What is a hard fork?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
A hard fork changes a blockchain's rules in a way that older software cannot accept. If participants disagree, the chain can split in two and become separate assets. It is also the ordinary mechanism for shipping protocol upgrades.
Key points
- A rule change that is not backwards compatible
- Every node has to upgrade its software
- Disagreement can split the chain in two
- Also how routine protocol upgrades are delivered
Definition
A protocol change, not backwards compatible, that makes blocks or transactions valid which the previous rules rejected.
A chain's rules live in its software. Change the block size limit or add an instruction, and un-upgraded nodes will reject the new blocks. If everyone upgrades the transition is seamless; if a group keeps running the old rules, two chains grow in parallel from that point.
Real examples include the 2017 split that produced Bitcoin Cash, and the Ethereum split over how to respond to a 2016 exploit. Holders at the moment of a split end up with balances on both chains, though whether any given exchange supports the new chain is each firm's own decision.
Ethereum's scheduled upgrades are also hard forks, but ones agreed in advance where everyone migrates together. No split occurs; the protocol simply gains new behaviour. Hard fork does not automatically mean chain split.
Watch out for
- · Not every exchange credits or lists the asset created by a split
- · Forks attract fake claim sites that ask for your private key
- · How forked assets are taxed should be checked before you act on them