A fork in cryptocurrency refers to any divergence in a blockchain's protocol or transaction history that creates two or more separate versions of the chain. Forks are a fundamental aspect of how decentralized networks evolve and resolve disputes.
There are two primary types of forks:
- Hard fork — a permanent, backward-incompatible change to the protocol. Nodes that do not upgrade will follow the old rules, effectively splitting the network into two separate blockchains.
- Soft fork — a backward-compatible upgrade where old nodes can still validate transactions under the new rules, though they may not take advantage of new features.
Forks can be planned or contentious. Planned forks are coordinated upgrades agreed upon by the community, such as Ethereum's transition to Proof of Stake. Contentious forks arise when community members disagree on the network's direction, often resulting in a permanent chain split and the creation of a new cryptocurrency.
Notable examples include the Bitcoin Cash fork from Bitcoin in 2017 and the Ethereum Classic fork following the DAO hack in 2016. In both cases, philosophical disagreements led to lasting splits.
Forks also occur naturally on a temporary basis when two miners find a valid block simultaneously. The network resolves this by following the longest chain, and the orphaned block is discarded. Understanding forks helps investors assess project governance and the consensus mechanism behind a cryptocurrency.