Bitcoin is the most popular cryptocurrency in existence. This digital asset was first released in 2009 and since then has become a central figure of the billion-dollar cryptocurrency industry. Despite being at the top of crypto charts, Bitcoin is far from perfect and has long needed to undergo changes. Allowing for this, numerous development teams have come up with the idea of originating the fork to introduce a new and improved Bitcoin.
Why does Bitcoin have so many forks?
A primary reason for the emergence of new forks comes from scalability issues and limitations of the initial Bitcoin currency. Bitcoin has a block size that is fixed at 1 MB, and there can only be a set number of Bitcoins ever created and circulated. The cryptocurrency was programmed this way to allow the coins to be released into circulation in an orderly and even fashion. However, for the cryptocurrency that is as popular as Bitcoin, a small block size can be a heavy curse. At peak times, it results in slow transactions and higher fees.
Alternatively, forks can also happen when the cryptocurrency users agree on a radical change of the protocol. Prominent members of the crypto community could propose a series of protocol upgrades that would improve the original currency – not everyone may agree with these changes, however. Therefore, a fork is born releasing a new currency that uses the proposed changes and complies with a different protocol.
Backward-compatible upgrade, or soft fork
This type of Bitcoin fork is essentially comparable to a computer software update that is compatible with old versions. We can use the analogy of Microsoft Office. Let's say you are using Microsoft Office 2003 but your friend has sent you a document created in Microsoft Office 2015. You will still be able to open the document in Office 2003, however, you will be prevented from using the additional features available in Office 2015.
In the same manner, a soft fork is backward-compatible with previous versions of the Bitcoin cryptocurrency. However, any updates featured in the new protocol will not be available for use in previous versions.
Not backward-compatible upgrade, or hard fork
This type of Bitcoin fork has a fundamental difference from a soft fork. A hard fork is NOT backward compatible with previous versions of the Bitcoin currency. Once a hard fork is created, there is literally no going back – that is it! If you do not choose to take on board the new cryptocurrency then you will not be able to use it at all – you will not be able to access any of the features or interact with the other users on the blockchain.
A suitable analogy could be the PlayStation games console. If you have a PS4, you cannot play PS3 games. Moreover, if you have a PS3, you cannot play PS4 games on it – the two are not compatible.
Which Bitcoin Forks are available on the market?
However, in practice, it is not as simple and easy, and there are forks that result in the community split and the birth of a new coin or a spinoff of Bitcoin. You might have noticed that there are multiple Bitcoins in the market - these are all Bitcoin forks, actually. So, let’s finally look at the iterations of Bitcoin available, why they emerged and where they are standing in terms of market cap.
Bitcoin - the original version
Market cap: $69.5 billion
This is the original version of Bitcoin and the most circulated. Bitcoin is generally the currency that most people wish to use or invest in. It acts as a benchmark for other cryptocurrencies and is widely used by merchants and businesses. The core principle behind Bitcoin is to ensure cheap and reliable peer-to-peer transactions with no middlemen involved. Bitcoin is decentralized, borderless, and transparent.
Where to buy (top 5 exchanges): Coinbase, Bitstamp, CEX.IO, Kraken, Binance.
Bitcoin - Cash
Market cap: $2.7 billion
The most successful Bitcoin fork for today is Bitcoin Cash (BCH). This cryptocurrency is undoubtedly the most popular among other forks due to its unique features and strong backing from the community. BCH was launched in response to Bitcoin’s scalability issues. It has several differences from Bitcoin such as an increased block size of 32MB, adjustable mining difficulty, and a lack of the "replace-by-fee" feature which may cause the inflated transactions fees.
Where to buy (top 5 exchanges): Coinbase, CEX.IO, Binance, Poloniex, Bitfinex.
Bitcoin - Gold
Market cap: $294 million
This fork was created to address the Bitcoin mining issue and offer better decentralization. Bitcoin mining is largely controlled by several pools, which contradicts the underlying idea of decentralization. Early on, it was possible to mine Bitcoin using a regular PC; now the process requires more power and more advanced hardware sets. Average users cannot afford it and thus have no incentive to mine Bitcoin. Bitcoin Gold uses a different algorithm for minin through which it expects to achieve true decentralization.
Where to buy (top 5 exchanges): CEX.IO, Bitfinex, Binance, KuCoin, HitBTC.
Bitcoin - Diamond
Market cap: $148 million
Bitcoin Diamond was another notable fork aiming to improve the speed and cost of Bitcoin transactions. What’s more, the developers of BCD decided to increase the maximum supply of the coins as well. With Bitcoin, 21 million units can ever be created; with Bitcoin Diamond, however, this number is 10 times bigger - 210 million. The changes also include increasing the block size to 8mb
Where to buy (top 5 exchanges): Binance, Bithumb, OKEx, HitBTC, KuCoin.
Bitcoin - Private
Market cap: $39.9 million
As the name implies, Bitcoin Private’s purpose is to add more privacy to Bitcoin transactions. By its nature, Bitcoin is transparent, meaning that the ledger records all transactions that ever took place within the network. It is done to make the Bitcoin ledger immutable. Bitcoin Private is unique because it combines the elements of Bitcoin and ZClassic. The privacy feature is enabled due to the zk-SNARK technology used by Bitcoin Private.
Where to buy: HitBTC
Hopefully, you are now bursting with the understanding of what Bitcoin forks are and have probably decided on one to invest in. However, the forks are usually met with much controversy in the community, so it would do no harm if you research more about each of them before buying. Remember that a great investor should be well-informed about the market and its risks to make a wise investment decision.