By James Wo, Founder & CEO of Digital Finance Group
The crypto world is known for its volatility, and hard forks—blockchain updates with security patches or other changes in the code—reinforce this perceived lack of stability. With updates like the recent Ethereum London hard fork, resistors are left behind on an obsolete, outdated fork. In perhaps the most famous example of a hard fork, Bitcoin Cash, the adopters didn’t quite steal the show. The split still, however, followed a series of debates within the Bitcoin community, with tensions still high today.
A better solution is needed to keep communities united while still allowing for blockchains to be updated. One major feature setting Polkadot’s “Layer 0” blockchain apart from others is its choice to be forkless, meaning there’s no need to create a fork in order to update the blockchain. As the crypto community continues to expand, a forkless future is the only way forward.
Blockchain is a decentralized system with anonymity. Therefore, it’s difficult to coordinate updates that will be agreed upon by the whole community, especially when it’s not always clear who is running the software. While blockchain upgrades are necessary for technological innovation, they lead to tensions within their respective communities, with endless debates on the necessity and timing of specific improvements.
Viewed by the crypto community as a dramatic event, hard forks can make a cryptocurrency’s exchange rate less stable. Data shows that the price tends to rise following major network updates, as seen in the recent Ethereum London fork, which resulted in a five-percent increase in the 24 hours after the fork. However, since each fork causes price volatility, certain upgrades that are necessary are stalled until the next fork or delayed indefinitely. In other words, concern about the price swing tends to take priority over technical needs. This ends up demoralizing users who feel their voice isn’t being heard regarding urgent matters that cannot be delayed.
Polkadot’s forkless solution
There have been continuous debates within the crypto community regarding whether to take on a hard fork, but there was never a third option. Blockchains created after Bitcoin and Ethereum are finding ways around this issue: Cardano, for example, uses a hard fork combinator that combines protocols without causing service interruptions or a network restart. Still, it is not forkless.
Polkadot’s solution is automatic forkless updates. The blockchain is built on Substrate, an open-source, modular, and extensible framework for building blockchains. Substrate uses an advanced governance system, and its stated goal is “to ensure that the majority of the stake can always command the network.” This system is akin to a democracy, where decisions are made by the majority, but there is room for different opinions.
On Polkadot, all proposals to make a change in the blockchain go through the same process: The proposal is added to a queue, and while it is there, other token holders can second it. If it gets enough support, the proposal becomes a referendum which can then be voted on. Once the voting window is over, the code is added to the chain and is executed by all nodes automatically, and no human intervention is necessary. If the vote fails, nothing happens. An automatic rollout ensures that the platform successfully adapts to technological changes.
Why a forkless solution eliminates community friction
Substrate features on-chain governance, which means that any token holder can propose a change to the chain. This gives additional value to holding a token and also gives token holders the power to influence the blockchain if they have enough support behind them. In addition, a forkless blockchain invites community members to suggest changes without causing internal tensions. Members are free to suggest any update they feel necessary and trust that if there is support behind it, it will be implemented.
Polkadot’s choice to be forkless also solves the issue of forks with multiple upgrades, which causes frustration within the community because some upgrade suggestions are delayed or even ignored. Instead, each upgrade can be addressed immediately, which is especially critical when there is a security issue. Unlike other blockchains, where hard forks can cause price volatility, being forkless allows blockchains like Polkadot to avoid such fluctuations.
As blockchain technology is advancing, there will always be a need to make upgrades. Polkadot’s ability to automatically make updates gives it an edge over other blockchains that pay a high price for avoiding or delaying necessary changes. Ultimately, a forkless solution also gives more control to the members of its community, without making unresolvable compromises.
James Wo is an experienced entrepreneur and investor in blockchain who founded DFG in 2015, where he oversees over $1 billion assets under management. He has participated in early-stage investment rounds of leading virtual asset service providers such as LedgerX, Amber Group, and the creator of USDC, Circle, in addition to being the Founder and Chairman of UAE licensed virtual asset exchange, Matrix.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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