What are Bitcoin Forks?

Bitcoin operates as open-source software, meaning anyone can modify its code. However, in a decentralized system, not all users immediately adopt changes, and some may choose never to upgrade. This presents a unique challenge: how can a network maintain consensus while evolving? The answer lies in forks, which are updates that either maintain or break compatibility with the existing Bitcoin protocol.

Unlike traditional software, where updates are controlled by a central authority, Bitcoin’s changes must be accepted by the majority of the network. If a proposed change is adopted by some but not all users, the network can split into separate paths—each following its own rules.

Soft Forks vs. Hard Forks

Forks come in two forms: soft forks and hard forks.

Soft Forks: Backward-Compatible

Soft forks introduce stricter rules without breaking compatibility with older versions. This means that nodes running the old software can still recognize and validate transactions under the new rules, even if they haven’t upgraded.

• Example: The Segregated Witness (SegWit) upgrade in 2017 was a soft fork that improved transaction efficiency without splitting the network. It introduced a new way to handle transaction data, but older nodes could still validate blocks created by upgraded nodes.

Hard Forks: Breaking Compatibility

Hard forks, on the other hand, expand the ruleset in a way that breaks compatibility with older versions. If some nodes adopt the new rules while others stick with the old version, the network splits into two independent chains.

• Example: Bitcoin Cash (BCH) was created in 2017 by a hard fork of Bitcoin. It introduced larger block sizes, but because it broke compatibility with Bitcoin, it became a completely separate cryptocurrency. Bitcoin’s community avoids hard forks whenever possible, as they risk fragmenting the network, weakening security, and confusing users.

Notable Bitcoin Forks

Throughout Bitcoin’s history, there have been multiple attempts to fork the network. Some forks aimed to increase transaction speeds, others sought to add smart contract functionality. However, none have gained significant adoption, and all have failed to rival Bitcoin’s dominance.

Failed Hard Forks

• Bitcoin Cash (BCH): Increased block size to 8 MB in an attempt to scale transactions. It lost significant value relative to Bitcoin over time.
• Bitcoin SV (BSV): A fork of Bitcoin Cash that further increased block sizes. It remains obscure and has little relevance in the Bitcoin ecosystem.
• Bitcoin Gold (BTG): Attempted to make mining more accessible by using a different hashing algorithm. It has mostly faded into irrelevance. While anyone can fork Bitcoin’s code, they cannot fork Bitcoin’s network effect and adoption. No Bitcoin fork has ever been able to compete with Bitcoin itself.

Do Forks create more Bitcoin?

Some people mistakenly believe that when Bitcoin is forked, it creates inflation by increasing the number of coins in circulation. This is false. Forked coins are separate assets that exist on a different chain. The Bitcoin network and its supply remain unaffected.

A Threat to Bitcoin’s Integrity?

Fork discussions can spark heated debates, as seen in the 2017 SegWit activation. Some users pushed for a hard fork that would have split the network, but the Bitcoin community ultimately rejected it in favor of a soft fork.

Bitcoin’s consensus mechanism ensures that only widely-accepted changes make it into the protocol.

Final Thoughts

• In decentralized systems, a fork is a change to the protocol’s rules
• Soft forks maintain backward compatibility and allow all nodes to remain on the same network.
• Hard forks break compatibility, often leading to new, separate cryptocurrencies.

📚 Book Recommendation: The Blocksize War: The The battle over who controls Bitcoin’s protocol by Jonathan Bier: This book chronicles Bitcoin’s blocksize war (Aug 2015 – Nov 2017), a battle over block data limits that revealed deeper power struggles over Bitcoin’s rules. It presents a timeline of key events, major players, and behind-the-scenes moments. Featuring insights from both sides, it explores their motivations, strategies, and decisions throughout the conflict.