What Does Fork Mean In Cryptocurrency?

What is Fork In Cryptocurrency

Often, the price of a cryptocurrency goes wild as and when it approaches the phenomenon called ‘fork‘.

Sometimes these wild rides can be positive while at times it can also go the other way. Irrespective of which way it goes, you can still make money if you play smart. And if you have been in the cryosphere for a while, you must have witnessed quite a few ‘fork’ events.

I have witnessed a few forks which I can name when Bitcoin’s price went on a wild ride. These forks were:

But what is so special about these ‘forks’ and why exactly are they called forks?

What Does Fork Mean In Cryptocurrency?

‘Fork’ or ‘Forking’ generally means a kind of software upgrade/update which is done in such a way that it can be backward-compatible or cannot be backward-compatible.(We will talk about compatibility further in this article).

In short, ‘Fork’ is just a fancy name for a software or a protocol update.

Similarly, updating a cryptocurrency protocol or code is referred to as “Fork”. Forks create an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network, depending on which type of fork is happening.

In the realm of cryptocurrencies or blockchains, these forks are major of two types:

  • Soft Fork (Backward Compatible)
  • Hard Fork (Non-Backward Compatible)

Also, soft forks are known as backward compatible forks which are optional but the other type i.e. hard forks are not backward compatible and hence are mandatory to be applied.

What Is Hard Fork In Cryptocurrency?

In the cryptosphere, any protocol change or software upgrade that makes old rules obsolete and uses the new code base as the driving force, is called hard fork. This type of fork is permanent and requires all nodes and users to upgrade to the latest version of the protocol software/wallets. This fork is not backward-compatible.

For example, you want to open an MS Excel 2015 file in MS Excel 2003 software without the compatibility pack. You won’t be able to do it because it is not backward-compatible that way.

Similarly, when a cryptocurrency like Bitcoin is hard-forked, the old rules become obsolete and a new version of the original blockchain evolves from that spot.

Reason For Hard Fork: A hard fork can happen due to the incorporation of a new feature or due to changing of core rules like block size or change of proof-of-work function.

Bitcoin protocol itself has not undergone a non-contentious hard fork yet but it has undergone many contentious hard forks like Bitcoin Cash etc.

What Is Soft Fork In Cryptocurrency?

A soft fork differs from a hard fork because all the new rules that are made don’t make old rules obsolete hence making it backward-compatible. This type of fork doesn’t need a universal update of nodes and softwares as old nodes recognize the change. But this type of fork requires most miners to upgrade in order to enforce the soft change.

For example, you want to open an MS Excel 2003 file in MS Excel 2015 software. You will be able to do it because it is backward-compatible.

A similar soft fork called Segwit, which was a long-awaited Bitcoin scaling solution through a soft fork of Bitcoin’s protocol was activated on August 24, 2017. (I have covered the specifics of the scaling debate here in case you are interested in reading it).

Why Does A Fork happen?

Forks happen due to many reasons but the main reason is the split of communities or due to new feature implementations.

However, it mostly happens due to the split of a community.

So in a way, a hard fork is a kind of split or divergence where the community decides they will no longer follow the rules of the old protocol on the same blockchain. Hence, they change the rules and make a new blockchain. That’s why a new version of the original blockchain evolves from that particular block.

Also, this is why BTC underwent a hard fork because a group of users, miners, and developers wanted bigger blocks in Bitcoin so they forked the Bitcoin into a new version called “Bitcoin Cash” on 1 August 2017 at 12:20 p.m. UTC

Here is an exclusive guide on Bitcoin Cash (BCH) – Everything You Need To Know.

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3 thoughts on “What Does Fork Mean In Cryptocurrency?”

  1. Pishu Shamdasani

    Aum….
    Dear Sudhir khatwani,
    Sincerely appreciate your efforts to explain about by soft and hard forks.
    Thanks n warm regards.

    1. Sudhir Khatwani

      True but one should know how to safely claim their forked coins otherwise there is a risk of getting broke…

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