Why Hard Forks Present a Threat to the Future of Cryptocurrencies

Hard Forks

Hard Forks

Hard forks are necessary to add new functionalities and remedy security risks in a blockchain network. Bitcoin Cash, one of the top cryptocurrencies by market capitalization forked from bitcoin addresses the problem of scalability for instance.

However, a new report indicates that hard forks may be eroding confidence in the industry among investors. The paper prepared by a team from the Oak Ridge Institute for Science and Education examined about 800 forks from Bitcoin, the pioneer cryptocurrency and alternative cryptocurrencies.

Lead researcher Benjamin Trump notes that such disruptions will make people lose trust in cryptocurrencies as a reliable medium of exchange. As it stands most of these forks have since gone down. A good number of them were money grab schemes with no real added functionalities. But as the study notes, hard forks are becoming more regular with about 50 projected for 2018 alone.

“Hard forks are a threat to maintaining a stable and predictable operating platform that is essential if cryptocurrencies are to be adopted for daily financial transactions,” Trump is quoted as saying.

Trump believes the future of bitcoin lies in whether all the players including miners, exchanges, and developers can be provided with better stability and governance.

Participants also “need to be better at preempting beneficial software changes,” the study published in the Springer’s journal Environment Systems and Decisions says.

The paper notes that cryptocurrencies could revolutionize e-commerce and information exchange, but the lack of trust could derail them. High volatility which has become characteristic of the market also presents a significant risk.

Incidentally, Bitcoin Cash has been taking a beating with a hard fork looming. nChain’s Steven Wright, a controversial figure is planning his own version of the BCH, a move whose effects are already visible on the BCH. The coin has shed about 10% of its value in the past one week, and its share of the market is also declining.

A unit of the cryptocurrency is currently trading at $460 compared to $512 a week ago, data from CoinMarketCap shows. The coin has however been recovering in recent hours with nearly 6% in gains in the last 24 hours.

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