Financial Education

How Does Token Forking Work?

December 23, 2021

So, your token has forked… now what? What does that even mean, and what is required of you, as the user? What is the difference between a “soft” and “hard” fork?

The Digifox team researches the best way to serve our users whether that means improving our existing services or taking preventive measures against new security threats. In this brief discussion, we’ll take a look at both soft and hard forked tokens to summarize why Digifox will not add the older counterparts to forked tokens in our cryptocurrency offerings as they potentially pose unnecessary risk..

What Is A Forked Token?

Think about when you’re driving down a highway and you see a fork in the road - the same thing often can happen to a token or cryptocurrency.

Essentially, a forked token or cryptocurrency refers to a tokenized asset (often, but not exclusively, an ERC-20 token) that has undergone a blockchain change. A fork can take place on any type of blockchain and is not an event exclusive to the Ethereum network. The reason for the change can vary from including improved security for the protocol, to a community initiative to have an improvement or feature prioritized. 

Hard Fork

Hard forks result in the creation of a new type of token, often similar in visual design to its predecessor but different in it’s mechanics. Both the new and old networks are maintained in an ideal development environment, resulting in the need of an update for the older network to understand and incorporate improvements of the newly forked version. Forks like this often result in two similar but separate tokens, both still usable on their respective blockchain.

Soft Fork

Soft forked tokens are quite similar to hard forked ones in that two blockchains remain while the new version is produced. However, one blockchain will remain once network validators work to adopt the software improvements and agree together to move forward with the adoption of the changed protocol. Soft forks differ from hard ones in that only the new token will be usable after the old network updates to the new version.

If a fork event is going to take place to an asset, it’s best to research information within the specific community that works and supports this cryptocurrency asset. Verify and double-check that you are in fact speaking to approved moderators and administrators on the platforms in which you connect with peers, and seek truthful information.

Why We Don’t Support Counterparts To Forked Tokens

One of the most important reasons to fork a cryptocurrency is to maintain its security. We take security seriously at Digifox, and this is the same reason behind our policy to not add the counterparts to forked cryptocurrencies. The need for an update to a hard forked token’s counterpart suggests vulnerabilities in security that are not safe to expose users to. Some cryptocurrencies have been forked for various reasons unrelated to this discussion so it’s important to keep in mind the difference between some of these lesser known cryptocurrencies available in order to keep you and your finances safe.

If you find yourself in a situation where your token has forked and you need to migrate it to another token or cryptocurrency, please look into the instructions for how to do so via the community that supports the asset 👍

And if you need any help, please don’t hesitate to reach out to us - we’re always happy to help! 🚀

Looking for more Digifox content? Head on over to the Digifox Blog as well as our Youtube channel for more educational content 📚

Need support in the Digifox app? Select the Profile tab in the Digifox app and choose “Contact Support.” A member of our Client Success team is ready to help you get started 🦊

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