In the ever-expanding universe of cryptocurrencies, Tether (USDT) has emerged as a significant player. Tether (USDT) is a cryptocurrency that serves as a stable coin, pegged to fiat currency, specifically the US dollar. It was created to provide stability in the cryptocurrency world, allowing users to conduct transactions without being subject to significant price fluctuations, and for storing and transferring value within the cryptocurrency space. Over the years, it has become one of the most popular cryptocurrencies among traders and investors, holding a special significance in the cryptocurrency market. In this article, we will explore what Tether is, how to buy and store it, and delve into the key aspects of using this cryptocurrency.
What is a hard fork and how does it happen?
What is a hard fork?
A hard fork is a change in the current cryptocurrency algorithm that cannot be combined with the previous version of the blockchain, and after it the software needs to be updated. As soon as the hard fork takes effect, all financial transactions that were carried out before, in the old protocol, will be invalid in the new one. In other words, a new alternative chain is being created in the network of nodes. A hard fork is often also called a split of an integral network into two directions, which had both common functions (blocks) and cardinal differences. Such directions can fully exist independently of each other.
A split is sometimes just necessary for any cryptocurrency project, as it introduces improved changes that can please regular users, as well as involve new ones.
Many people are already accustomed to such updates, as they understand the need to develop the project for each cryptocoin using hard forks.
What is the purpose of hard forks?
They can be carried out for various reasons, it already depends more on the project management and what exactly they want to get from such changes in the network. If you take a bitcoin hard fork, then it was carried out in order to create a new Bitcoin Cash coin and solve the problems of anonymity, low scalability, speeding up the work process, high commissions and the impossibility of mining for a regular user that existed in BTC. There are cases when the developers of the project make such changes because they simply have no other choice. However, here they turn back time. This is how the Ethereum hard fork happened. In 2015, a fraudulent attack was carried out on the Ethereum network, as a result of which many nodes were affected. In order to avoid losing everyone, the programmers rolled back the network to its previous state and thus minimized large losses.
The hard fork occurs in two scenarios:
- The first is when the entire cryptocurrency community moves to new nodes and stops the old ones.
- The second is when the project exists in parallel before the split and after it. At the same time, each crypto coin has its own crypto community, individual investments, plan, strategy, etc.
As practice shows, the price of a new coin will not necessarily be higher than that of the old one. As an example, you can take BTC and BCH. After the appearance of the second, the cost of the first did not fall, but remained the largest and most stable on the digital market of coins and tokens.
What is changing?
- coin issue;
- task complexity;
- time to create a block and its minimum and maximum size;
- the amount of remuneration;
- mining algorithms - PoS, PoB and PoW.
Who conducts hard forks?
Theoretically, absolutely anyone or a group of people can make a change. The main aspect here will be that for the full functioning of the updated coin, the votes of the majority of the crypto community are needed. Otherwise, the appearance of new blocks simply does not make sense. In this regard, the initiators of hard forks are often people who have a good reputation and many like-minded people. Often such splits can mean that there are disagreements and quarrels in the community itself and it is simply impossible to do otherwise.
Pros and cons of coin hard forks
Pros:
- Modernization and improvement of software;
- Attraction of new clients;
- Many financial opportunities for mining;
- Revitalization of the digital market with novelties;
- Correction of found problems.
Cons:
- Community split;
- Possible panic in the community;
- The further development of the hard fork is unknown;
- Activation of hackers;
- An increase in the volatility of the previous coin of the project.
How can you prepare for a future hard fork?
Before a possible fork in the network, it is better to leave your savings in cryptocurrency on a personal electronic wallet, and not on the exchange and deposits. As a rule, if the exchange is reliable and solid, then it will take care of the safety of its customers so that they do not lose their funds. We advise you to regularly update the system, so you protect yourself from losses, and also receive new fork tokens. However, in order to continue using them, you need to create a new crypto wallet and transfer money to a new address.
What are the types of Hard Forks?
Cryptocurrency hard fork is divided into two types:
- Simple fork - occurs by developing a new cryptocurrency on the already existing algorithms of the old code in the block. After that, an updated code is released and, accordingly, a new coin with a zero history of financial transactions and a user base. This is how Litecoin and Dash were created on the basis of Bitcoin.
- Softfork - makes changes to the code, which allows users to work with the old version of the coin or token software without much difficulty. Here the transition to the new version is quite smooth. As for the complete disconnection from previous algorithms, this is also possible here, but on one condition: all network members must upgrade their personal wallets.
How do you know when a hard fork is needed?
Sooner or later, problems or new ideas are brewing in any community that need to be eliminated and implemented. Therefore, a group of people is formed, which includes: traders, developers, miners, designers, analysts, marketers, which make changes to the project. However, how do you know that you need to change something?
A major update of the project software should be done when the following occurs:
- Mining is centralized and remains inaccessible to ordinary users;
- The network suffers from poor scalability;
- Large commissions create congestion in the blockchain itself;
- It is necessary to eliminate bugs and problems in the code that prevent it from fully functioning;
- It is necessary to take a step or several steps back in order to roll back fraudulent network hacking schemes;
- It will be quite real here to change the strategy, management, plans, goals, and beliefs of project managers.
Hard forks of the most popular cryptocurrency blockchains
Previously, we have already briefly mentioned several well-known cryptocurrencies and their changes, but we want to stop here and present the information in more detail.
Most of the changes were in the project of the first coin - Bitcoin.
- To speed up the processing of applications and transactions, it was proposed to increase the size of the chains in the block. The size was chosen by voting of all community members. This change was named Bitcoin Unlimited. However, it never went into effect as large mining pools tightened control over the characteristics of the coin.
- A variant of network acceleration using a fixed increase in chains was proposed. Developers from Btc Core were considered the initiators of such a proposal. Unfortunately, this idea did not gain a sufficient number of like-minded people and was not implemented.
- Bitcoin Classic was supposed to expand the block size in two stages: first it was planned to increase to two megabytes, and then to four megabytes. Initially, most of the community liked this idea and discussed it for a long time, but over time everything calmed down and no result came out.
- In order to implement mining for anyone on video cards, changes were made to the cipher system. Switched from sha256 encryption to Equihash. Such a project was called Bitcoin Gold.
- Bitcoin Diamond offered a wide range of changes. The key ones are: block size expansion, the introduction of SW (Segregated Witness), a completely different functioning algorithm for mining (X13), work was also carried out to increase the number of emissions.
- In order to increase the speed of processing applications, transfers and scalability, the processing time was set to 3 seconds in the amount of up to 2 MB. BTC Lightning offered to use the Lightning Network algorithms, as well as smart contracts. But, as with other projects, it was not possible to realize these goals and they were abandoned.
- Perhaps the most successful hard fork in the history of Bitcoin is Bitcoin Cash. In this chain, the block size was increased to eight megabytes. To save space in the block, the sizes of signatures in transactions were reduced by moving them out of scope, according to the Segregated Witness algorithms. EDA features have also been introduced.
As for the Ethereum Blockchain, there were not so many edits and changes. In the entire history of the ETH coin, only one impressive hard fork can be tracked. It was carried out in connection with the hacking of the DAO system. The project itself was launched as a smart contract and raised over $145 million. Later, the developers noticed that something went wrong in the system, as money suddenly began to disappear. As a result, the hackers managed to steal the Eth coin worth $50 million. It was possible to use the stolen money only after 30 days, as it was indicated in the ICO. In order to return the money, Vitalik Buterin, known to many, initiated a hard fork, as a result of which he managed to save some of the money, and another coin appeared - Ethereum Classic (ETC).
Bitcoin Cash hard fork
This hard fork was called the most scandalous in the history of digital coins and tokens. In November 2018, the Bitcoin Cash network scheduled an update to its project. As soon as the discussion of new goals and plans began, the participants realized that they could not come to a common decision and the community was forced to split into two groups. The former developed a new cryptocurrency called BTC Cash ABC, while the other developed Bitcoin SV. Let's take a look at what benefits each of them offered for its users.
The Bitcoin Cash ABC group was supervised by investor Roger Ver, and the project received money from sponsoring the Bitmain mining pool. The following was suggested here:
- Implementation of cross-chain functions for transactions;
- Functioning of smart contracts;
- Transfer of non-tokenized digital assets;
- The ability to have a vote in voting for the optimal chain size in the block;
- Accelerating the confirmation of large blocks in the shortest possible time.
As a result, this particular coin was chosen by the majority and became the original version of BCH.
The second community that worked on the creation of Bitcoin Cash, Satoshi Vision, positioned themselves as adherents of the vision of the legendary Satoshi Nakamoto. The main project was the businessman Craig Wright, who later announced to everyone that he was the same Satoshi. However, few people believed him, everyone called him “fake Toshi”.
The Bitcoin Cash SV project has been working on:
- Block size of 125 MB or more;
- Using the coin only as a means of payment, without smart contracts;
- Rollback of the blockchain to the original version of BTC Cash.
It cannot be said that this coin has received tremendous success among others, some exchanges have even removed it from their ratings. Many believe that this attitude towards the coin was caused by Wright's statements that he is Satoshi.
Hardfork and mining
Mining is an electronic way of mining digital coins. Many analysts and cryptophiles claim that the success of a new coin directly depends on the miners. If a couple of months after the release of the coin, there are no requests for its mining, then we can assume that the project has failed. Let’s take the Btc Cash cryptocurrency, which gained popularity and a long period of existence due to the increased demand for mining.
However, do not forget that a large block size entails some resource difficulties, and if the problem is not solved, then over time the project may lose some of the miners. As you can see, some projects that promote not quite popular and familiar solutions (burning part of the coins, a constant increase in the size of blocks) affect many factors in the life of the coin itself and mining becomes quite costly. The community needs to understand that if there are difficulties within the team, or if it is not possible to adapt to new changes in the digital market, it is best to simply close.
How does a hard fork affect the exchange rate? conclusions
A hard fork occurs by forking the original blockchain into two completely different blocks that operate on different algorithms and technologies. Such a change is necessary to update the software and modernize the cryptocurrency project. The impact on the course here is as follows. At the initial stage of separation, the value of the coin will inevitably fall. The further fate of the course depends only on the team of this coin. Thanks to the joint efforts of analysts, developers and marketers, you can achieve the desired result in a certain period of time.
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