Bitcoin is a decentralized currency that is electronically created using cryptography, and is distributed by ‘miners’ solving mathematical problems and verifying transactions. Bitcoin cannot be printed by any central bank; instead, it is digitally created and mined using computations on a distributed network (a distributed public ledger, aka a blockchain) that processes transactions hence making Bitcoin it’s own payment network.

Who created it?

Bitcoin was created in 2008 and implemented as open source code and released in January 2009 by the unanimous Satoshi Nakamoto. Bitcoin is an electronic payment system based on mathematical & cryptographic proof. The Bitcoin was created to produce a currency independent of any central authority, more or less instantly transferable electronically, and with very low transaction fees.

Why Bitcoins?

Bitcoins enable anonymous purchases of merchandise. In addition, Bitcoins make international payments easy and cheap because they are not regulated by any country or bank. Bitcoins favor small businesses since they involve no credit fees. Moreover, Bitcoins are decentralized, non-repudiable, and transparent.


Bitcoin’s software code is free and can be viewed and utilized by anyone. However, current versions of Bitcoin, for those wishing to participate in the Bitcoin network as a miner, node operator, or wallet administrator, need to be updated and changes made to the bitcoin protocol. New features and changing of the core metrics of the protocol can be made.

The event of a project spinning off of another project by copying the code base, in open source software development, and running with it, is called a fork. For instance, the cryptocurrency Litecoin’s developers copied Bitcoin’s code, made some changes, and launched a separate project hence making it a fork of Bitcoin.

Soft Fork And Hard Fork In Bitcoin Terminology

The terms soft fork and hard fork in Bitcoin describe the compatibility of changes in the Bitcoin protocol: should the community be irreconcilably divided about such an issue? The old version and the new version of Bitcoin could emerge as distinctly different projects thereafter. While both versions of the Bitcoin protocol are in use, the differences in acceptance may cause a lasting blockchain-fork, i.e. two distinct longest chains which are both considered valid by part of the network.

Soft Forks

A soft fork is an updated version of the protocol which is backward compatible with previous versions whereby older versions of the Bitcoin software will recognize new blocks. Conducting a soft fork of the Bitcoin software is less challenging on the network as only a majority of node users need to upgrade. All nodes, whether updated or not will continue to recognize new blocks and maintain compatibility on the Blockchain.

What Could Go Wrong?

The soft fork could become the shortest chain and shunned off by the network when it is supported by only a minority of hash power in the network. Or, it can act like a hard fork, and one chain can be dislodged.

Past Successes Of Soft Forks

Soft forks have been the most commonly used option to upgrade the Bitcoin Blockchain so far because of their capability of lowering the risk of splitting the network. Software upgrades like BIP 66 – which dealt with signature validation – and P2SH – which altered bitcoin’s address formatting – are past examples of successful soft forks.

Hard Forks

A change of the Bitcoin protocol that is not backward compatible with the older version is called a hard fork. Any client running a node in the Bitcoin network will need to upgrade their software for the recognition of new blocks.

A Hard fork is a permanent divergence in the block chain that usually occurs when non-upgraded nodes cannot validate blocks created by upgraded nodes that follow updated consensus rules. Hard fork execution can beget a risky situation of a fork of Blockchain since nodes running the new software are separated from the previous version. If half of the nodes are running the latest version and mining blocks, and the other half are running the older version and mining a different set of blocks, it can result in a fork of the Blockchain which is different from a fork of the software, due to different chains.

Miners should prevent a fork of the network from happening due to the incentive structure of Bitcoin. Miners are also incentivized financially to maintain the integrity of the network by mining on the main chain because of the monetary value of the tokens they are mining. How consensus is both achieved and maintained is vitally important in Bitcoin so that the miners can accept the changes made to the protocol by the developers hence maintaining persistence across the entire system.

The consideration, deliberation, and implementation process of a change to Bitcoin’s code can take a long time. Upgrading of the protocol can induce a hard fork which can make the process become more stringent.

Bitcoin is strongly anti-fragile, meaning that a complete destabilization of the entire network is extremely difficult.

Past Successes Of Hard Forks

A hard fork implemented on the Decentralized Autonomous Organization (DAO) in the Ethereum blockchain was to correct important security risks found in older versions of the software, and to add new functionality, or to reverse transactions. The proposal relocated the funds tied to the DAO to a newly created smart contract with the single purpose of letting the original owners withdraw them. However, the proposal did not untwine the history of the network’s transactions. The holders of the DAO token will be able to withdraw ETH at a rate of approximately 1 ETH to 100 DAO.

Bitcoin still faces high price volatility and some have labeled it as a speculative bubble. However, most of the major open-source currencies are expected to see significant expansion in 2017. According to research by Cambridge University in 2017, there are between 2.9 million and 5.8 million unique users actively using a cryptocurrency wallet, most of them using bitcoin. Economists, merchants, and financial institutions are embracing the use of bitcoin as either a safe haven or to reap it’s decentralized benefits, thereby making Bitcoin king of the cryptocurrencies.

NOTE: If you need a digital wallet, you can now use Bitcoin and Ethereum on the advanced digital wallet app, with more cryptocurrencies and digital gold in the works.