What is a fork in crypto?

[Volkan Kirkar]

Hi. Can someone explain what does "fork" mean in crypto?

[Ulrich Meyer]

Hi,

A fork in crypto is when the software is copied and modified. The original version of the software continues to operate, but it gets separated from the new one, which takes a new direction. There were instances when the fork occurred due to disagreements in cryptocurrency teams over how should they proceed. Several members of the team would have different opinions about the cryptocurrency’s future and they would replicate the crypto content on a different domain to take a different approach in the future.  

It’s important to point out that there are hard forks and soft forks.

Hard forks refer to backwards-incompatible software updates. Hard forks happen when nodes implement new rules that are contradictory to old nodes’ rules. In that case, new nodes are able to communicate only with nodes that run the new version of the software. This results in a split in blockchain, one with old and one with new rules. 

A soft fork, on the other hand, is a backward-compatible upgrade, which means that new nodes can communicate with the old ones. With soft-fork updates, the newly-added rules usually don’t conflict with the old ones.  

A decent example of a soft fork would be the Segregated Witness (SegWit) fork, which took place after the Bitcoin/Bitcoin Cash split. SegWit update made changes to the format of blocks and transactions, but it was developed in a way that allows old nodes to validate blocks and transactions.