What is a blockchain hard fork?
A hard fork in plain words
A blockchain's rules are written into software run by the network's computers, which are called nodes. Each node checks every new block against these rules itself and rejects any block that breaks them. Over time the rules get changed to fix a bug or add a feature. Developers write the new version of the software, and each node operator decides whether to install it1.
Once a hard fork takes effect, a node still running the old version checks new blocks against the old rules and rejects them as invalid2. So everyone who wants to stay in the shared network updates the software, and anyone who doesn't update is left on the old chain of blocks.
Picture a group of friends who have long played a board game by the same rules and keep the score of every game in one shared notebook. Someone suggests a new way of counting points. If everyone agrees, they play the new way from the next get-together, and there is still one notebook. If part of the group refuses, the players end up at two tables with two notebooks, whose first pages match while the entries after the dispute differ. A hard fork works the same way, with blocks of transfers in place of notebook pages.
What happens to your coins in a hard fork
Do I need to do anything as a holder in a planned hard fork?
No. Node operators, wallets and exchanges update the software, and your cryptocurrency stays where it was. That was also the case when Ethereum switched to validators in 2022. Nobody had to do anything with their cryptocurrency or wallet, and there is no such thing as "old" or "new" ETH. ethereum.org called anyone claiming otherwise likely scammers3.
What will happen to my coins after a network split?
The new network inherits the entire history of transfers along with the balances, so your coins exist on both networks. You don't need to move or "claim" anything: the new coins are already in your wallet, and the same seed phrase that opens your original coins opens them too. Owners of Trezor wallets, for example, found exactly this when the Bitcoin network split in 20174. From then on the coins of the two networks live separate lives, and a transfer on one network is invisible on the other. What you actually see depends on where your coins are kept:
- in your own wallet, where only you know the key, coins from the new network appear only in an app that supports it. Use a well-known wallet that has officially announced that support;
- on an exchange, the exchange holds the coins and decides on its own whether to credit customers with the forked coins, so watch for its announcement5.
Right after a split, do not rush to move your coins. If the new network has no replay protection, a transfer made on one network can be repeated on the other, and the coins leave on both. Wait until your wallet or exchange announces that transfers are safe.
Coins received in a network split may be taxable. In New Zealand, for example, they may be taxed on receipt, on sale, or both6. ⚖️ How to approach taxes in your own country is covered in the tax guide.
How scammers exploit hard forks
Scammers offer "free new-network coins" and ask you to enter your private key (the secret code your wallet uses to approve transfers) or your seed phrase. In November 2017 the mybtgwallet website worked this way, promising to hand out Bitcoin Gold coins, and people who uploaded their private keys to it had their bitcoins and other cryptocurrency stolen78.
How a hard fork differs from a soft fork
The rules can also be changed in a way that lets old nodes keep working in the same network. Such a change is called a soft fork, and with it new blocks still pass the checks of old nodes2.
Files make the difference easy to grasp. A hard fork resembles a new document format that old software cannot open until it is updated. A soft fork is like a new rule that documents must be typed in a single font. The old software still opens every file; there are simply fewer formatting choices.
| Soft fork | Hard fork without a split | Hard fork with a split | |
|---|---|---|---|
| Does the old software accept new blocks? | yes | no | no |
| Does the node software need updating? | no | yes | yes |
| Is there still one network? | yes | yes | no |
| Does a new coin appear? | no | no | yes |
Why the network doesn't always split after a hard fork
A blockchain has no management that could order everyone to update, so every change to the rules is discussed first. The article what is consensus explains how network participants agree on the correct record.
Normally a hard fork is agreed in advance, and node software switches to the new rules at the same moment, while a network split over a dispute about a hard fork is rare9. Ethereum is upgraded this way on a regular basis, and its past and planned upgrades are listed with dates on the network's history page.
If some participants oppose a change and others push it through anyway, the network can split1. After that, each of the two networks has its own blocks, its own miners or validators and its own coin. Who adds blocks to a network is covered in the article miners and validators.
How networks have split because of a hard fork
In 2016 attackers used a bug in the code of The DAO, a program on the Ethereum network, to drain a large amount of ETH from it. Most participants decided to change the rules and return the coins to the victims9. Some refused to switch, arguing that the flaw lay in a single program while the network's rules were sound. They carried on with the original network, without the hard fork, and it was named Ethereum Classic; the network with the hard fork became today's Ethereum with its coin ETH1.
On 1 August 2017 the Bitcoin network split and the Bitcoin Cash network appeared. Its supporters wanted each block to fit more transfers, and the new software raised the block size limit10. Everyone who held 1 BTC at that moment also got 1 BCH11.
On 15 November 2018 the Bitcoin Cash network itself split, and the second network was named Bitcoin SV12.
More detail on how decisions are made and on well-known forks
In Ethereum anyone can write a proposal to change the rules. The developers of node software discuss it on open calls1. Planned Ethereum hard forks include the London upgrade in August 2021 and the Pectra upgrade in May 20259.
One example of a soft fork is the Taproot upgrade, which went live on the Bitcoin network on 14 November 2021 at block 709,6321314.
More than 3.6 million ETH were drained from The DAO. The hard fork that moved those coins to a program for refunding the victims won more than 85% of the votes and took place on 20 July 2016 at block 1,920,0009. Replay protection for Ethereum was set out in a separate proposal, EIP-155, in October 2016, so that a transfer on Ethereum would not go through on Ethereum Classic15.
Bitcoin Cash raised its block size limit to 8 MB10. The histories of the Bitcoin and Bitcoin Cash networks are identical up to and including block 478,55811.
