For those who are in the cryptocurrency trading and Bitcoin mining, this ‘forking’ is a usual term. The occasional wild price fluctuations that cryptocurrency users face are commonly referred as ‘fork’. So let us try and understand the basis of these forks and its quite sure lot of people are still new to this term, so let’s have a look.
Now, what is cryptocurrency? A cryptic medium that makes transactions transparent to the whole community and completely digital without a centralized authority is a much simpler definition to cryptocurrency. But the holistic procedure to make this happen is quite complicated and there are users, miners and set of rules involved in-between to make this happen.
Generally, forking occurs when two data miners find a valid hash in a short time period. When both the miners send the hash to others for verification, this causes the network to split in two: where both believe their hash is going to be included in the ledger. This creates the fluctuation and thus leads to forking. In Bitcoin, the forking can happen when the software updates to a newer version. This may look simple but it can turn out be very dangerous as this can cause a ripple effect to the whole blockchain users. This is because no two blockchains can be correct instead only one is right and valid, so the coin transactions in the wrong blockchain will be lost completely if not solved by experts. So the users are always warned about forking whenever it happens regarding the temporary ceasing issues in that particular blockchain.
- Transactions could be lost during a fork
- Risk of losing tremendous money if software not kept up-to-date
- Stressful environment is created due to the risk involved
There are different kinds of fork that occur like
- Accidental fork: This is the common one when two miners who found the same hash.
- Hard fork: This occurs when develops upgrade the programming of virtual coins
- Soft fork: This occurs when software protocols are changed and can be reversed with a hard fork.
- Git and software forks: These are outcomes of a temporary or permanent codebase that is developed newly.
Being a cryptocurrency trader or user needs immense practice and great management skills and also the ability to handle stressful situations. They are reversible but yet can cause panic and anxiety at times. Forks are indeed stressful however if the program developers are able to efficiently improve the codes and reverse the effect in shorter time then it is a relief. To master the art of cryptocurrency and coin trading the primitive step is practice and effective handling skills.