Are crypto forks a good thing?

This question in particular is now filling the crypto discussions due to Ethereum’s major hard fork. So I will dive in to this subject and present information that perhaps will answer most of these unanswered questions due to bias or lack of understanding. So I will first start by explaining what a crypto fork is, to put simply it is an update to the blockchain protocol whereby the code or the process of the ledger is altered.

Different approach

They can be categorised as a “Hard” or “Soft” fork. A hard fork is when the protocol has changed significantly so that the parent blockchain is no longer compatible with the new existing daughter protocol system and therefore develops into a new cryptocurrency. A good example of this is the Bitcoin fork that produced Litecoin that effectively kept the main code with a few adjustments to allow a faster transaction speed.

A soft fork therefore is an update that is still compatible with the original protocol and therefore a new cryptocurrency is therefore not necessary. However there are “Clones” that are effectively duplications of a parent coin that develop into another cryptocurrency. A good example of this is the fork of Bitcoin to produce Bitcoin Cash.

So are these forks a good thing and why do they happen? The simple answer to this is that it depends what you are using the crypto for. This is not a vague or evasive answer, let’s go into case details of this. A hard fork usually develops due to developers of the original cryptocurrency having disagreements of the approach of how the cryptocurrency should be or the vision of what it should be. For example the development of Bitcoin XT was to increase the blockchain memory capacity to allow for faster transaction speed. You may ask what’s wrong with that? some developers felt that the memory size of the block ensures immutability.

Hard forks from a point of view from traders is extremely challenging as this adds a level of variability that cannot be technicality analysed and totally relies on fundamentals and scope of what other people will decide to invest in. This also significantly effects the price of the original cryptocurrency too. From a point of view from miners however it is always going to be unfortunate as they are disadvantaged every time. Effectively a portion of the volume transactions are lost to another cryptocurrency and lose hash rate or requires them to invest in mining the newer crypto.

From a technological standpoint point it’s a great thing as like with all products and services upgrades are required to improve the market abilities. Without these improvements it will not allow innovation to flourish in this industry and compete with other industries. If we take a look at Visa they can process far more transactions per second due to its technology, yet Bitcoin significantly lags behind. Without the constant upgrades and improvements to the blockchain technology it would surely not be able to compete in the market.

Also another perspective is that these forks or clones allow developers to explore other applications or utilisation of the blockchain technology so can enhance service or offer better products for society whatever that may be in the future.

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