Forks - Bitcoin vs. Ethereum

in #blockchain8 years ago

Bitcoin's forking problem

Today's fork created Bitcoin Gold. A couple of month's back there was a fork that led to the creation of Bitcoin Cash. Again in November, there is going to be another fork to Segwit2x. Many more forks can happen down the road -each claiming to have a new variation of the Bitcoin blockchain. Afterall, bitcoin's source code is open source, and so is the blockchain accessible to all participants. If a group of people decides to host nodes with a particular version of the BTC code software with a particular change in the code (or logic) and start mining their own blocks a new chain is created.

The largest challenge for participants(traders, nodes, exchanges, miners) in the crypto-ecosystem is to identify that one of the forks is the original Bitcoin. Recently a couple of early adopters (Bitcoin millionaires) started claiming that Bitcoin Cash was the original Bitcoin and that they would fight for the rebranding.

Needless to say, this looks like the wild west in finance, where many versions of the same chain can exist independently, without anyone to control or coordinate these changes. (Time series Price correlations between Bitcoin Cash and Bitcoin has been < 0.6 since the birth of Bitcoin Cash).

Every exchange that supports Bitcoin will at the time of the fork have to decide at the time of the fork to either support or to not support the fork. This is tedious work, to ensure that wallets of all users now access the corresponding keys on different blockchains to reflect the right balances. For exchanges will millions of users like CoinBase, Kraken, etc. this is a huge software update challenge.

Ethereum's Fork (No! Problem)

Compared to Bitcoin's forking problem, Ethereum's hard fork to the Byzantium release did not create either a new chain or a new token variant of Ethereum. The Ethereum ecosystem, though, closely resembling Bitcoin's ecosystem rallies around Vitalik and the Ethereum Foundation's proposed changes. This is a wonderful model for large scalable open source systems, and, is slowly but surely leading to a self-regulated environment wherein a core team decides the roadmap for scaling (or other features) to be rolled out. The entire community of nodes, miners, and developers rally behind the fork and adopt the fork almost instantaneously.

Scaling the network, for all participants i.e. nodes, exchanges, transaction endpoints such as payment nodes, etc. become significantly simpler with Ethereum's fork.

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