Blockchain networks are open-source software that grants access to improve on its software protocol by anyone, anywhere. However, it is commonplace in blockchain to have different misaligned protocols, leaving the miners with the ultimate decision of choosing and sticking with a particular blockchain.

In cases where decisions are split, this causes the creation of two versions of the same blockchain. This effect of split decisions in the blockchain network is called a “Fork”.

What Is a Fork?

A fork is when blockchains diverge to form two or more on the same network, which usually happens when changes are made to a blockchain software. This divergence occurs when different developers use different software versions after a fork (software change) has occurred. It means that simultaneous projects from the same network are running at the same time, but will follow different paths from there on.

Forks can be - and are usually - initiated by developers and even members of a cryptocurrency community. This event is commonly seen when a particular community may have been displeased with the usability of the prior implementation of the blockchain; hence another version of the software is implemented.

In other cases, forks can be a way to crowdsource money to implement new projects or even digital currency offerings.

Types of Forks

There are two other categories of Forks: Accidental and Intentional Forks. Accidental forks occur when two or more blocks are discovered simultaneously, and this kind of Fork usually solves itself because after other blocks are added, the longer block remains valid while the shorter blocks - or “orphanage blocks” - are abandoned.

Intentional Forks, however, are subdivided into two sub-sections: Hard Forks and Soft Forks.

Hard Forks

Hard Forks are changes that occur to the blockchain, with a broad spectrum of implications on the whole software protocol of the network. These Forks are created per new rules inputted in the software, rules that tend to invalidate prior transactions and vice versa.

Once the new rule has been inputted, some users may use the new path, while others may toe the line of the old software. This variation results in a permanent split.

Soft Forks

Soft Forks, on the other hand, are changes that allow the old nodes - or users - to accept the data without the new nodes noticing such change. This happens when new features and upgrades occur, usually at the programming level. It still results in a single blockchain, and the changes implemented are still compatible with the pre-fork blocks.

A Comparison of Hard and Soft Forks

Both Forks - hard and soft - are similar, as when a directive in the network is changed, both old and new versions are present.

However, they are substantially different in that while there is merely a split in soft forks, hard forks produce two different blockchains entirely. So for soft forks, it’s still one blockchain that’s barely split into two.

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Popular Examples of Hard and Soft Forks

1. In 2017, Tether (USDT) forcibly initiated a Hard Fork after claiming that millions worth of the stablecoin had been stolen. The Hard Fork essentially rendered the stolen coins redundant, as the coins could not be used for transactions any longer.

2. In 2020, Ethereum initiated a hard Fork due to its new update in its network. The digital currency shifted, through a consensus protocol, from Proof of Work to Proof of Stake.

3. One of the most notable Soft Forks in the cryptocurrency industry occurred in 2017 when Bitcoin created an update known as the “Segregated Witness”, which altered the format of transactions on the network.

4. When Bitcoin in 2019 created a 1MB block size limit, this created Soft Forks as it meant that Bitcoin could now only perform between three to seven transactions per second.

Pros in the Application of Forking

Forking is applied to solve many things. For instance, it addresses faults in the system or bugs in a particular blockchain. A fork in this context, in turn, expands the efficiency and stability of such a cryptocurrency

Several altcoins (alternative coins) have forked from both Bitcoin and Ethereum. These coins aim to enjoy the security features inherent in these two major digital currencies.

Due to variations in security features, users prefer a hard Fork over a Soft Fork. Although it takes a lot of effort, the privacy guaranteed by Hard Forking is an underlying hedge.

Cons in the Application of Forking

Even though the Forking process is very vital to the usability of a coin, undertaking Forks can be time-consuming and quite messy! Additionally, during these processes, the stability of the value of digital currencies is at a high risk of volatility.

Also, anyone can copy and alter a prior code. Disagreements are bound to arise among developers on which block to follow. Over-saturation is also bound to happen, as Fork tends to lead to the creation of other altcoins. For instance, Bitcoin - as of 2021 - has had 105 hard Forks, which included Bitcoin Cash, Bitcoin Gold, etc.

Conclusion

While forks can be described as a change in blockchain software leading to a divergence in blockchain usage, it is more than that. Forks offer an avenue for blockchain projects and users to adapt to opportunities in the market and thrive. Forks, in the most emblematic cases, represent the evolution of the underlying technology behind a project and are also correlated to how fiercely a blockchain is being updated and developed.