Why are Forked Coins Created (Risks of Forked Coins)

Why are forked coins created? In the cryptocurrency market, the emergence of forked coins can result in significant losses for investors. But why do these forked coins appear? Is it to prevent asset theft by preventing capital outflows that lead to splits?

For the encryption industry, forking is a new concept or technological form aimed at solving some issues that are incompatible with blockchain technology. It can be divided into two parts: an upgraded version of the Bitcoin protocol and a sharded network. These projects often adopt different methods to achieve interoperability, hence the new term “hard fork”. This pattern is also called software-hardware separation. If a project wants to become a software system, it needs to be modified or updated to support transactions and calls between other tokens, similar to the operating system of Windows. However, because they each have their own code library, code repository, and corresponding development environment, there are many issues. Does the emergence of forked coins affect the overall development of the encryption industry? From the current situation, forked coins have been around for some time, but as blockchain technology continues to advance, the divergences will also grow. For example, in June 2018, EOS announced the issuance of native token EOSCoin (BCD) through an ICO. However, in the following months, the price of BCD plummeted to below $3, reaching a low of around $2. The price has now returned to normal and started to rebound, recently surpassing $1 again. Prior to this event, the official EOS team stated, “This is just a temporary pause, and we will no longer make any contributions to EOSCoin.”

However, despite this, forked coins are still an emerging phenomenon, and “when you link your blockchain wallets, you are building a decentralized global payment platform.” What is the essence of forked projects? They are all built on open-source public chains. Blockchain itself does not rely entirely on existing technology. Instead, it relies on various applications, including exchanges, DeFi platforms, etc. While forked coins may indeed disrupt the existing cryptocurrency ecosystem, they can still maintain the current network’s security and stability.

Risks of Forked Coins

In the cryptocurrency world, news about Ethereum forks is often seen because they are tokens issued by a blockchain project team.

For such events, the most apparent risks are problems with exchanges and fund security. If an exchange is targeted by hackers and unable to withdraw funds, it can lead to losses.

However, it is now becoming increasingly difficult for such situations to occur. For example, in recent times, the popular EOS forked chain experienced serious vulnerabilities. According to Tokenview blockchain explorer, the forked coin’s network has a total computing power of 129.8 TH/s, which is a decrease compared to before. At the same time, mining rewards have also decreased to around 12.5 ETH (approximately 200 million yuan), and due to fewer community votes, some holders have sold off, resulting in a significant price drop.

However, if investors are not interested in or do not have sufficient understanding of such events, they can refer to the article “OKExResearch: Bitcoin Halving Market Trend Analysis and Related Risks” for more details.