What is a Bitcoin or crypto fork?

May 10, 2021

Bitcoin, the original and innovative leader in the cryptocurrency game, was created based on blockchain technology and software. As the currency’s popularity increased, it was apparent that issues would arise regarding aspects such as transaction speed and scalability. To try and combat these, developers began to diverge and split the cryptocurrency by means of forking the blockchain.  

How does a Bitcoin fork work?

In layman’s terms, a fork in the blockchain occurs when the original blockchain is split into two avenues based on a need for different rules or protocols in the blockchain, including mining software and technology. The new fork deviates from the original blockchain and introduces new rules into the newly forked blockchain that exists and works based on new rules, while the old blockchain continues as normal with the original rules. This means that community members can choose which rules they prefer, what software they are compatible with and choose the fork that suits their needs. 

Why does Bitcoin fork?

Bitcoin will fork based on various issues that arise in the coding software in the original Bitcoin blockchain, in the mining processes or in the transaction exchange. When an issue is identified, developers will attempt to resolve it by either creating a soft or hard fork. An example of why a Bitcoin fork might be created is because of Bitcoin’s limited transaction processing time. This issue in particular led to a fork that increased the block size from 1MG to 2MG in a soft fork and up to 32MG in a hard fork to one of Bitcoin’s earliest forks – Bitcoin Cash.  

What is a Bitcoin soft fork?

A Bitcoin soft fork is when there is a fork or split in the Bitcoin blockchain resulting only in a change in rule/protocol. There is not a new currency resulting from the fork but just an update or altering of the rules. This means that the two forks are able to communicate with each other still as they are still a part of the same cryptocurrency and there’s an agreement in the community about which rules to undertake and which to discard.

What is a Bitcoin hard fork?

A Bitcoin hard fork is when the fork or split results in a new cryptocurrency that works and operates on a new blockchain protocol. This change is permanent, and the two currencies are no longer able to communicate with one another. An example of a hard fork is Bitcoin Cash which was split from Bitcoin in 2017. 

How many Bitcoin forks exist? 

At present, Bitcoin has seen a whopping 105 forks and no doubt, as more developers attempt to create deviations from the original blockchain, we will see many more forks, currencies and protocols. Although Bitcoin is the leading cryptocurrency, other currencies experience forks in the same way as Bitcoin does. This is not necessarily a bad thing – as it leads to innovative thinking – but it can also divide the community and warrant unnecessary competition for investors who might not understand the market and technology.