Can Crypto Exchanges Be Trusted With Hard Forks?

While the case is new for China, compilations regarding hard forks and exchanges have been amassing since perhaps as early as the DAO incident in 2016.

What's a hard fork? Essentially, a hard fork is a change to the cryptocurrency's protocol that makes previously invalid blocks/transactions valid - and vice versa - and therefore requires all users to upgrade to the latest version.

"With the ETC and BCH hard forks, it was clear that those two coins will be the minority fork, so it was safe to use a wait-and-see approach. So Coinbase didn't support those forks initially. And only if there was traction on those forks would Coinbase spend the time and resources to support those forks and let people access their coins on the minority chain."

How do exchanges handle hard forks? Thus, providing private keys shouldn't be difficult as long as the coins are stored in a software or hardware wallet that can connect to the coin's mainnet.

The situation is different when the forked cryptocurrency is held on a crypto exchange's hot wallet - in that scenario, the keys are technically held by the platform along with the coins.

When Bitcoin Diamond forked off of the original Bitcoin blockchain in November 2017, Binance was one of the few major exchanges to issue the new coins to BTC holders, while many other exchanges ignored the hard fork entirely.

Some exchanges opt to accommodate most forks by default - for instance, in July, Binance announced that it will endeavor to support airdrops and forked coins conducted by any project, as long as the project team reaches out and contacts the platform directly.

In the opposite way, some exchanges choose not to support forks deliberately.

The platform warned the clients to withdraw their remaining BCH. More complications and lawsuits However, even if the exchange supports a certain hard fork, complications might arise.

In their announcement, the lawyers recognized that there is no legal framework for handling hard forks, and that seems to be the essential problem in regards to the complex relationship between crypto exchanges and hard forks.