Why Do Coins Hard Fork (Why Do Coins Explode)

Why do coins hard fork? In the Bitcoin network, forking is an important part of the consensus mechanism.

When a hard fork occurs, in order to prevent unnecessary chaos and errors caused by the drop in coin price, there will generally be upgrades or changes to the blockchain protocol, producing new and old versions (e.g. Ethereum merge). These types of projects usually update or adjust on different chains. However, this approach may also lead to events such as new tokens being stolen by hackers, attacked, or even pre-emptively released.

Why do coins hard fork?

We know that many codes in the blockchain world are published by open-source developers, without any official organizations endorsing them, nor any centralized entities controlling them. However, because blockchain systems require a large amount of computing power to operate and transaction fees are high, many blockchain projects have adopted this model.

Therefore, smart contract codes on the blockchain often have vulnerabilities and security issues that cannot be fixed once a bug occurs.

For example, once a Bitcoin address owns more than 10,000 bitcoins, it will be threatened by 51% security risk. This situation can be solved by “flash lending” or by “malicious mining” through launching a one-time attack on block packagers to achieve double-spending. This ensures that users will not lose their assets and can fund transactions in exchanges.

With more and more digital currencies entering the crypto market, their prices will also rise. If the prices of these tokens rise significantly, they may continue to skyrocket.

As we can see, Ethereum has already had a large number of hard forks related to it. Although there are currently no specific hard fork plans, according to a research report from the Ethereum Foundation, it is expected that $10 billion will be used to support this plan by 2021, with more than half of it completed in the past two years, and the majority will be implemented by the end of 2022. (Decrypt)

Why Do Coins Explode?

Editor’s Note: This article is from 8btc (ID:bitcoin8btc), written by Jeff Benson, translated by CaptainHiro, and published with permission by Planet Daily.

In recent Bitcoin and Ethereum markets, the term “coins” has been used to the extreme, and when people become interested in it, this phenomenon becomes very common – because these cryptocurrencies are usually pegged to the US dollar and are easily affected by price fluctuations, such as stablecoins like USDT or DAI. However, in fact, some tokens have become a good store of value, and as many investors believe, they are looking for other ways to purchase and trade digital assets. What are coins? Why can coins skyrocket? Simply put, people want to invest money in something, such as cryptocurrencies, stocks, or bonds, and then profit from these assets; however, when such a thing really happens, the project will quickly collapse. This leads to a question, what do people want? One synonym for “inflation” is “deflation”, its growth is driven by its native token “XRP” (Ripple), but as more and more funds start to flow into it, this concept emerges.

So, what contributes to these “issuances”?

From 2017 to early 2018, various tokens based on blockchain technology experienced explosive growth, until January 2nd of this year, it came to a complete halt. At that time, less than 10% of the circulation could sustain the network, but in the past year, this number has dropped significantly to 20%. However, it seems true now, although the market value has not reached its historical high, the quantity has increased by more than double in the three months before the end of 2020.

Therefore, although the prices of most tokens are still not fully validated, their increase in the upcoming period may be even higher.

Of course, some people think this is the result of market expectations because according to CoinMarketCap data, as of 10 am on June 30th, “coins” doubled within about 5 days and reached a historical high of about $10 billion. In addition, since early April, more than 20 listed companies have held at least 10 million coins, and over 50% of the total supply has been used to pay issuers.

So for those who are unfamiliar with cryptocurrencies, can they understand why their coins experience rapid declines? The answer may be yes, but the reality is not so straightforward. “High demand drives low supply.”

In order to make these newly generated coins more liquid, investors often increase their positions, providing them with more convertibility, and attracting more users to enter the market.