The History of Bitcoin Hard Forks: Conflict and Growth

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From its peak of $69,000, Bitcoin has led the entire crypto market into a bear market that has lasted nearly two years. As we approach the 2024 halving, many are hopeful that Bitcoin will once again lead a bull run, similar to the past three cycles. However, history doesn't simply repeat itself. Bitcoin's growth curve has entered a flatter phase, and it needs new catalysts to surge upward.

The fourth Bitcoin halving is expected to occur in April 2024. Miners' block rewards will drop from the current 6.25 BTC to 3.125 BTC. With the current reward, data from BTC.com shows that the shutdown price for mainstream Bitcoin miners is between $14,000 and $20,000. After the halving, if hash rate doesn't increase and transaction fee income remains unchanged, Bitcoin's price would need to exceed $40,000 for miners to break even and have an incentive to maintain the network.

Each bull run has seen Bitcoin's price increase by a smaller margin, while hash rate continues to grow. In fact, since 2018, Bitcoin has underperformed many major U.S. stocks, with gains only close to those of Amazon and Netflix. Apple's gains were three times higher, and Tesla's were over eight times greater.

Even during bear markets, Bitcoin's hash rate continues to rise. After each halving, Bitcoin's price increases have been smaller than the previous cycle. The question of how to keep miners in the network to maintain Bitcoin's security after mining ends has been raised since Bitcoin's early days. Increasing transaction fees is not a viable solution, so boosting transaction volume to raise miner income is the only path forward. As a result, efforts to scale Bitcoin have never ceased, and hard forks have continued as a way to "search for a better Bitcoin."

What Is a Bitcoin Hard Fork?

A Bitcoin fork is defined as a change in the network's protocol or a situation where two or more blocks have the same block height. Forks are typically implemented to add new features to the blockchain or to reverse the effects of hacks or catastrophic errors. Forks impact the validity of network rules and require consensus to resolve. Without consensus, a permanent split occurs, resulting in a hard fork.

Depending on the object and purpose of the hard fork, they can be categorized into several types.

Hard Forks of Bitcoin Clients

Bitcoin XT

Bitcoin XT was one of Bitcoin's earliest famous hard forks, initiated by Mike Hearn. Before the actual fork, Hearn proposed BIP 64 on June 10, 2014, suggesting the addition of "a small P2P protocol extension to perform UTXO lookups given a set of outpoints." On December 27, 2014, Hearn released version 0.10 of the XT client, which included the changes from BIP 64.

In August 2015, Bitcoin XT adopted BIP 101, proposed by Gavin Andresen, which increased the block size limit to 8 MB per block, raising Bitcoin XT's TPS to 24. Bitcoin XT initially saw success, with over 30,000 to 40,000 nodes running its software in the late summer of 2015. However, within just a few months, the project lost user interest and was largely abandoned.

Bitcoin Classic

As Bitcoin XT declined, some community members still wanted to increase the block size. In response, a group of developers launched Bitcoin Classic in early 2016. Unlike XT, which proposed increasing the block size to 8 MB, Classic aimed to raise it to just 2 MB.

Like Bitcoin XT, Bitcoin Classic initially garnered interest, with node counts ranging from 27,000 to 200,000 in early 2016. The project still exists today, with some developers strongly supporting it.

Bitcoin Unlimited

Since its release in early 2016, Bitcoin Unlimited has been an enigma. The project's developers released code without specifying the type of fork required. Bitcoin Unlimited's unique feature was allowing miners to decide their block size, with nodes and miners limiting the block sizes they accepted, up to 16 MB. In November 2016, the project shifted to a solution that transferred the power of software rules to miners and nodes. The complexity of this rule change led to Bitcoin Unlimited largely failing to gain acceptance.

Hard Forks Creating New Bitcoin-Based Coins

This is the most common type of Bitcoin hard fork. By changing network rules and sharing transaction history with Bitcoin up to a specific point in time, a new blockchain network is created.

The following is a list of hard forks that split from Bitcoin, organized by date and block:

Bitcoin Cash (BCH)

Bitcoin's first hard fork occurred on August 1, 2017, resulting in the creation of BCH. This fork was initiated by the Bitcoin Unlimited team, with support from Bitmain, the world's largest mining hardware manufacturer. This fork凭空 created a cryptocurrency that ranked fourth in market cap at the time.

BCH supports larger blocks as a scaling solution, currently allowing blocks up to 32 MB. Bitcoin Cash remains Bitcoin's most successful hard fork, ranking as the 28th largest cryptocurrency by market cap as of June 2023.

Bitcoin SV (BSV)

On November 16, 2018, Australian businessman Craig Wright, who has long claimed to be Satoshi Nakamoto, initiated a fork of BCH. This resulted in the creation of BSV (Bitcoin Satoshi Vision), which Wright views as embodying "Satoshi's vision."

Similar to how BCH forked from BTC, the BSV fork represented a ideological divide within the BCH community between Jihan Wu and Craig Wright. Wu advocated for gradual improvements, while Wright called for radical changes—implementing 128 MB blocks and locking the client to version 0.1 from Satoshi's era.

Bitcoin Gold (BTG)

BTG was a hard fork in October 2017 that differed from Bitcoin in its Proof-of-Work algorithm. The creators aimed to restore GPU mining, believing that Bitcoin mining had become too specialized in terms of required equipment and hardware.

With Bitcoin's increasing mining difficulty and the emergence of Application-Specific Integrated Circuit (ASIC) hardware, it became nearly impossible for ordinary people to participate in Bitcoin mining. BTG supporters argued that this was detrimental to Bitcoin's security.

BTG introduced a pre-mining feature, allocating a certain amount of BTG directly to the team's address, which later sparked controversy. In the eyes of many investors, BTG became a classic example of a project using a hard fork to exploit investors.

Since BCH became Bitcoin's first hard fork project on August 1, 2017, forking Bitcoin has become increasingly common. According to statistics, over 10 Bitcoin fork projects emerged in December 2018 alone. According to forkdrop.io, there are as many as 78 such fork coins. Many of these were created by speculators and scammers using the hard fork narrative to commit fraud.

Beyond these two categories, there is another type of hard fork: experimental hard forks designed to test new ideas for Bitcoin. You might think of Litecoin (LTC), but in the future, you're more likely to hear about LayerTwoLabs, MainChain, and DriveChain.

LayerTwoLabs' Planned Experimental Hard Fork

This type of hard fork is a last resort, similar to the creation of Monero and Ethereum, and similar to the hard fork planned by LayerTwoLabs.

Due to the increasingly conservative stance of the Bitcoin Core team and the BTC ecosystem, and the critical importance of Bitcoin's network security budget, recent soft fork upgrades have occurred only every 2-3 years. BIP-300/301, which has support from many community members, has been delayed indefinitely. With the halving approaching, the issue of miner loyalty is becoming more pressing, and solutions must be accelerated. LayerTwoLabs plans to conduct a hard fork of Bitcoin this year as an experiment and a temporary measure to seek solutions.

However, LayerTwoLabs' planned hard fork differs from those of Monero and Ethereum. The latter created new chains because their improvement proposals were not adopted by the Bitcoin Core team. LayerTwoLabs aims to use the hard fork to validate the feasibility and effectiveness of their DriveChain solution, hoping to persuade the Bitcoin Core team and opponents to implement BIP-300/301 upgrades on the Bitcoin network. This would enable Bitcoin scaling and enhance its security and utility in the future.

BIP300 Miner Sentiment

BIP300 supports decentralized sidechains, such as EthSide or zSide, or even larger block size sidechains. This would make BTC's development more competitive. Users might not trust BIP300, rendering it useless. Additionally, miners would be responsible for adding/removing sidechains, which they might find burdensome. BIP300 doesn't seem to harm any other BTC use cases, so it should likely be activated.

BIP301 Miner Sentiment

BIP301 introduces Blind Merged Mining (BMM), improving merged mining by eliminating the need for miners to run alternative chain software. BIP301 can be used by altcoins (e.g., Namecoin) or BIP300 sidechains (referred to as "Drivechains"). There don't seem to be any technical objections to BIP301. Merged mining has been used continuously for over 10 years. On the other hand, there hasn't been much technical review of BIP301. BIP301 doesn't seem to harm any other BTC use cases, so it should likely be activated.

LayerTwoLabs' hard fork also differs from BCH/BSV. The BCH/BSV hard forks were due to disagreements with the Core team on scaling approaches. Their approaches required changes to Bitcoin's underlying code and had a tendency toward future centralization, potentially impacting Bitcoin network security. LayerTwoLabs advocates for smaller blocks, and the DriveChain scaling solution doesn't require consensus-level code changes to Bitcoin. Security issues on sidechains wouldn't affect the main chain. Existing concerns among opponents primarily revolve around the security of cross-chain assets and how to prevent miners from acting maliciously in cases of hash rate centralization. In BIP-300's peg mechanism, malicious behavior by miners would be both a short-sighted trade-off and an unethical, illegal act in broad daylight, easily addressed by honest participants.

For years, the DriveChain community, led by Paul Sztorc, fiatjaf, and others, has been working to advance and popularize DriveChain. They have proposed an improved form of merged mining with BIP-301, designed seven sidechains with various functions, and integrated miner and developer resources. They are about to embark on a bold exploration of Bitcoin's future path.

Hard Forks: Both Division and Growth

A single voice in a community is dangerous, and the consequences of stagnation can be unbearable. A hard fork is a division, but division can also be a form of growth, seeking opportunities through different paths. Bitcoin has always faced ideological disputes. For Bitcoin supporters and enthusiasts, hard fork experiments are explorations of solutions, not ruptures.

To some extent, each new Bitcoin fork creates fertile ground for the development of blockchain and crypto technology as a whole, whether it's genuine developers innovating or merely narrative-driven forks for speculation. As the most popular crypto project on the market, Bitcoin has always been a hub for new and promising ideas using its publicly available blockchain code in various directions. It has spurred the emergence of exciting cryptocurrencies and blockchain applications like GameFi, NFT, DeFi, and the Metaverse.

DriveChain offers a simple, effective, and secure way to integrate these use cases into the Bitcoin network and address the fundamental network security issues arising from declining miner rewards. LayerTwoLabs and its community will explore its effects.

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Frequently Asked Questions

What is a Bitcoin hard fork?
A Bitcoin hard fork is a permanent divergence in the blockchain that occurs when non-upgraded nodes cannot validate blocks created by upgraded nodes following new consensus rules. This results in two separate networks with a shared history up to the fork point.

Why do Bitcoin hard forks happen?
Hard forks typically occur due to disagreements within the community about protocol changes, scaling solutions, or philosophical differences regarding Bitcoin's direction. They can also address security vulnerabilities or implement significant technical improvements.

What's the difference between hard forks and soft forks?
A soft fork is backward-compatible, meaning non-upgraded nodes still recognize new blocks as valid. A hard fork is not backward-compatible and requires all nodes to upgrade to the new protocol version; otherwise, they split onto a separate chain.

Are Bitcoin hard forks profitable for investors?
Historically, some hard forks have provided value to Bitcoin holders through airdrops of new tokens. However, many fork coins have little to no value, and some were created explicitly for speculative purposes or scams. Thorough research is essential before engaging with any fork.

How does Bitcoin's upcoming halving relate to hard forks?
The halving reduces miner rewards, potentially threatening network security if transaction fees don't compensate. This economic pressure fuels discussions about scaling solutions, sometimes leading to proposals for hard forks to increase transaction capacity and fee revenue.

What makes DriveChain different from previous hard forks?
Unlike forks that create competing chains, DriveChain aims to enhance Bitcoin through sidechains without changing main chain rules. It proposes a modular approach where experimentation happens on sidechains while preserving Bitcoin's core stability and security.