Questions » What is a hard fork?

What is a hard fork?

In the context of cryptocurrencies, a hard fork is a type of software upgrade that results in a permanent divergence in the blockchain, creating two separate versions of the cryptocurrency. This occurs when there is a change to the rules governing the blockchain, such as a change in the protocol or consensus algorithm, that is not backwards-compatible with older versions of the software.

When a hard fork occurs, the blockchain splits into two separate chains, with one chain following the original rules and the other chain following the new rules. This creates two separate cryptocurrencies, each with their own unique blockchain and transaction history.

Hard forks can occur for a variety of reasons, such as to fix security vulnerabilities, introduce new features, or resolve differences in the community regarding the direction of the project. They can be contentious and result in a split in the community, with some users continuing to support the original chain and others supporting the new chain.

One important aspect to note is that holders of the original cryptocurrency will also have an equivalent amount of the new cryptocurrency after the hard fork. This can create a situation where users may profit from the split, as they may be able to sell or trade the new cryptocurrency at a higher value than the original cryptocurrency. However, hard forks can also create uncertainty and volatility in the market, as users may not know which chain will ultimately become the dominant chain.