Understanding Cryptocurrency Forks

Understanding Cryptocurrency Forks

What is a Fork?

A Fork is an event that signifies the separation of any one (or possibly more) Cryptocurrency. During a Fork, a Cryptocurrency can be split into 2,3 or more separate Cryptocurrency entities, depending on the circumstances.

Hypothetically, such separations could take place due to a myriad of factors. They also tend to be highly contentious in nature which is often the cause for the emergence of separate entities.

The most commonly seen type of Fork occurs when a proposed upgrade to a Cryptocurrency does not reach a 100% consensus from the community. A small percentage of the community does not adopt the changes to the network. They would break off from the majority and function on either Old or Separate but new set of rules. This is illustrated below.

New Protocols Fork


Fork_1.png

Separate Protocols Fork
​ 

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Hard Forks vs Soft Forks

1. Hard Forks

Occurs when there is a permanent separation in the blockchain. This is likely due to a disagreement on amendments to be made and Nodes that do not adopt the new protocols will not be able to validate blocks created by the Nodes that adopt the changes.

2. Soft Forks

Occurs when there is a temporary separation in the blockchain. This is likely due to certain nodes failing to adopt the new protocols during an update. This can be due to (but not limited to) technical errors or nodes simply failing to follow the new protocol.

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