In blockchain, a fork is the event arising from a blockchain diverging into two potential paths forward, reflecting a change in protocol at the junction. A fork happens when a community alters the blockchain’s protocol, or basic set of rules. This leads to a split in the chain— producing a second blockchain (the new path or route) that shares all of its history with the original chain, but it takes a new direction.

A cryptocurrency fork implies a blockchain software update that may result either in minor changes to the existing protocol (the so-called soft fork) or cause the chain to split into two separate and incompatible protocols (the so-called hard fork).

A hard fork is an event involving a split of a blockchain into two separate blockchains that will function parallel with each other, each under different rules and parameters as to a previous chain. Transaction history and parameters change after the hard fork, where the two networks dissociate from one another after the hard fork, and evolution of each network will not be reflected on the other. Hard forks are major events that lead to modification of a certain characteristic of a project (such as the block size, rewards and hard cap, etc.)

Contrary to a soft fork, a hard fork requires that all nodes in the network upgrade to the new version of the code after the split. A soft fork involves a change to the software protocol under which only previously valid blocks/ transactions are invalidated, and hence it is backward-compatible. A soft fork is a minor change to a blockchain protocol.

Given that many blockchain networks are open source, developers can orchestrate and initiate changes depending on consensus. For instance, developers may decide to introduce improvements to the existing chain or addition of new functionalities for improving security features. Forks may also be needed when developers decide to resolve disagreements in the blockchain community—particularly when developers, miners, or users do not agree with its direction at a certain point.