What the fork?

[xoitx]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

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[Heisenberg_Hunter]

Could you be clear in asking question?

A bitcoin fork is that, it divides itself from the main chain and follows its own chain. A fork is created when there is a difference of opinion in the community and the people tend to follow the hard fork. Bitcoin Cash was created for increasing the block size from 1 mb to 8 mb. Whoever owns 1 bitcoin before the forking happened is an owner of 1 BCH. Some people tend to use the new fork and sell their bitcoin or vice-versa.

How is value forked?

Value is not forked. It is the acceptance of the community which drives the value of the fork.

If a blockchain is forked, is it's value also forked?

No, the value of the fork is determined based on the bitcoin price before and after the fork.

Isn't that a doubling of value overall?

No. Consider in the case of BTC and any hard fork (X). If the price of BTC was $7000 before the forking and was $6500 after the forking happened, then the value of new fork (X) could be priced somewhere at $500.
A simple formula for calculating the price of forked coin,

Value of Forked Coin (X) = Value of BTC before Forking - Value of BTC after Forking

[HeRetiK]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

If by value you mean exchange rate -- the exchange rate between two coins that share a transaction history until a hard fork occurs is determined by the free market.

To exemplify: When Bitcoin Cash (BCH) forked off Bitcoin (BTC), people had coins on both side of the fork because there was a shared transaction history until the time of the split. Some people favour BCH over BTC, so naturally they try to gain BCH by selling BTC. Some people favour BTC over BCH, so naturally they try to gain BTC by selling BCH. More people willing to buy BTC than BCH, leads to BTC being more worth than BCH.

The relation towards their fiat value, eg. USD exchange rate, is a bit more complicated. Before the hard fork happened, many people assumed that the accumulated USD value of both sides of the fork would be slightly less than of BTC alone. That is, BTC would lose value in terms of USD by the amount with which BCH enters the market place (eg.: pre-fork BTC is worth USD 4000,- BCH forks off and is evaluated at USD 1000,-, BTC tumbles down towards USD 3000,- making for a total of USD 4000,-). This devaluation of BTC never happened though, with BCH gaining market value without taking a bite off of BTC. Subsequent hard forks even seemed to push the BTC price upwards, as people wanted to hold coins on both sides of the fork. It wasn't a pattern that held up though, as hard forks got less and less interesting, making less and less of a market impact.

TLDR; The market decides on the exchange rate between coins and their hard forks as well as the exchange rate between the resulting coins and the rest of the market (eg. fiat currencies such as the USD).

[xoitx]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

: pre-fork BTC is worth USD 4000,- BCH forks off and is evaluated at USD 1000,-,

What do you mean it is evaluated? who evaluates it? I mean if anything splits it's value is halved. Are you saying at the instant of spliting, the value is halved and then corrects itself based on what people decide to do with either of the coins? or is the value of the new coin zero and then builds up based on how many people ....... did what?

[DannyHamilton]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

: pre-fork BTC is worth USD 4000,- BCH forks off and is evaluated at USD 1000,-,

What do you mean it is evaluated? who evaluates it? I mean if anything splits it's value is halved. Are you saying at the instant of spliting, the value is halved and then corrects itself based on what people decide to do with either of the coins? or is the value of the new coin zero and then builds up based on how many people ....... did what?

A fork is just the creation of a new altcoin.  It is only called a fork because the altcoin happens to share some historical data, but that doesn't change the fact that it is an entirely new thing.

As such, the forked coin obtains value in the same way that any altcoin gains value (from the willingness of individuals to pay for it).

Asking if "at the instant of spliting, the value is halved and then corrects itself" or if "the value of the new coin zero and then builds up" are meaningless questions.  They are just two different ways of saying the same thing.

Prior to the fork, there is one coin. That coin has an exchange rate that is determined by people willing to exchange other things of value for that coin.

After the fork, there are two coins.  Each coin has an exchange rate that is determined by people willing to exchange other things of value for either of those coins.

Imagine you are manufacturing hammers with wooden handles, and are selling them.  You have found that people are willing to spend $1 for one of your hammers.  Now imagine that one day after you have been in business for a while, I use some wood from the same forest to manufacture and sell screwdrivers.  Some people that might have bought your hammers, but don't have enough money for BOTH a hammer AND screwdriver may choose to buy my screwdrivers instead of your hammers.  As such, there is a bit less demand for your hammers, and there is sudden demand for my screwdrivers that didn't exist when I wasn't making them. You quickly discover that (given your large supply and the decrease in demand) people are only willing to spend $0.90 for your hammers.  Meanwhile, I find that my screw drivers are useful enough that demand has driven the price up to $0.80 each.

What happened here when I started selling screwdrivers?  Did the "tool" market SPLIT and each of our tools was instantly worth $0.50 (even though neither of us EVER sold a tool for less than $0.80) which then corrected itself?  Or were my screwdrivers valued at zero and then instantly built up to $0.80?

It would seem more accurate to say that a new tool was created. It had it's own value to the population, and that the changes in the market had an overall effect on the exchange rate for your tool.

Note that the creation of new tools, or coins, aren't the only changes in the market that can effect exchange rate. The creation of a new coin (or tool) is only one of billions of variables that drive individuals to be willing to make a purchase decision.  Some of the variables that have a large effect are things like good or bad news, usefulness, marketing, competing products, etc. But the decision of any single individual to buy or sell at a given price can also be effected by things as simple as how long ago they ate their last meal, what time of day it is, what the weather is like, who they talked to last, etc.

[HeRetiK]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

: pre-fork BTC is worth USD 4000,- BCH forks off and is evaluated at USD 1000,-,

What do you mean it is evaluated? who evaluates it? I mean if anything splits it's value is halved. Are you saying at the instant of spliting, the value is halved and then corrects itself based on what people decide to do with either of the coins? or is the value of the new coin zero and then builds up based on how many people ....... did what?

"Evaluated" meaning "priced at". The price being determined by how much people are willing to pay for it.

To see how this determines the price of a currency, check the order book of the crypto-exchange of your choice. You'll see bids (ie. people buying) and asks (ie. people selling) -- the price that people are willing to pay is what happens when someone that wants to buy makes a good enough offer for someone that wants to sell.

As DannyHamilton already pointed out, a fork is not much different from the creation of a new alt coin. It's just that people already own coins at the time of creation, without having done an initial investment in the alt coin itself and without being part of a premine.

[xoitx]

As HeRetik said,
It's just that people already own coins at the time of creation, without having done an initial investment in the alt coin itself and without being part of a premine.

and as you (DannyHamilton) says,
What happened here when I started selling screwdrivers?  Did the "tool" market SPLIT and each of our tools was instantly worth $0.50 (even though neither of us EVER sold a tool for less than $0.80) which then corrected itself?  Or were my screwdrivers valued at zero and then instantly built up to $0.80?

There is a huge difference!!
If at the moment of splitting people already own coins, and it's value is split in half, then the first to sell in those few seconds profit out of nothing. For instance if the value of both the hammer and the screwdriver were split in half, then whoever sells the screwdriver (against another currency alltogether) at .50 profits, because at that instant prolly not everyone knew about the split therefore sat at home sipping on lemonade, while the rest sold as soon as possible because they weren't that confident. So the value of the screwdriver shot back down to zero in the bargain and hammer reached $1 due to the sudden pump. Now essentially the people who sold the screwdriver at .50 are holding $1.50 because of some "split".

If the coin start off at zero, things make more sense. Although it means that the history of the coin is irrelevant, and therefore why the split to begin with? Just to hold coins without pre-mine? Like forcefull adoptation or free marketing?

[bob123]

If at the moment of splitting people already own coins, and it's value is split in half, then the first to sell in those few seconds profit out of nothing. For instance if the value of both the hammer and the screwdriver were split in half, then whoever sells the screwdriver (against another currency alltogether) at .50 profits, because at that instant prolly not everyone knew about the split therefore sat at home sipping on lemonade, while the rest sold as soon as possible because they weren't that confident. So the value of the screwdriver shot back down to zero in the bargain and hammer reached $1 due to the sudden pump. Now essentially the people who sold the screwdriver at .50 are holding $1.50 because of some "split".

A fork/split does create a different currency which does share the same history of transactions.
The first people who sell do not profit 'out of nothing'. Their profit is from the people who bought the screwdriver (and sold their hammer for it). Their net worth went to 0 in your example.

If the coin start off at zero, things make more sense.

The first 'value' (exchange rate) of the coin is determined by the price a seller is willing to accept AND a buyer is willing to pay.
Only after the first trade happened, the coin has a 'price'.

Note that the market is determining the price. For each buyer there has to be a seller, and vice versa..

[xoitx]

I still can't quite wrap my head around why the splilt to begin with, why not just a new coin. It's only good for unfair distrubution and marketing I suppose. What benifit does a shared transaction actully have? security? Does the mining difficulty continue? or reset?

[HeRetiK]

I still can't quite wrap my head around why the splilt to begin with, why not just a new coin.

Because the people initiating a hard fork usually already have skin in the game but don't like the direction that the currency and its dev team are currently going.

BCH forked off because they wanted bigger blocks.

BTG forked off because they wanted to get away from ASIC mining.

ETH forked off ETC because they wanted to reverse the transactions that occurred during the DAO debacle, with ETC proponents holding onto the principle of "code is law" -- this being an example for a hard fork becoming the predominant currency and keeping the original name.

Whether the intention behind these forks are legit or whether they are just cash grabs to take advantage of an existing userbase and brand name is a different debate and arguably differs from hard fork to hard fork.

Does the mining difficulty continue? or reset?

Depends on the hard fork. Per default a hard fork continues with the previous mining difficulty. However assuming a minority hard fork this is often problematic because the block intervals then heavily increase upon the split. This is why eg. BCH implemented the EDA, an algorithm to adjust difficulty down within shorter timeframes than usual. However these difficulty adjustment strategies often come with challenges of their own.

[xoitx]

I think I get it now. The instantaneous value is irrelevant. They price is always based on market hype, whether there is a split or not. Like even now, someone could sell their BTC for $50000 and for that instant if someone agrees to that price, BTC would actually be worth that much, just for that instant. The market momentum wouldn't agree to that, and the next transaction would resolve the issue because other bitcoin holders are willing to sell at a lower price. Did I get it right?

[Heisenberg_Hunter]

Did I get it right?

Yes, You are right. Since this is a decentralized economy, the price of btc is based on the buyer and seller. If he sells them at a higher price than normal and if the buyer buys them, the price increases. No one determines the price (no central party). If there is a news favouring the btc economy, seller sells them at a higher price than normal and vice versa. For instance during the mt.gox days price fell from 1k$ to $500 within a month due to the hack and then rised slowly. Btc price is literally very sensitive to news.

[xoitx]

Did I get it right?

Yes, You are right. Since this is a decentralized economy, the price of btc is based on the buyer and seller. If he sells them at a higher price than normal and if the buyer buys them, the price increases. No one determines the price (no central party). If there is a news favouring the btc economy, seller sells them at a higher price than normal and vice versa. For instance during the mt.gox days price fell from 1k$ to $500 within a month due to the hack and then rised slowly. Btc price is literally very sensitive to news.

I think it's the case even though there is centralization. In centrailization, who determines the prices? Isn't it still based on supply and demand?

[HeRetiK]

Did I get it right?

Yes, You are right. Since this is a decentralized economy, the price of btc is based on the buyer and seller. If he sells them at a higher price than normal and if the buyer buys them, the price increases. No one determines the price (no central party). If there is a news favouring the btc economy, seller sells them at a higher price than normal and vice versa. For instance during the mt.gox days price fell from 1k$ to $500 within a month due to the hack and then rised slowly. Btc price is literally very sensitive to news.

I think it's the case even though there is centralization. In centrailization, who determines the prices? Isn't it still based on supply and demand?

Note that decentralization isn't a concept exclusive to crypto.

All free markets act decentralized. This includes traditional stocks, bonds, certificates, etc. Exceptions include communistic regimes based on centrally controlled economies (eg. USSR and friends) and to some extent central banks trying to steer the bonds market. Centralized market places such as stock or crypto-exchanges, not even centrally issued assets such as ICOs or stocks make for a centralized market, as long as market participants can freely trade amongst each other.

[xoitx]

Thank you all for responding, my concepts are clearer now.

[btj]

Fork is when developers take a copy of source code from one software package and start independent development ... this term exist even before introduction of bitcoin, it's used on github especially and it come from there ... Bitcoin fork mean a copy of bitcoin, that mean an Altcoin (Alternative coin).

The value depend on the number of peoples using it ... if some of them stop and switch to other altcoin ... the value will be transferred aswell (Not in all case, be cause still there peoples who own multiple altcoins without leaving Bitcoin for example, but in some way they decrease the move of bitcoin).

[fredo123]

How is value forked? If a blockchain is forked, is it's value also forked? Isn't that a doubling of value overall?

The value of the fork is determined based on the bitcoin before and after the fork,
Fork defined variously as what happens when a blockchain diverges into two potential paths forward , a change in protocol or a situation that occurs when two or more blocks have the same block height. Forks are related to the fact that different parties need to use common rules to maintain the history of blockchain, forks have been used in order to add new features to a blockchain.