What Is the Process for Upgrading a Cryptocurrency’s Core Hashing Algorithm, and What Are the Implications for Its Options and Futures Markets?

Upgrading a core hashing algorithm is extremely difficult and requires a hard fork, where the entire network must agree to adopt the new rules. The process involves extensive developer consensus, community buy-in, and a coordinated activation.

For derivatives markets, such an event creates massive uncertainty. Implied volatility on options would skyrocket leading up to the fork.

Futures contracts would face potential settlement issues, with exchanges likely having to settle based on the dominant chain's price post-fork, or even offer contracts for both resulting chains. The risk of a contentious split would depress prices and create chaotic trading conditions.