Bitcoin Forks 101
Blockchain forks occur when the fundamental rules of a blockchain are changed, splitting it into two.
It’s a real fork-in-the-road moment where two blockchains share a history but not a future.
Bitcoin has experienced a number of different forks, but what exactly does this mean?
What is a Hard Fork in Crypto?
A hard fork is an event in which significant changes are made to a blockchain network. These changes are made to the underlying blockchain protocol and are incompatible with the original programming of the blockchain.
When this happens, the new version of the blockchain is no longer backward-compatible with earlier blocks in the chain. Hard forks therefore "split" the blockchain into two branches: the original and the new version.
Essentially, a hard fork creates a new blockchain and cryptocurrency. All nodes (or participants) must upgrade if they want to stay on this new chain. Typically, the original chain – which has not been altered – will continue as normal.
What is the Point of a Hard Fork?
Blockchains can be impacted by errors, bugs and hardware failures. When this happens, developers may propose a hard fork as an upgrade, for maintenance purposes or to address security risks.
Alternatively, hard forks can also be initiated by the community, perhaps to add additional functionality or to take the cryptocurrency and blockchain network in a new direction.
What is a Soft Fork in Crypto?
A soft fork is more akin to a software upgrade for the blockchain. Assuming that the change is accepted and adopted by all users on the chain, it becomes the new standard for the network.
Soft forks have historically been implemented to bring new features or functions to a network, without fundamentally altering the blockchain itself. This means that soft forks don't require the blockchain to split into two; instead, the result is a single blockchain that is backward-compatible with pre-fork blocks. Nodes that don't participate in the upgrade will still be able to validate the network.
Examples of Bitcoin Hard Forks
Bitcoin hard forks work in the same way that a regular hard fork does. Typically, these hard forks have been proposed to improve on Bitcoin's limited 1MB block size, with the intention of improving transaction speeds.
Below are some examples of the first Bitcoin hard forks:
1/ Bitcoin XT
Launched in 2015, Bitcoin XT was the very first Bitcoin hard fork. Bitcoin XT focused on adding new features to the network and improving transaction speeds up to 24 transactions per second (tps). To do this, the hard fork aimed to expand the block size to 8MB. However, Bitcoin XT continued to lose popularity since its implementation and was eventually abandoned in 2018.
2/ Bitcoin Classic
Bitcoin Classic was a hard fork that originally aimed to double Bitcoin's block size to 2MB. Bitcoin Classic gained popularity in 2016 but changed direction in November that same year. Instead of increasing the block size to 2MB, Bitcoin Classic's block size was determined by miners and node operators. Bitcoin Classic still exists but is not actively maintained.
3/ Bitcoin Cash
Bitcoin Cash was a hard fork launched to address scalability issues with the Bitcoin blockchain. Bitcoin Cash increased the block size to 32MB to enable faster and cheaper transactions compared to Bitcoin. While Bitcoin Cash was intended to serve as an affordable peer-to-peer payment system, it has seen increased popularity as an investment asset.
Several other hard forks including projects like Bitcoin Unlimited and Bitcoin Gold are still running today but with various levels of acceptance and usership.
Examples of Bitcoin Soft Forks
There are also a number of impactful Bitcoin soft forks that have taken place since the network's creation:
1/ Segregated Witness
Segregated Witness (Segwit) was proposed in 2015 and activated in 2017. It was designed to remove signatures (witness data) from transactions, instead storing them on an extended block. This helped to reduce the size of transactions, without altering the original block size of 1MB.
2/ The Taproot Upgrade
Implemented in 2021, BIP 340, 341 and 342 make up the Taproot upgrade. Taproot allowed multiple signatures and transactions to be batched together, speeding up the process of transaction verification. Taproot also scrambled transactions with single and multiple signatures together, making it more difficult to identify Bitcoin transaction inputs.
Conclusion
It's likely that additional Bitcoin forks will be proposed in the future, but with Bitcoin Layer 2s – such as the Lightning Network – working to improve transaction speeds, only time will tell whether Bitcoin forks will have a serious impact to the ecosystem.
