A hard fork occurs when there is a change in the network so different from the previous one, that merging is impossible, therefore, a new part appears. It’s like a snapshot, where you record the network data in a “photo” that will be used by the created variant.
But the fork does not necessarily occur within a blockchain. The Tech Fork, for example, makes you start from scratch, even when you have used another Blockchain as a base. Usually, this type of practice signals that a new project appears, seeking to solve a new problem. Blockchain Fork, therefore, has a more internal upgrade-oriented sense. In this division, it is understood that the Technological Fork is geared towards innovation and the Blockchain Fork is more geared towards a division of the community.
Forks can end up forcibly directing users to some projects, so it’s very important to be careful. As there is a “doubling” of the assets, the initial behavior of the agents is to carry out the sale, generating negative pressure on the price.
ICO’s also had their notoriety, where their exchange launches had standard bullish behavior at the beginning and bearish at the end. A recent example is LUNA, from Terraformlabs.
Coming back to the Hard Fork, we recently have the Ethereum situation, which will change its consensus from proof-of-work to proof-of-stake, in its update called Merge. This change is justified by an analysis of future demands, given the expected scalability. In a more general justification regarding Proof-of-stake, it is the resolution of the “51% Attack”, which theoretically could put an entire proof-of-work-based blockchain at risk.
Changes in the sense of solving real problems is very interesting, but if the market is not rigid in choosing its champions, bad projects can be confused with good projects and end up harming the market itself.
This and much more can be followed in the Decentralized Debate that aired on 08/14/2022.
Warning: The text presented in this column does not necessarily reflect the opinion of CriptoFácil.
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