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Since its inception in 2009, Bitcoin has undergone many upgrades and changes to its functioning. These transformations have reportedly been necessary as the scale of the network has grown to heights only dreamed of by many of its early adherents. Today, the Bitcoin network processes around 300,000 transactions per day. 10 years ago, it was just 5,000.
When an upgrade is implemented, it is referred to as a “fork,” which includes “hard” forks and “soft” forks. A hard fork occurs when a section of the validators on the network — the miners — adopt a new protocol. When a fork happens, validators begin rejecting transactions from the original protocol, and a new chain is created. The chain splits off with two competing blockchains.
The most famous example of a hard fork is Bitcoin Cash (BCH), which split off in 2017. The desire was to increase the rate at which transactions could be validated by increasing the size of each block. Bitcoin Cash is Bitcoin’s most successful hard fork, remaining in the top 30 coins by market capitalization.
Alternatively, the network can undergo a soft fork in which upgrades are adopted by all the miners on the network, and the upgraded protocol does not reject transactions from the previous iteration — it is “backward compatible.” A soft fork is implemented when miners on the network vote, much like a referendum.
A significant upgrade came as a soft fork in 2017 with the Lightning Network. This contentious issue in the community caused what some would call a “civil war”.
Recently, in a show of unity, miners reached a 90% consensus to upgrade the network. The soft fork is called Taproot, and it is designed to make the blockchain more private, increase speed and bring about smart contract capabilities.
The Taproot fork is considered by some to be huge for Bitcoin. Although Bitcoin is still by far the largest and most widely adopted cryptocurrency, Ethereum (ETH) has made up a lot of ground recently. Its growth was boosted by the explosion in decentralized finance (DeFi), a space that relies on smart contract networks. Bitcoin has been viewed by some to be outdated without smart contracts. But this upgrade could be an important step in the coin remaining on top of the crypto universe.
Large players like Marathon Digital Holdings Inc. (NASDAQ: MARA) and Riot Blockchain Inc. (NASDAQ: RIOT), new players like OLB Group Inc. (NASDAQ: OLB), and hobbyists all came together to approve the upgrade. The ability of miners on the network to agree to such a critical upgrade is arguably a good sign for the longevity of Bitcoin and its increased adoption, something that might benefit all miners, large and small.
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