Dos and Don’ts in a Bitcoin Hard Fork
In the past couple of years, the crypto community has seen an unprecedented number of hard forks. Both Bitcoin and Ethereum, the leading and most valuable cryptocurrencies, have had various hard forks which annoyed some and helped others.
In Bitcoin’s case, the most notable hard forks are Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, Bitcoin Cash, Bitcoin Gold. In Bitcoin’s case, forks have been widely related to its underlying scalability problems.
If you’re new to the cryptosphere, then you might be wondering what a hard fork is, how can I benefit from one, and what are the dos and don’ts in a Bitcoin hard fork.
What is a hard fork?
In software development, a fork happens when developers take a copy of a project’s source code and start to independently develop it, creating a distinct piece of software. In the context of cryptocurrencies, a fork is determined by either a change in protocol or when a blockchain project diverges into two potentially different paths.
To be more precise a hard fork is a change in the rules that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In short, hard forks, by definition, are always incompatible with the original chain. This is in contrast to soft forks. A soft fork represents a change of rules that creates blocks recognized as valid by the previous software.
As one can imagine, these hard forks can be beneficial for Bitcoin holders. For example, when forks such as Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond took place, Bitcoin holders were entitled to the same number of tokens on the new blockchain.
Dos in a Bitcoin hard fork
– Never store your Bitcoins on an exchange wallet
This is not only very good advice in the case of hard forks. It’s recommended that you never keep large numbers of Bitcoin and for long periods of time in exchange wallets for security reasons. For example, if your Bitcoins are in an exchange wallet during a hard fork, claiming the newly forked coins can become a very risky and tedious process.
– Keep your Bitcoins in a non-hosted wallet
Make sure you keep your Bitcoins in the most secure wallet you can find. There are various alternatives when it comes to Bitcoin wallets, some hot, some cold (referring to their store, if they’re connected to the Internet or not). You can opt for desktop, mobile, online, and even paper wallets, but it’s generally agreed-upon that the safest storage solution is represented by hardware wallets such as Ledger Nano S, Trezor, KeepKey, and CoolWallet S.
This way, you ensure complete control over your private keys and your funds as well as increase your chances of claiming the forked coins.
– Signing secure messages with your Bitcoin wallet
A Bitcoin signature is a process of signing a message with your Bitcoin address by using your private keys. It’s a method usually used for proving that you control a particular Bitcoin address and, hence, you own the funds associated with it. By learning how to sign secure messages with your Bitcoin wallet, you avoid the risk of exposing your private keys or seeds directly to third parties. It’s a very useful tool for acquiring forked coins.
– Check if your wallet is Legacy or SegWit supported
It’s very important to check if your wallet is legacy or SegWit-compatible. If you hold your Bitcoins on a SegWit address, you will need a SegWit wallet to claim any potential forked coins.
Don’ts in a Bitcoin hard fork
The most important thing to remember is to never keep your Bitcoins in an exchange wallet during the fork if you want to make sure you will get your free forked coins.
When the Bitcoin Gold fork happened, various Bitcoins holders lost everything because they were not careful with their private keys. Keep in mind that during hard forks there will always be malicious services trying to take advantage of any weakness in security. As a rule, NEVER use your seeds or private keys until you are absolutely sure that the chosen wallet of service for claiming your forked coins is indeed trustworthy.
Taking everything into account, you should not be afraid to get ahold of forked coins. However, it’s important to do it mindfully and to take every possible security measure possible. This endeavor can be rewarding and profitable, but only if done with caution.