Unit 6 – Forks and

Altchains Text Book:

Mastering Blockchain
Unlocking the Power of Cryptocurrencies and Smart Contracts
Authors
Lorne Lantz & Daniel Cawrey
Chapters 3
 Topic
• Introduction s
• Understanding Forks
• Contentious Hard Forks
• The Bitcoin Cash Fork
• Altcoins, Litecoin
• Privacy-Focused Cryptocurrencies, Segregated witness
• The Ethereum Classic Fork, Evolution of Ethereum
 Introduction

• Cryptocurrencies are still very much in a research and development stage.

• Developers have been trying for years to create another Bitcoin network.

• Whether because of scalability, functionality or speculation, there have been

a number of proposals for forking the Bitcoin code into a new
cryptocurrency with similar properties.
• Some of these ideas are quite novel, while others are simply a play to
engineer value.
 Bitcoin Improvement Proposals

• Why not just change Bitcoin itself?

• Its not that easy.

• There is a governance process that must be followed to update the Bitcoin protocol.

• This is typical of software products:

o Internal process to continuous improvement opportunities.

o Takes into account criteria such as who owns the product

o Who has a final say in its development

o Determines when new features should be added.

 Bitcoin Improvement Proposals
• Bitcoin core – open source – open to everyone and is intended to be owned and
managed by the Bitcoin community.

• Bitcoin Improvement Proposals (BIPs) are the community’s process to continuously

manage and update the Bitcoin Core code.

• Decisions are made by entire community.

• Anyone with the new idea can propose a new BIP.

• They must then champion the BIP to get consensus from the community that their
proposal should be approved.
 Life Cycle of a BIP

1. Someone from the community comes up with an improvement idea and proposes
it to the BIP editors.

2. If the editors approve, they create a new BIP and put it into draft status.

3. If the miners signal support for a BIP, it moves into final status. It is the miners who
need to be convinced to adopt a new BIP or not, because they are the ones
who have to upgrade their software.

4. Once a BIP is in final status, the rest of the community must upgrade to the new
software.
Following criteria must be followed to be accepted by the
community
1. It follows the correct format specified in the initial proposal outlining the process, BIP-0001.

2. It includes code that implements the change..

3. At least 95% of the past 2,016 blocks to be discovered were created by miners using the
new BIP.
• With that in mind, Bitcoin’s democratic process looks like this:

4. Anyone can propose a new bill.

5. The miners are voters, and the more hash power a miner has, the more votes they get.

6. The bill gets pushed into law if more than 95% of the hash power adopts the change.
The Bitcoin Improvement Process
 Understanding
Forks
• Bitcoin community started to come together for common good of the network.

• Programmers decided to software fork the technology, allowing them to

create their own altcoins.

• Forking involves taking the Bitcoin core software, changing some parameters, and
launching it on mailing lists and message boards.

• The result is alternative coins, also known as altcoins.

• Some of these altcoins are different from Bitcoin that it is better to refer to them as
altchains.
 Understanding
Forks
• Forking can mean differently in the cryptocurrency world. Some of the terms are:
1. Software fork:- general term in technology, developer takes a piece of open source software and
changes some parameters to meet their needs. E.g. Linux
2. Soft fork:- pertains to Blockchain technology, an upgrade to mining software that makes a change
to the network, doesn’t require all miners to participate, compatible to older software, usually
done to upgrade transaction functions.
3. Hard fork:- hard in the sense it requires all miners to participate, typically implement key security
or functionality changes, incompatible with older software.
4. Contentious hard fork:- backward-incompatible upgrade to mining software that is not accepted
by all miners, blockchain effectively splits in two, past records same but will have different
transactions records once split, incompatible to each other.
 Contentious Hard Fork
• When a contentious hard fork occurs, the blockchain of a
main cryptocurrency splits into two separate
blockchains.
• E.g. Bitcoin cash, a chain that diverged from Bitcoin in
2017.
 Contentious Hard Fork
• Each chain inherits the history of the main blockchain before the fork.

• Every previous transaction, every address balance, every block hash and so on.

• At the moment of the fork, both blockchains have identical histories.

• After the fork, each blockchain creates its own new blocks, its own new record of transaction, blocks
can be mined by different miners.
• Address A maintains a balance of 100 on both of the new blockchains, so it has 100 BTC on the
Bitcoin blockchain (worth about $270,000 at the time of the fork) and 100 BCH on Bitcoin Cash
(worth about $24,000).
• Once the Bitcoin Cash nodes start accepting > 1 MB (megabyte) blocks, the Bitcoin Cash chain forks
itself away from Bitcoin, creating the new chain.
 Miners
• Contributes hash power to keep the network running.
• When a contentious hard fork occurs, the then decide which
miners blockchain they want to support.
 Miners
• So what happens then?

• When a contentious fork occurs, the community considers the

blockchain with the highest hash rate after 2,016 blocks to be the
“winning” blockchain.

• he prize is that that blockchain gets to retain the prefork name.

• Bitcoin has forked into three substantially different blockchains that

the community continues to follow.

• They are Bitcoin, Bitcoin Cash, and Bitcoin SV.

Bitcoin’s Hash Rate
 Replay
Attack
• When a hard fork happens, both new blockchains become
potentially vulnerable to what is called a replay attack.

• Attacker takes data from a legitimate transaction on one blockchain

and
“replays” or mirrors that transaction on second blockchain.

• Two blockchains are vulnerable to replay attacks if they both have the
exact same process for generating a transaction signature.
Replay
Attack
 The Sequence of
Events
1. Address A broadcasts transaction instructions to the Bitcoin network – send
60 BTC to Address B.

2. The broadcast includes transaction data as well as a transaction signature.

The transaction signature generated by Address A authenticates transaction
on the network.

3. Since Address A has publicly broadcasted its transaction data and transaction
signature, any one can broadcast same out to the Bitcoin cash network, and
the network will process it because the two chains are similar.