What Are Bitcoin Forks? Soft Forks, Hard Forks, and How They Work

Bitcoin forks are significant changes to the Bitcoin network’s consensus rules or software, and they have played an important role in the development and evolution of Bitcoin. A fork can introduce new functionality, change existing rules, or create a permanent divergence between different versions of a blockchain.

Bitcoin forks can be broadly categorized into two main types: soft forks and hard forks. Understanding the difference between them is important for anyone who wants to understand how Bitcoin is upgraded and how disagreements over the network’s rules can sometimes result in separate blockchains.

Before looking at forks specifically, it helps to understand the underlying technology. If you are new to blockchain, see our guide to what blockchain is and how blockchain technology works.

What Is a Bitcoin Fork?

A Bitcoin fork occurs when the rules used to determine which blocks and transactions are valid are changed, or when the blockchain temporarily diverges because different participants accept different blocks.

Not every blockchain fork creates a new cryptocurrency. For example, two miners can occasionally find valid blocks at nearly the same time, creating a temporary chain split that is eventually resolved as the network converges on one chain.

When people discuss Bitcoin forks, however, they usually mean a change to the network’s consensus rules. These changes are generally described as either soft forks or hard forks.

1. Soft Forks

A soft fork is a change to Bitcoin’s consensus rules that makes some blocks or transactions that were previously valid no longer valid under the new rules, while remaining compatible with the older rules in the relevant sense.

Because a soft fork makes the valid set of blocks more restrictive rather than expanding it, older software can continue operating on the same blockchain. However, non-upgraded nodes may not fully understand or enforce the new rules, so upgrading is still important for users and businesses that want to validate the new features themselves.

Soft forks can be activated through different mechanisms. Historically, Bitcoin has used approaches including miner signalling and user-activated mechanisms. Therefore, it is not accurate to say that every soft fork simply requires a majority of the network to upgrade.

Example: Segregated Witness (SegWit)

One of the best-known Bitcoin soft forks is Segregated Witness (SegWit), which was deployed in 2017.

SegWit changed the way certain transaction data, particularly witness data such as signatures, is committed to the blockchain. It also addressed transaction malleability and enabled more efficient use of block space.

SegWit was specifically designed as a soft fork, allowing older Bitcoin software to continue operating while upgraded software could enforce and use the new rules.

You can learn more about this important upgrade in our guide to how SegWit fixes Bitcoin’s biggest problems.

2. Hard Forks

A hard fork is a change to Bitcoin’s consensus rules that can make blocks valid under the new rules even though they would have been invalid under the old rules.

Because the old and new rules are not fully compatible, nodes running different software versions may disagree about which blocks are valid. If the disagreement is not resolved through coordination or one side does not adopt the other’s rules, the blockchain can permanently split into separate chains.

Each chain can then have its own rules, miners, nodes, users, transactions, and cryptocurrency.

Example: Bitcoin Cash

One of the most significant examples is the Bitcoin Cash (BCH) hard fork in August 2017.

The split followed a long-running debate within the Bitcoin ecosystem about how Bitcoin should handle transaction capacity and scaling. Bitcoin Cash increased the block-size limit, initially adopting an 8 MB limit, while Bitcoin continued under its existing consensus rules.

This resulted in two separate networks: Bitcoin (BTC) and Bitcoin Cash (BCH). Bitcoin Cash has continued to operate as a separate blockchain with its own development and network upgrades.

For a more detailed comparison, see our guide to Bitcoin vs Bitcoin Cash and their differences.

Soft Fork vs Hard Fork: What Is the Difference?

Bitcoin’s developer documentation describes soft and hard forks in terms of changes to the consensus rules. A soft fork tightens the set of valid blocks, while a hard fork can expand it.

Why Do Bitcoin Forks Happen?

Bitcoin is a decentralized network, so there is no single central authority that can simply decide to change the consensus rules for everyone. Changes require software development, testing, implementation, and adoption by the participants who operate and use the network.

Forks can therefore happen for several reasons.

1. Network Upgrades

Forks can be used to introduce improvements to Bitcoin’s protocol. A soft fork can add new functionality while maintaining compatibility with existing rules.

SegWit is an important example. It introduced changes to transaction structure, addressed transaction malleability, and improved the efficiency of block-space usage.

2. Disagreements Over Bitcoin’s Rules

Different groups within the Bitcoin ecosystem may have different views about how the network should develop. Disagreements can involve block capacity, transaction processing, development priorities, or other technical and economic questions.

If participants cannot agree on a common set of rules, competing software implementations can potentially lead to a hard fork and separate chains.

3. Different Approaches to Scaling

Scaling has been one of the most important sources of debate in Bitcoin’s history. The Bitcoin Cash split in 2017 was closely associated with disagreement over block-size limits and how Bitcoin should increase transaction capacity.

4. New Features and Technical Changes

Bitcoin’s consensus rules can be changed to support new capabilities or improve existing functionality. The challenge is ensuring that any change maintains the security and decentralized nature of the network.

What Happens When Bitcoin Forks?

The result depends on the type of fork.

With a soft fork, the network can continue operating as a single blockchain while upgraded nodes enforce the new rules. Older software may continue to participate, although it may not recognize or validate all aspects of the new functionality.

With a hard fork, participants running incompatible software can disagree about which blocks are valid. If both sides continue operating independently, two separate blockchains can emerge.

In a major hard fork, users may therefore need to understand which software, wallet, exchange, and blockchain they are using. A cryptocurrency associated with one chain should not automatically be assumed to work on another chain.

Do You Get New Coins After a Bitcoin Hard Fork?

A hard fork can result in a new cryptocurrency that shares historical blockchain data with the original chain up to a particular point. This is what happened with Bitcoin Cash in 2017.

However, receiving or accessing coins associated with a fork depends on the specific fork, wallet infrastructure, private-key ownership, and the rules and policies of exchanges or other service providers.

Users should also be careful with claims that a fork automatically means they can safely claim free coins. Fork-related scams and phishing attempts can target cryptocurrency holders, so private keys and recovery phrases should never be shared with an unknown service.

For broader information about protecting cryptocurrency and blockchain systems, see our guide to blockchain security risks.

Important Bitcoin Fork Examples

Bitcoin Cash (BCH)

Bitcoin Cash was created through a hard fork of Bitcoin in August 2017. The change included an increase in the block-size limit and resulted in a separate blockchain and cryptocurrency.

SegWit

Segregated Witness was deployed as a Bitcoin soft fork in 2017. It changed transaction structure, addressed transaction malleability, and enabled more efficient use of block space.

Temporary Blockchain Forks

Not every fork produces a new cryptocurrency. Two miners can find blocks at approximately the same time, temporarily creating competing branches at the same block height. Bitcoin’s consensus mechanism is designed to resolve such temporary situations as the network continues to build on the chain that satisfies the consensus rules and becomes the accepted best chain.

Bitcoin Forks and Bitcoin Mining

Mining plays an important role in Bitcoin’s consensus process. Miners construct candidate blocks and compete to produce valid proof-of-work blocks according to the network’s rules.

When consensus rules change, miners need software that understands and follows the applicable rules. If different groups of miners follow incompatible consensus rules, their blocks may be rejected by nodes following the other rule set.

If you want to understand Bitcoin mining in more detail, read our guide to Bitcoin mining with a web browser.

Bitcoin Forks and Network Security

Forks are closely connected to Bitcoin’s security because consensus rules determine which blocks and transactions the network accepts.

A poorly coordinated rule change can create confusion, incompatible software, or temporary chain splits. Users running outdated software may also have a different view of which transactions and blocks are valid.

However, a fork itself should not automatically be described as a security attack. A planned protocol upgrade and an accidental chain split are different events, and a malicious attack is another distinct category.

For more information about threats to blockchain networks, see our explanation of 51% attacks.

Bitcoin Forks and User Choice

One of the important characteristics of Bitcoin is that users, businesses, miners, developers, and node operators participate in the ecosystem using software that follows particular consensus rules.

When a proposed change is controversial, different participants may choose different implementations. In this sense, forks demonstrate that Bitcoin’s rules are enforced through a decentralized network rather than by a central company or government.

At the same time, users should not assume that every participant has equal influence over every type of change. Miners, full-node operators, developers, wallet providers, exchanges, merchants, and ordinary users can have different roles and incentives.

Why Do Bitcoin Forks Matter?

Bitcoin forks matter because they demonstrate how a decentralized blockchain can evolve while maintaining a set of shared consensus rules.

Their importance can be summarized in several areas:

1. Network upgrades: Forks can introduce technical improvements and new functionality.
2. Consensus: Forks show how changes to network rules require coordination among participants.
3. Decentralization: Bitcoin does not have a central authority that can unilaterally change the rules for everyone.
4. Creation of separate networks: Hard forks can result in independent blockchains with different rules and assets.
5. Market impact: Fork announcements and new assets can affect market activity and investor attention.
6. User responsibility: Users need to understand which blockchain and software they are using, especially during contentious upgrades.

Are Bitcoin Forks Good or Bad?

There is no universal answer. The effect of a fork depends on the technical change, how it is activated, how widely it is adopted, and how participants respond.

A fork can introduce useful improvements, while a contentious fork can divide developers, miners, businesses, and users. The important point is to examine the specific change rather than treating all Bitcoin forks as the same type of event.

Bitcoin Forks vs Blockchain Forks

The word fork is used in several different ways in blockchain technology.

A temporary blockchain fork can happen when competing valid blocks are produced around the same time.

A soft fork changes consensus rules while aiming to maintain compatibility with older rules.

A hard fork changes consensus rules in a way that can make previously invalid blocks valid, potentially creating incompatible chains.

A software fork, meanwhile, simply refers to a separate development of software code and does not necessarily mean that the blockchain itself has split.

Understanding this distinction prevents the common misconception that every use of the word “fork” means a new cryptocurrency has been created.

Frequently Asked Questions About Bitcoin Forks

What is a Bitcoin fork?

A Bitcoin fork is a change or divergence involving Bitcoin’s consensus rules or blockchain. Forks can be temporary or can result from intentional protocol changes such as soft forks and hard forks.

What is a Bitcoin soft fork?

A soft fork is a change to Bitcoin’s consensus rules that makes the valid set of blocks or transactions more restrictive while maintaining backward compatibility in the relevant sense. SegWit is a well-known example.

What is a Bitcoin hard fork?

A hard fork is a consensus-rule change that is not backward-compatible with the old rules. If participants continue following incompatible rules, the blockchain can permanently split into separate chains.

Is SegWit a Bitcoin fork?

Yes. Segregated Witness was deployed as a Bitcoin soft fork in 2017. It changed transaction structure and addressed transaction malleability while maintaining compatibility with older Bitcoin software.

Was Bitcoin Cash created by a fork?

Yes. Bitcoin Cash was created through a hard fork of Bitcoin in August 2017. One of the major changes was an increase in the block-size limit, initially to 8 MB.

Does every Bitcoin fork create a new cryptocurrency?

No. Temporary blockchain forks can resolve without creating a permanent new cryptocurrency, and soft forks are designed to update the consensus rules without necessarily creating a separate chain.

Can Bitcoin forks affect users?

Yes. A fork can affect which blockchain a wallet or exchange supports, which software users need, and how transactions are interpreted. During a contentious hard fork, users should verify exactly which asset and network they are using.

Conclusion

Bitcoin forks are an important part of understanding how the Bitcoin network evolves. They can occur as temporary blockchain divergences or as deliberate changes to Bitcoin’s consensus rules.

Soft forks are designed to introduce more restrictive consensus rules while maintaining compatibility with older software in important respects. Hard forks can introduce incompatible rules and, when different participants continue following different rules, can result in separate blockchains.

SegWit demonstrates how a significant Bitcoin upgrade can be deployed as a soft fork, while Bitcoin Cash demonstrates how disagreement over consensus rules can result in a separate blockchain.

Understanding Bitcoin forks is therefore useful not only for Bitcoin users, but for anyone interested in blockchain technology, decentralized governance, cryptocurrency security, and the way decentralized networks evolve.