What is a fork
The word “fork” is sometimes used in the space of the cryptocurrency. Some people think it has something to do with the eating utensil when you use this word. That is both false and right.
When used concerning cryptocurrency, the term “fork” usually refers to a break of one cryptocurrency into two distinct cryptocurrencies, or even two variants of the same one. For example, a fork will be one example of Bitcoin splitting into Bitcoin and Bitcoin Cash. The reason the term fork is used to describe this form of occurrence is that there is a handle in the structure of a basic fork, which is a certain length and then splits into separate tines.
When and why do occur forks?
Forks normally arise when one cryptocurrency is generated from another’s existing blockchain, or when the cryptocurrency’s underlying software is modified. Forks happen when a group of people only want to create another cryptocurrency; they think it would be superior to the old one. People create cryptocurrencies either because they think they’ve created one that’s better than the original, that serves a different purpose, or otherwise.
Hard forks vs. soft forks
There are two main fork types: hard forks and soft forks. A hard fork is when a cryptocurrency is separated into two different currencies. For example, it was a hard fork developed from the Bitcoin blockchain, when Litecoin was formed. If the hard fork is over, then the two distinct cryptocurrencies exist as independent entities.
When an update for a particular cryptocurrency is made, a soft fork is formed. Soft forks can lead to a temporary situation where the culture around the cryptocurrency must determine whether or not the modified or original version will be the currency’s primary variation. If this occurs, the winner becomes the currency’s primary edition.
The benefits of forks
Forks are extremely important in the ecosystem of cryptocurrency since this is how many cryptocurrencies are produced or enhanced. As the cryptocurrency industry continues to expand and develop rapidly, updates for existing cryptocurrencies will be needed. Many people will likely continue to build new crypto coins with hard forks. So forks enable the entire cryptocurrency industry to continue to expand and develop.
Do investors gain?
Yes, investors will certainly benefit from the forks, and they can do so in different ways. The first is called an “airdrop.” Airdrops occur when the hard forking of an established cryptocurrency produces a new cryptocurrency. An airdrop is effectively when owners of a hard-forked crypto-currency obtain an equal amount of the new currency that suits their actual possession. This is because the new cryptocurrency is based on the blockchain of the original.
But investors will get “free” money when they buy hard forked cryptocurrencies. For example, everyone who owned Bitcoin at the time received an equal amount of Bitcoin cash coins when Bitcoin was hard forked into Bitcoin Cash. Currently, Bitcoin Cash is worth about $2,500, around six months after the hard fork has occurred. So, a lot of people who got Bitcoin Cash airdrops made a lot of money here.
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