What Is a Fork? Crypto Forks Explained

We’re not talking about cutlery today, instead, we’re talking about what some crypto projects decide to do in the face of disaster or when attempting to upgrade.

Let us explain…

What Is a Fork?

Whenever you make a big decision in life, be it choosing a university to attend or marrying your partner, there’s a fork in the road. You’re choosing between two (or more) options that will change the course of your life. Go one way and one thing will happen, go the other, and something else will happen.

This is the same philosophy that forks in crypto subscribe to.

A fork in crypto happens when a project’s community decides to make a change to the blockchain’s protocol. This will often split the chain, creating two blockchains — the original (often called “classic”) and the new blockchain.

Why Would a Crypto Fork?

Forks mostly occur when a blockchain needs to upgrade its network. This could be in many different forms, such as:

• Increase scalability,
• Address security concerns,
• Take the project in a different direction,
• Create a simple foundation for new project,
• Reverse transaction(s),
• And, more!

There are two ways a crypto could fork; soft fork and hard fork.

What Is a Soft Fork?

Soft forks don’t create a separate blockchain; instead, they simply update the original network. It introduces a new rule set to the blockchain (e.g. bigger block size), but doesn’t make any drastic changes to the network. The majority of nodes must enforce the new rules for the blockchain to upgrade.

This type of fork is backwards compatible, meaning that old nodes will recognize newly created blocks as valid. Although old nodes are able to process new transactions, some previously valid transactions will now be invalid, as they must adhere to the new rule set. This means that nodes don’t need to upgrade to process transactions.

Nodes are what secure the blockchain — learn more about consensus mechanisms here. This means the more nodes that accept the new rules, the more secure the blockchain will be after the fork. As soft forks are backwards compatible, this is rarely an issue.

Not all nodes will update to the new rule set straight away, but the updated nodes will reject any blocks that break the new rule set. This encourages old nodes to update their rule set to take part in the ecosystem.

Issues could arise if some nodes enforce the new soft fork rule set, but the majority regress to the pre-soft fork rule set — meaning, you have your community split across two different rule sets (pre-soft fork and post-soft fork). The divide in your community may result in the network failing to reach consensus.

What Is a Hard Fork?

A hard fork will create a separate blockchain, leaving the original blockchain (often rebranded as “classic”) behind the newly formed blockchain (either going by the same name or adding 2.0 to the end).

You would opt to create a hard fork (over a soft fork) if drastic changes need to be made to the blockchain’s code, or if the network struggles to reach consensus on an update — more on that later.

As this is a more hardline update to the blockchain, it requires all nodes to upgrade their protocol software to the latest version — it’s not backwards compatible. This creates a permanent separation from the previous network.

Some people will continue to support the original blockchain. However, historically, we’ve often seen original blockchains be abandoned by users, as they realize that the new chain is superior.

As the new chain is an exact copy of the original blockchain, any transactions that happened prior to the hard fork also happened on the new chain. Meaning, both networks will have the same balance. Free money, right? Well, not exactly.

With the split, one of the chains is bound to either fall in value, or not reach the price of the original blockchain. This means that although you may have the same balance on two chains that you can sell separately, your balance on one chain may quickly become…