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Knob and tube wiring
Knob and tube wiring (abbreviated K&T) was an early type of electrical wiring. It was commonly used from the 1880s to the early 1940s, and is occasionally, but very rarely, still used today. In knob and tube wiring, wires were held to the wooden structure by ceramic knobs, and were protected by ceramic tubes when they went through a piece of wood. Wires were held to the knobs by another piece of non-conducting wire. A material called loom protected the wire when it entered a junction box, which usually contained an outlet, switch, or light fixture. Splices were soldered together and wrapped in cloth electrical tape. The insulation on knob and tube wiring was usually cotton cloth soaked in asphalt. To prevent short circuits, the hot and neutral wires were kept far apart. This is not necessary on modern wiring because modern insulation alone is enough to prevent short circuits. Knob and tube wiring did not have a ground wire and therefore did not have three-prong outlets. Most electrical codes allow the use of a GFCI to update knob and tube outlets to three-prong without installing any new wire.
Knob and tube wiring used cloth insulation. Over time this insulation can wear out, become brittle, and fall off, leaving bare wire. The ceramic knobs and tubes provide some protection because even if the insulation does fall off, the bare wire can not touch the wooden structure. The insulation is also somewhat flammable. Some knob and tube insulation intended for industrial use contained asbestos, which reduced the risk of fire, but can cause cancer. Unlike modern wiring, splices were not contained in a protective box. If a splice failed, it could make a spark and start a fire. The fuse boxes usually had no protection from using an incorrect fuse. An incorrect fuse could cause the wiring to overheat and become damaged or start a fire. Another problem is that when a fuse blew, people who didn't know or didn't care about the hazards would sometimes replace it with a coin or a ball of foil if a replacement fuse wasn't available, leaving no overload protection at all. These issues can be partially corrected by installing a modern circuit breaker panel with arc fault circuit interrupter breakers. There was also no ground wire. Knob and tube can be updated with a GFCI to add the equivalent of grounding. There is generally no need to replace knob and tube wiring if it is in good condition.
Unusual wiring layouts
Unlike modern wiring, knob and tube supply and return wires were not always alongside each other. In the oldest installations, several branch circuits could share the same neutral wire, which can cause overloads. To prevent overloads in this layout, the neutral wires were protected with fuses. If a neutral fuse blew or was removed, it could create a dangerous condition where the power appeared to be off, but was in fact still present. Three-way switches could also be wired in such a way that the outer ring of a lamp socket, which is normally connected to neutral, could be connected to hot, which is an electric shock hazard.