What’s a 'Fork' in Crypto?

In programming, the English word "fork" describes a situation where one product's code becomes the foundation for building another. The term comes from a visual analogy — one program (the fork's "handle") splits into several separate ones (the "teeth"). Similar splits happen in the world of cryptocurrency. Let's break down what a crypto fork actually is, and whether you can make money from new branches of existing coins.

This material is published for informational purposes only and does not constitute investment advice.

Forks in Cryptocurrency — What Are They?

In crypto, a fork is when an existing blockchain splits into separate branches. There can be two or more resulting branches, though a fork most often splits a coin into exactly two. Both new branches continue to share the coin's history up to the fork, but from that point on, new transactions are recorded independently on each.

There are two main types of forks, distinguished by scale and consequences:

• Soft fork — a gentle update where only one branch remains active
• Hard fork — a full split that creates a new cryptocurrency while the old one continues to exist in parallel

Sometimes, only one of the two resulting branches remains popular within weeks of a hard fork. In that case, the less popular branch gradually fades from major exchanges and eventually stops existing — effectively, the hard fork turns into a soft fork after the fact.

Why Do Cryptocurrency Forks Happen?

New coin branches typically appear for these reasons:

• Community disagreements — for example, Bitcoin XT increased block size to address Bitcoin's scaling issues
• Creating a new currency based on an old one — as with Bitcoin Gold
• Testing technical ideas — Bitcoin Unlimited, for instance, let users set their own block size
• Changes to network rules
• Bug fixes

Changes made during a fork most often affect block size, security rules, or the consensus algorithm — some coins have shifted from Proof-of-Work to Proof-of-Stake as part of a fork.

Forks most often happen when developers try to change principles built into a cryptocurrency, and that change meets resistance from validators — miners or stakers. As a result of that disagreement, some validators adopt the new rules and update their software, while others keep running the old rules.

That's how a hard fork happens — two independent coins emerge. If developers manage to convince nearly all validators that the change is necessary, a soft fork happens instead: the old branch simply dies out, and the new branch keeps the original coin's name while operating under the updated rules.

A telling example of how forks can repeat: Bitcoin Cash, which emerged in 2017 as a hard fork of Bitcoin, later went through two more splits of its own — Bitcoin SV broke off in 2018, and another split followed in 2020. This illustrates well that a fork isn't a one-time event — it's a process that can repeat within branches that already exist.

Can You Make Money from Forks?

The simplest way to potentially benefit from a fork is to hold a coin ahead of its scheduled split. After the fork, your wallet retains all of the "old" coin, and you also receive an equal amount of the "new" one. For example, everyone holding BTC as of August 1, 2017 received a corresponding amount of Bitcoin Cash — one of Bitcoin's most notable forks in terms of historical market impact.

It's worth understanding that a forked coin's price can shift dramatically in either direction over time — Bitcoin Cash's own trajectory illustrates this well, from its all-time high in December 2017 to significantly lower levels years later. Check the current price and its ratio to Bitcoin directly before making any decisions, since both figures are volatile.

Investing in new hard-fork spinoffs of popular coins right after launch can be considerably riskier. Bitcoin's source code has spawned hundreds of new projects, but only a handful have retained meaningful popularity — for example, Litecoin, Dogecoin, Namecoin, Bitcoin Cash, and Bitcoin Gold. It's worth distinguishing between two different things here: Bitcoin Cash and Bitcoin Gold are true hard forks of the Bitcoin blockchain, sharing transaction history up to the split. Litecoin, Dogecoin, and Namecoin, on the other hand, are separate projects that launched their own blockchain from scratch, simply using Bitcoin's source code as a starting point.

Sometimes a hard fork can hurt both the "old" and "new" coin. Because of this, making large investments in new branches of existing coins is worth approaching with real caution.

FAQ

What's the difference between a hard fork and a soft fork?

A hard fork creates a completely new, independent cryptocurrency, while the old one continues to exist in parallel. A soft fork rolls out an update more gently, and only one branch ends up remaining active — under new rules, but keeping the original name.

Does a coin holder automatically receive new tokens when a fork happens?

Usually yes — if the coins were held in a wallet that supports that coin at the time of the fork (not on an exchange, where terms can differ), tokens on the new branch are credited proportionally to the existing balance.

Are all forks equally successful?

No. Most forks lose popularity over time and eventually disappear from major exchanges. Only a small number out of the hundreds of projects built on Bitcoin's code have left any lasting mark on the market.

Can a coin that is itself a fork undergo another fork?

Yes, this is a common occurrence — a network can keep splitting if new disagreements emerge within its community. Bitcoin Cash is an example: it went through several more splits of its own after it was created.

What's the risk of investing in a new coin right after a hard fork?

These coins are often extremely volatile, and their long-term prospects are unpredictable — many quickly lose liquidity and disappear from exchanges. A hard fork can also sometimes hurt the price and reputation of both the old and the new branch.

How do you tell a genuine hard fork apart from a new project that's simply using someone else's code?

A genuine hard fork shares transaction history with the original blockchain up to the point of the split — Bitcoin Cash is an example. Projects like Litecoin or Dogecoin launched their own blockchain from scratch, only borrowing the original source code — technically, these are separate coins rather than branches of the same network.