*Further down we will analyse the upcoming ETC Hardfork (approx 5th March).
But to begin with, you need to understand what a fork is and how it works.
What's a Fork on the blockchain?
If you remember how the blockchain works (Analysed on a previous post - see the post here), there can be only 1 valid chain of blocks. These blocks represent and keep a record of every event that happened on the blockchain up to that specific moment in time. So "Forking" a blockchain is literary taking a snapshot of the complete set and running it parallel to the original, thus having a separate and autonomous blockchain formed that can run independent from the master chain.
What is the purpose of a Fork?
There are many reasons why a fork may be applied. Some of these are:
- An upgrade to the core code of the existing blockchain, that cannot be applied on the current running blockchain (Incompatibilities).
- A division of roadmap, meaning the developers wish to follow a separate path, and thus form 2 different blockchains to apply their changes accordingly
- A new blockchain project that wishes to take advantage of existing data, but cannot run on the existing blockchain
*Other reasons exist, but the main ones are listed above.
Soft Fork VS Hard Fork
The main difference between the 2 forks is the way it gets implemented.
A "Soft Fork" is a change to the master core code, but it is subject to voting. By voting it is not implied that we all get to drop a vote, rather the biggest players such as mining pools, masternodes, wallet providers etc get to choose whether to upgrade to the new blockchain Fork or remain on the existing. If the fork receives sufficient coverage, it is then established and will survive. The same goes for the master blockchain, whereas if it keeps enough support it will also survive and continue on as it was.
A "Hard Fork" follows the same above rules for survivability but is more of a "Hostile Takeover"! In other words, when a Hard Fork is applied, it is final, everyone is instructed to switch to the new upgraded blockchain and usually it is announced that the original master will not be supported further.
How does it affect you?
In most cases, you don't have to do anything during, before or after a Fork. Your wallet, mining pool or whatever blockchain service you use, will do the necessary tasks for you. If the fork splits in 2 separate chains, you will have equal coins in both. In some cases, where the split and both chains surviving is expected (Such as the ETC Fork analysed below), the developers of the fork may apply a ratio rule for coin distributions, e.g. if you have 5 coins on the master chain you get 1:10 (50) on the second or whatever ratio they deem logic and/or fair.
Upcoming ETC HardFork
To put all the above in perspective, we have the opportunity to analyse the upcoming ETC Hardfork which will occur at block-height 5500000 (Approx 5th March). It is classified as a Hard Fork and it is purposed to apply new changes the ethereum-classic (ETC) blockchain with some interesting upgrades. However, this HardFork does not imply the drop of support for the existing chain. A new chain will be formed parallel to the master ETC chain and will be called Callisto Network (CLO).
Callisto is an experimental network, that hopes to achieve scalability for both ETC and Callisto by acting as a side-chain. This is a brilliant concept that can improve various aspects of the ETC blockchain and is comparable with the infamous Bitcoin Lightning Network. In layman's language, several actions (ie transactions or smart-contracts) can be executed on the sidechain without affecting the parent network or use it's resources, and further added to the parent as a bulk transactional block.
The concept of side-chain and cross-chain operations is the best to-date solution for scalability issues, as you can have multiple blockchains serving the master. Expansion with this concept is theoretically infinite!
During this fork, all ETC holders will receive 1:1 equal distribution of CLO coins (Callisto). As expected, and since the announcement of the Fork, a bull run has been noticed on the ETC price, as investors are stocking up ETC for the free CLO distribution. If you wish to participate and claim some free CLO, there is still time to acquire some ETC, but beware of which wallet you keep them during the fork. If you are on an exchange or other wallet provider, you may need to ask them if they will support CLO and will they provide you with your free CLO. Rule of the thumb is, any wallet that you have your private keys yourself is a safe bet for the CLO drop. e.g. MEW wallets, jaxx, ledger/trezor etc.
More info can be found at these official resources: