Fork (Crypto)

In blockchain, a fork occurs when changes are made to a network's protocol rules, potentially splitting the blockchain into two paths. Forks are categorized as soft forks (backward-compatible updates that don't require all nodes to upgrade) and hard forks (fundamental protocol changes that create a permanent divergence, requiring all participants to upgrade or remain on the old chain).

Soft forks tighten existing rules — blocks valid under new rules are also valid under old rules. Bitcoin's SegWit upgrade was a soft fork that changed how transaction data is structured while maintaining backward compatibility. Old nodes still process transactions, just without the new features.

Hard forks create two incompatible chains, sometimes intentionally (planned upgrades like Ethereum's transition phases) and sometimes contentiously (community disagreements about the network's direction). Bitcoin Cash was born from a contentious hard fork in August 2017, when a faction wanted larger block sizes than Bitcoin's 1MB limit. Ethereum Classic resulted from a 2016 hard fork to reverse The DAO hack — those who opposed reversing the hack continued on the original chain. Hard forks can result in "free" tokens for holders, as they receive equivalent balances on both chains, though market value distribution is unpredictable.