What are Bitcoin forks? Can forking be profitable?

It feels like Bitcoin will have a fork every three to five. But what is a fork? Can we profit from it? Are forks risky? Did you get free coins through the fork? Let's talk together.

Back in August 2017, the first digital currency generated by a fork of Bitcoin was born: Bitcoin Cash. However, since then, there have been many forks of Bitcoin, such as Bitcoin Gold and Bitcoin Diamond. Most people still don't know what these forks mean, how they happen, and whether they can benefit from them.

So, what is a fork?

A fork is basically a change to the current Bitcoin code (or protocol), in other words, someone makes a change to the rules of Bitcoin. Imagine you're playing a game with thousands of people from all over the world, and someone says, "Why don't we change the rules." Usually, for the game to stay intact, everyone needs to agree to the rules. Change to consensus. After the rules are changed, the normal operation of the game will not be affected. But if there is no consensus on this change, there will be two different versions of the game, one running the original rules and the other running the new rules. In other words, the game forks, similar to the forks of the road, which also happen in the Bitcoin code.

Typically, when a fork occurs, you will have one "original bitcoin" and one "new bitcoin". For example, Bitcoin Cash changed the block size from 1 MB to 8 MB, so more transactions can be processed per block.

So there were some people who supported this change, they moved from the Bitcoin network to the Bitcoin Cash network.

There are also people who want to maintain the original rules and continue to use the "original bitcoin" (so there is a fork).

Of course, my explanation of Bitcoin forks is relatively simple, because each fork is different.

There is a soft fork, and the new version can be well compatible with the old version;

There are also hard forks that produce a completely different new coin.

All the Bitcoin forks that you have heard of so far are hard forks.

Why should we care about forks? There are several reasons:

First of all, you may feel that the new rules and new coins are better than the original ones;

Secondly, the fork may have an impact on the Bitcoin community, the application of Bitcoin, and even the price of Bitcoin, which we will discuss later.

In the end, you want to profit from selling the new forked coins, because every bitcoin holder gets these new forked coins.

Wait a moment.

Can I get coins for free?

Yes, you heard that right.

Back to the game just mentioned. Imagine that your game has been running for a long time and you have accumulated a lot of points. Now someone wants to change the rules, but doesn't want the players to lose the points they already have, so when the new game starts running, everyone gets the same amount of new points. For example, if you have 150 points in the original game, you will get another 150 points for the new game after you have the new game. You can play two games at the same time if you want. In both games, you have 150 credits.

Let's see how this situation applies to Bitcoin. When a fork occurs, people who support the fork say, "We don't like the old rules, so let's create a new one." People who hold Bitcoin at the time of the fork will have two "bitcoins Coins": "Original Bitcoin" and "New Bitcoin". It's up to you to decide which to use, or both. It means that if you hold a bitcoin when the fork occurs, the original bitcoin is still in your hands, and you can also receive a "new bitcoin" that runs on the new rules,

Is it not easy to understand? Just remember one sentence:

When a bitcoin fork occurs, any bitcoin holder gets the same amount of new coins.

The new currency will not be automatically sent to your address, you need to collect it yourself. Therefore, each new fork coin has a different claim mechanism, which we will not discuss in detail in this video.

You can hoard the new coins you have successfully received, or sell them. In other words, you can earn money through forks, because you can easily get free coins and sell them on exchanges. Is it easy to make money?

With the emergence of a series of forked coins such as Bitcoin Cash, forking seems to be a legitimate way to change the original course of Bitcoin. But the forks after Bitcoin Cash have all been similar, and more of a marketing gimmick than an actual ideological change. In other words, if someone feels that Bitcoin is not good enough, he can create a brand new altcoin, there is no need to clone Bitcoin at all. ThatThe reason why they choose to fork Bitcoin is mainly for the following three reasons:

1. Marketing gimmicks

Bitcoin forks are the new ICOs, and everyone wants to get free forked coins, so everyone spares no effort to fork Bitcoin. How to better attract the attention of investors when issuing new coins? Just say, you're forking Bitcoin, and that's it.

2. Developers can earn a fortune.

Some forks do not really copy the previous rules of Bitcoin. The way the rules are changed is that developers get a large number of newly issued new coins, and when the new coins can start trading, they sell them in the market.

3. Fraud in the name of fork

Scammers can fork Bitcoin to smash the market, and even steal users' Bitcoin while users are receiving new forked coins. Therefore, there is also a great risk in receiving forked coins.

So, how do we securely claim the new forked coins?

First of all, I suggest that you have a good understanding of this forked coin, understand the developer team, understand their past background, understand their planning process, and read articles about this project. If there is no problem, this forked coin should be fine. However, even if this fork is legitimate, it does not mean that receiving new coins is worthwhile.

The process of receiving new coins is usually very complicated, and there is a risk of losing coins if you are not skilled in the operation. For example, if you have 0.5 Bitcoin, then you are eligible to own 0.5 Bitcoin Gold. I don't know if the value of 0.5 Bitcoin Gold is worth your risk. Of course, this is up to you to decide.

There is one very important thing: forked coins must implement replay protection. Basically, the network can separate the old currency from the new currency, and will not send the original currency to the new currency address when receiving the new forked currency.

When you decide to receive forked coins, I suggest you follow the guidelines of some formal wallets or information. Remember, this is your money and only you are responsible for it. There is one rule that must be followed:

Before receiving the new coins, you can transfer the bitcoins to a new wallet that can generate new mnemonics, so that you can reduce the chance of losing bitcoins to almost zero.

Hopefully, you now have some understanding of what a fork is, how it works, its benefits, and potential problems.