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Blockchain Forks: A Beginner’s Guide

Last Updated July 3, 2023 9:27 AM
Andrew Kamsky
Last Updated July 3, 2023 9:27 AM

Key Takeaways

  • Forking in computer science refers to creating a new project or version out of the existing code.
  • Blockchain forks occur when the community and developers cannot agree on network changes.
  • Soft forks introduce new rules while maintaining compatibility, while hard forks create permanent divergence.
  • Forks have implications for network security, decentralization, cryptocurrency prices, and market dynamics.

In computer science, forking refers to creating a new independent project or version from an existing codebase. In the realm of open-source software development, a common practice involves taking a copy of the original code and adapting it to establish a distinct or enhanced project, incorporating newer features and advancements.

Forking allows for developing the project roadmap, making changes and updates, and building community support. Forks provide flexibility and foster innovation enabling developers to explore different directions and experiment with new ideas while maintaining the foundation of the original code.

Introduction To Blockchain Forks

A blockchain fork occurs when the community and developers of a blockchain network cannot reach a consensus on proposed changes or updates to the network’s rules and protocols. Blockchain forks are of two types:

Soft Forks

A soft fork is a backward-compatible upgrade that introduces new rules and features to the network. It maintains compatibility with the existing blockchain, allowing nodes that have not upgraded to continue participating in the network.

Hard Forks

A hard fork is a non-backward-compatible upgrade that introduces major changes to the network’s rules. It creates a permanent divergence, as nodes that have not upgraded will not be able to validate or process new transactions.

History Of Blockchain Forks

Bitcoin XT

The first major blockchain fork took place in 2010 with the creation of Bitcoin’s first fork, called Bitcoin XT. A Bitcoin engineer named Mike Hearn started this fork with the intention of expanding the block size limit to support more transactions. The Bitcoin XT fork, however, did not find popular acceptance and eventually vanished.

Ethereum Classic

Ethereum forked to Ethereum Classic  due to a controversial event called the Decentralized Autonomous Organization (DAO) hack in 2016. After the hack, the Ethereum community had a disagreement on how to handle the situation which led to its hard fork, creating a new instance of the network known as Ethereum Classic. Major debates surrounded Ethereum decentralized nature because of this fork to reverse the hack.

Bitcoin Cash 

The 2017 fork of Bitcoin Cash occurred due to disagreements over scaling solutions and resulted in the formation of distinct communities and chains. There was a belief that Bitcoin transactions should be cheaper and faster. 

However, the Bitcoin community held the view that maintaining a small block size was crucial to preserve decentralization. By sacrificing immediate cost and speed advantages, they aimed to help new and more miners to participate and compete for block rewards in a sustainable manner.


On September 15, 2022, Ethereum blockchain underwent a significant transition by shifting from a proof of work (PoW) to a proof of stake (PoS) consensus mechanism. This pivotal change also gave rise to the emergence of ETHPoW, a separate blockchain that preserves the original proof-of-work mining process of Ethereum prior to the merge. This forked version of Ethereum was introduced in response to the opposition by Chinese miner Chandler Guo towards the PoS consensus method.

Types of Blockchain Forks

Codebase Forks 

Codebase forks refer to creating a new independent project or version from an existing blockchain codebase. In this type of fork, developers copy the source code of an existing blockchain network and make modifications to create a new blockchain with distinct features or improvements. Codebase forks can be further classified into two categories; soft forks and hard forks discussed earlier.

Chain Splits 

Chain splits can be caused by disagreements regarding the blockchain’s governance, consensus algorithm, or other fundamental rules. They can happen in both public and private blockchain networks. Notable examples of chain splits include the Bitcoin and Ethereum forks mentioned earlier.

Network forks occur when the blockchain network’s participants fail to reach a consensus on proposed changes or updates to the network’s rules. This type of fork leads to a permanent divergence in the blockchain’s transaction history, resulting in two or more separate chains.

During a chain split, the network participants choose which chain to support, leading to a division in the community. The chain with the majority of participants and computational power typically becomes the dominant chain, while the other chain(s) may continue to exist with a smaller community or eventually fade away. Chain splits can have implications for the network’s security, community, and overall ecosystem.

Implications Of Blockchain Forks

The implications of blockchain forks may be significant and are often considered to be major events in the life cycle of a specific cryptocurrency. With a fork of a protocol within a blockchain the crypto project should first consider:

Effects On Network Security And Decentralization

Forks may generally impact network security and the level of decentralization within the community. A controversial fork of a blockchain may lead to a decrease in security as resources and developers operating the project get divided, while non-contentious forks can enhance security by improving the underlying technology.

Impact On Cryptocurrency Prices And Market Dynamics

Cryptocurrency prices and market dynamics are often influenced by forks. Forks create uncertainty, potentially leading to volatility in prices which gives rise to speculation of prices. Once a fork is passed, existing holders may receive new coins or have their assets diluted. 

When Bitcoin experienced its hard fork with Bitcoin Cash (BCH) each person who held Bitcoin was given an equal amount of BCH. Speculators were then provided with an opportunity to hold both or sell the coin they did not believe in. As a result, the market may react differently based on perceptions of a fork’s legitimacy, utility, and support from the community.

Community And Developer Responses To Forks

Community and developer responses to forks vary based on the coin and update to the protocol of a blockchain project in question. Some stakeholders may embrace forks, seeing them as opportunities for innovation and growth. Others may tend to resist, perceiving forks as disruptive or unnecessary. Forks often foster highly intellectual debates amongst developers and key stakeholders, these people then choose sides based on their vision and interests.

Legal And Regulatory Considerations

Legal and regulatory considerations arise with forks. Authorities may need to address issues such as tax implications, regulatory compliance, and classification of new coins. Forks can also challenge existing frameworks, requiring adjustments to accommodate new governance models and token distributions, while mitigating potential risks like fraud and money laundering.

Future Outlook

The future of forks depends on several factors, including the consensus mechanisms adopted and the community’s governance decisions. While some forks lead to innovation and improved functionality, others also fragment the network and dilute resources. Therefore, it is plausible to expect a decrease in fork frequency as the industry matures and stakeholders prioritize interoperability and collaboration.

On one hand, forks can lead to the creation of new chains with enhanced features, scalability solutions, or specialized use cases. This essentially may foster innovation and competition among different blockchain ecosystems. On the other hand, frequent forks can lead to fragmentation of the project making it challenging for developers and businesses to navigate multiple chains and ensure interoperability.

Looking ahead, blockchain technology is poised to continue its expansion into various industries, with governments, enterprises, and startups driving its adoption. The future is poised to witness advancements in scalability, privacy, and interoperability, enabling blockchain to address more complex use cases and unlock its full potential.


What is forking in computer science and how is it used in open-source software development?

Forking in computer science refers to creating a new independent project or version from existing code. In open-source development, developers can copy code to create separate projects with improvements.

What are the different types of blockchain forks, such as soft forks and hard forks?

Blockchain forks occur when consensus cannot be reached on proposed changes. Soft forks are backward-compatible upgrades, while hard forks introduce major rule changes.

What are the implications of blockchain forks on network security, cryptocurrency prices, and community responses?

Blockchain forks can impact network security, decentralization, and cryptocurrency prices. They lead to debates and community division, while legal and regulatory issues also arise.

How do legal and regulatory considerations come into play with blockchain forks, and what are the future prospects for forks in the industry?

Legal considerations include tax implications and regulatory compliance. The future of forks depends on consensus mechanisms and industry maturity, with potential for innovation and fragmentation.