Hard Fork

What Is a Hard Fork (in Crypto)?

Hard Fork in crypto is when a blockchain splits into two separate chains due to a major change in its code. This creates a new version of the blockchain that is incompatible with the previous version, meaning any old rules are replaced or modified. Hard forks can result in two versions of a cryptocurrency, with each one running on its own distinct chain.

How It Works

• Code Change: Developers propose significant updates to the blockchain’s code that aren’t backward compatible, meaning older software versions can’t validate transactions on the new chain.
• Network Split: If the community agrees on the change, everyone switches to the new chain. But if there’s disagreement, some people may stay on the old version, creating two parallel blockchains with the same transaction history up until the fork.
• New Token: In some cases, a hard fork leads to the creation of a new cryptocurrency token, giving holders on the original chain an equivalent amount on the new one (e.g., Bitcoin and Bitcoin Cash).

Example

Let’s say Ethereum developers decide to improve the network with a hard fork that changes how fees are calculated. If most users accept the change, they update to the new version. But if a group of users disagrees and keeps the original system, the network will split, resulting in two separate blockchains and possibly two tokens (one for each version).

Key Takeaways

• Hard Fork is a permanent split in the blockchain due to major, non-reversible code changes.
• It can create two versions of a cryptocurrency, with each chain following its own rules.
• Hard forks sometimes lead to the birth of new tokens, giving existing holders a matching amount on the new chain.

In short, a hard fork can be like a “choose-your-own-adventure” for blockchains, allowing communities to decide if they want to stick with the original chain or try something new.