mining difficulty estimated each block
- New Equihash mining algorithm
SegWit2x is currently the hottest topic of contention in the crypto ecosystem at the time of this report. Bitcoin Gold is still popular, but has not dominated Bitcoin related discourse anywhere near as much as SegWit2x.
SegWit2x is presented neatly in the New York Agreement, which has been signed by some of the most influential and important CEOs in the Bitcoin ecosystem. SegWit2x proposes a compromise between Segwriters and Big Blockers, and aims to activate and implement a hard fork that would result in the blocksize increasing to 2 MB.
The New York Agreement
The decentralized nature of blockchain technology is fundamentally opposed to centralized dictatorship, and thus the New York Agreement was met with harsh criticism from the Bitcoin community. Instead of aiming to please everybody, the SegWit2x concept will impose SegWit on big blockers that don’t want it, while small block proponents will now have their block size doubled.
Discontent regarding the SegWit2x fork has been particularly visible during the Breaking Blockchain conference, in which the hashtag #NO2X was virulent. Despite this, SegWit2x is still likely to happen, although a number of larger blockchain companies have withdrawn their support. Recently, Coinbase has stated that it would list the proposed new chain as Bitcoin2x.
SegWit2x won’t integrate replay protection, which is intended to guard against replay attacks. These attacks are essentially duplicates of transactions from one chain to another. SegWit2x developers have not expressed any plans to integrate replay protection, as they (somewhat arrogantly) assume that SegWit2x will become the main chain, and that Bitcoin Core will need to implement it.
- Hard fork
- Implementation of Segregated Witness
- 2 MB block size
- No replay protection