There are over 100 different Bitcoin variants or hard forks. Some popular variants still in existence include Bitcoin Cash and Bitcoin Gold. The Bitcoin code is open source, therefore, its code could be forked to create a different version.
Most of the Bitcoin variants were created to solve scalability and security issues perceived by some members of the Bitcoin community. Oftentimes, there are divisions in the Bitcoin community when a core-code-changing or parameter-altering upgrade is proposed. The debates these proposed upgrades cause in the Bitcoin community leads to the forking of the Bitcoin network sometimes.
Bitcoin variants are created from a hard fork of the Bitcoin network. When changes are proposed to an existing blockchain, the changes are carried out either through a soft fork or a hard fork.
A soft fork is a type of backward-compatible upgrade to a blockchain network. A soft fork does not change the underlying rules or the parameters of a blockchain. An example of a soft fork is SegWit – a soft fork change in the transaction format of Bitcoin.
A hard fork is a type of radical upgrade to a blockchain network. When there is a hard fork, a chain is split; miners and validator nodes choose which chain they continue to validate. A hard fork leads to the creation of a new blockchain network from the existing blockchain. Hard forks often occur to add a proposed functionality, to a blockchain to correct a security risk, or to roll back blockchain transactions.
An instance where blockchain transactions were rolled back was in 2016. The DAO, a decentralized autonomous organization built on Ethereum, was exploited by attackers. Part of the Ethereum community decided to roll back all the DAO-related transactions, allowing the DAO contributors to reclaim their funds. Some members of the Ethereum community supported the hard fork to roll back the transactions, while others were against it. After the controversial hard fork, the newly created blockchain retained the name Ethereum (ETH), while the existing (old) blockchain is now known as Ethereum Classic (ETC),
A detailed article on the difference between Ethereum and Ethereum Classic can be found on Securities.io.
Notable Bitcoin Hard Forks
Most of Bitcoin’s hard forks are mainly a result of proposed upgrades to improve the security, scalability, and decentralization of the network, or to solve a perceived problem. Some hard forks that were initially successful have been altogether abandoned by their communities and seen zero adoption; others are still actively traded on exchanges and fairly used in peer-to-peer (p2p) transactions.
Bitcoin XT was launched in 2014 by Mike Hearn, a former Bitcoin developer. The hard fork hoped to solve the Bitcoin scalability issues by an increase in block size. The proposal was formalized in Bitcoin Improvement Protocol 101 (BIP 101). Bitcoin XT hard fork launched in August 2015; its block size was 8 megabytes – an eight times increase from Bitcoin’s 1-megabyte block size.
Despite initial interest in Bitcoin XT, with over 1,000 nodes running the Bitcoin XT software, users’ and node operators’ interest in the new Bitcoin fork waned very quickly as major miners refused to support the project.
The Bitcoin XT hard fork influences Bitcoin fork proposals to this day. Subsequent hard forks have mostly implemented a block size increase.
Moving away from block size contention typically witnessed in Bitcoin forks, Bitcoin Gold’s hard fork sought to make Bitcoin a more decentralized network. Bitcoin Gold uses the proof-of-work consensus algorithm similar to its pre-fork version. However, Bitcoin Gold favors mining on less specialized hardware.
Bitcoin uses the SHA-256 algorithm and favors ASIC mining equipment, which is expensive to procure and run. Bitcoin Gold uses the Equihash algorithm and supports GPU mining, or mining using a graphics card. Bitcoin Gold aimed to make crypto mining more accessible.
The developers and supporters of Bitcoin Gold argue that as Bitcoin is only mined using expensive hardware, it creates the possibility of having only a handful of miners control the network, which goes against the tenets of decentralization. By allowing mining operations on less expensive, more available hardware, more miners could join the network, reducing the chances of a 51% attack – an attack on a crypto network in which a miner or a group of colluding miners control more than 50% of the network’s hash rate. When a miner or group of miners own or control more than 50% of the network, it could lead to double-spend and other network vulnerabilities.
Relentlessly following in Bitcoin XT’s footsteps, Bitcoin cash sought to make the Bitcoin network scalable by increasing the block size of the network. Bitcoin Cash’s block size is 8 megabytes, similar to that of Bitcoin XT.
Bitcoin Cash came about in May 2017 following discussions in the Bitcoin community to implement a scaling solution known as the Segwit2x upgrade. This led to debates within the Bitcoin community. SegWit2x was never implemented. Those in favor of a larger block size decided to create the hard fork called Bitcoin Cash.
Bitcoin Cash was designed to be a cheaper and peer-to-peer system. The block size of Bitcoin Cash is dynamic – it increases over time. The Bitcoin Cash block size started at 8 megabytes but has since grown to 32 megabytes block size.
Bitcoin Satoshi Vision (SV) was not a direct hard fork of the Bitcoin network; it was a hard fork of the Bitcoin Cash network. Bitcoin SV was created by Australian computer scientist Craig Wright, the controversial self-proclaimed Satoshi Nakomoto. Just like most hard forks that preceded it, Bitcoin SV was created to solve the scalability problem PoW blockchains face.
Bitcoin SV started with a block size of 128 megabytes. Less than a year after its creation, the Bitcoin SV network underwent an upgrade called Quasar. The upgrade increased the network’s block size to 2 gigabytes. Seven months into the Quasar upgrade, there was another upgrade to the Bitcoin SV network which was called the Genesis update: this update removed the block size limit altogether, making Bitcoin SV scalable to any possible size.
How have the Bitcoin Hard Forks Fared?
A common motive for creating these forks is to introduce a supposedly more secure and scalable system that would overtake Bitcoin in adoption and popularity. So far, none of the Bitcoin forks has been able to topple Bitcoin and its dominance.
Some of these Bitcoin forks have ended up becoming hard-forked as a result of carry-over debates among community members; even after becoming a fork the scalability debate still lingers in the communities of the fork-created blockchain, often leading to a further split.
In terms of developer activities, Bitcoin has a larger number of active developers compared to its hard-forked versions. Bitcoin has also greatly improved in scaling its network using layer-2 solutions like the Lightning Network – a lightweight, fast, and scalable network built on top of Bitcoin – and upgrades like SegWit and Taproot.
Of all the Bitcoin hard forks, Bitcoin Cash has managed to maintain relevance over the years. Its native coin BCH is still actively traded on major crypto exchanges including Binance, Coinbase, and Kraken.
In the latest development, Robinhood, in an email to customers, announced that it will end support for Bitcoin SV. Users have been given a deadline of January 25 to convert or sell their BSV. Robinhood said its decision is based on its regular review of the cryptocurrencies it offers on its platform. Similarly, BTG, the native coin of Bitcoin Gold, was delisted from Binance in October 2022. The delisting and end of support of these Bitcoin variants on major crypto platforms and exchanges clearly indicate their lack of adoption and use.
Bitcoin has, however, maintained its status as the undisputed crypto king over the years, gaining the attention of and investments from retail and institutional investors alike.
To learn more about Bitcoin, visit our Investing in Bitcoin guide.
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