Do you have Bitcoins in your crypto exchange wallet which is about to split and follow the hard fork protocol? Are you skeptical about what to do and what not to do after hearing the incident of the Chinese investor suing Okcoin exchange for blocking his bitcoins?
I hope nobody is imagining about the cutlery set with the hard forks ready to gobble up some tasty food(kidding). Basically, hard fork is the condition when a cryptocurrency rips into two; it results due to the upgradation of software which forces the users to upgrade with the new version to continue their transactions.
It compels the user either to update the software or to drop down from the network because and discontinue valid blocks or transactions. You can compare hard fork to a reset button that you press and get something entirely new which gets you a separated block, upgraded protocols that you have to trace like a shadow to remain in the Blockchain to perform valid transactions.
Talking about soft forks, they also cause a split, but the only difference is that the users still have the advantage of sticking up with the previous software. So this might raise a question in your mind as to why is there a need for hard fork when things can continue swiftly with soft forks, right? The answer is due to the functionalities and security reasons which were enhanced in the new software making it secure for the users to make their transactions in comparison to the previous ones.
According to Forkdrop.io, it is revealed that presently there are 116 forks out of which 74 are affiliated with Bitcoins. It is believed that Bitcoin gold, Ethereum classic and Bitcoin cash rank 24th, 12th and 4th respectively according to coinmarketcap.
There are other coins as well but are less likely to be used on more prominent platforms due to the less money value they hold. According to Charlie Lee, the father of Litecoin, BCH and ETC hard forks lie in the category of minority forks and thus it was better to wait before deciding how these coins would perform. Initially, Coinbase didn’t support these forks and there was a condition that if these forks were able to cater transactions only then Coin base will provide resources and support to these minority forks to let the users access their coins in the minority chain.
Decentralised Autonomous organization commonly known as DAO was established in the year 2016 which aimed at investing in other business firms following the concept of investor directed. The organization was successfully able to cater a fundraiser of $120million in ETH, but due to the exploitation of the vulnerability in DAO code by users, it had to drain one-third of the funds gathered to a secondary account which was approximately 50 million dollars. This created chaos amongst the users which resulted into a debate with few members considering this act as unfair and demanding a refund and others supporting the cause and favoring no further adjustments.
But as one would presume, the maximum votes were dropped in favor of refund finally resulting into hard forks by the Ethereum team. The funds were then credited to the user’s account and were given ETH for 100 DAO tokens. The community who refused this affair and favored permanency sticking to the unforked Ethereum Classic which did not impose hard fork and software update to unbolt the violation of DAO code. It kept the Ethereum classic going as it is as an alternative to all the members who disagreed for the exchange rate mentioned above.
Consequently, all ETH holders were allowed to claim ETC equivalent to their ETH through MyetherWallet and send their ETC coins to other addresses. This implied that the users would be able to receive and retrieve their coins on the grounds that they provide the private keys as a certification of their claim.
Provision of private keys isn’t a difficult task if the coins are stored in a virtual wallet connecting the coins’ mannet. But when we talk about cryptocurrency, the keys and coins are held by the exchange platform which gives authority to the exchange to decide if the coins need to be distributed a to the customers or not complicating the process on the whole. Claiming coins is not an easy process as well.
When ETC forking happened, Kraken exchange supported the clients and credited the respective Etc balance to their account, same was the case of Binance that issued the new coins to its bitcoins holders whereas many exchanges denied issuing new ones during the hard fork.
It is in the hands of the exchange department whether they support their clients for a split and fledge with them new coins or not. In some cases, the exchange reimburses the coins according to a default pattern set by them.
For example, Binance a Blockchain ecosystem announced that it will support fork coins and airdrops if any team reaches out to them directly.
Following the pattern, Coinbase also further announced that they would assist in Bitcoin fork withdrawal for their Coinbase products. On the other hand, there were some exchanges which did not offer any assistance to forks and coin withdrawal. Hence Dutch Exchange delisted BCH due to their failure in coping up with the requirements of altcoins and also further warned participants holding BCH to pullback their bitcoin cash.
There are other complications in the Bitcoin ecosystem despite all the support provided by exchanges. A Chinese trader Feng Bin filed a case against OKcoin, a crypto exchange firm claiming that the exchange platform obstructed him from availing his bitcoin cash after the fork split took place in August 2017. He had 38.748 Bitcoin cash which had a monetary worth of $4000 which he was not able to extract due to the discrepancies of the exchange platform. In return, OKcoin claimed that Bin was not able to do so due to the expiry of forked cryptocurrency at the time of withdrawal of bitcoin cash.
Feng further accused the exchange of not officially announcing about any such deadlines of withdrawal. Apart from this, a group of lawyers challenged the misconduct of such exchange platforms of not delivering split coins and fledging their customers with proper information about the same. According to them, the exchanges do not have an appropriate legal framework for handling the various types of hard forks and soft forks and is thus creating trouble for the clients who have invested in cryptocurrency. This is in return creating a cumbersome association between hard forks and crypto exchange departments.