A Fork in a blockchain is a divergence in its protocol or code that leads to the creation of a new path in the chain. Forks occur when changes are made to a blockchain's rules, resulting in either a temporary or permanent split.

The Two Sides of a Fork

A fork can be a planned update or a contentious split, and there are two main types:

Soft Fork: A soft fork is a backward-compatible update. This means that a new rule can be implemented, but older versions of the software will still recognize the new rules as valid. A soft fork does not result in the creation of a new cryptocurrency. It is a way for a blockchain to smoothly transition to a new set of rules without causing a permanent split.

Hard Fork: A hard fork is a non-backward-compatible update that permanently splits a blockchain into two separate chains. Nodes that follow the new rules will begin mining on the new chain, while those on the old chain continue to follow the old rules. If a community is unable to reach a consensus on a hard fork, it can result in the creation of a completely new cryptocurrency. For example, the contentious Bitcoin hard fork in 2017 created Bitcoin Cash, which is a separate asset.

Why Forks are Crucial for Blockchain Evolution

Forks are a natural part of the evolution of open-source blockchains. They allow developers to introduce new features, fix bugs, or improve scalability. While a hard fork can be disruptive, it is also a powerful tool for a decentralized network to adapt and improve over time.