In the context of decentralized networks, a ‘fork’ signifies a modification to the source code of the network. Bitcoin, an open source and decentralized network, is made up of hundreds of thousands of nodes (computers) running the Bitcoin software source code. Each of these nodes maintains a separate copy of the Bitcoin blockchain to ensure undisputed consensus over the state of the Bitcoin network. Maintaining this consensus requires that every node in the network operates on code that is mutually compatible. Therefore, any proposed forks (alterations to the source code) to the Bitcoin protocol must undergo meticulous testing to ensure functionality across the entire network nodes.

There are two types of forks you should be aware of in the world of Bitcoin:

Hard Forks

These kinds of forks introduce substantial changes to the Bitcoin protocols code. Should a hard fork be implemented without obtaining a majority consensus from all nodes in the network, it may lead to a network split—resulting in the creation of a new cryptocurrency with the desired changes that is separate from the original Bitcoin network.

Soft Forks

These kinds of forks introduce backwards compatible changes to Bitcoin’s code. This allows the network nodes to remain compatible regardless if they are running the new or old version of the code. Unlike hard forks, soft forks do not create a permanent split of the blockchain, making them more common than hard forks.

For example, if the community collectively decided to implement a modification to the source code of Bitcoin that changed its rules, it would result in a hard fork of the Bitcoin network. The Bitcoin blockchain would split into two networks, the original network and the network with the new source code. 

This raises the question: which of these networks is the real Bitcoin? The answer is quite simple—the network with the majority nodes. In other words, it is a prerequisite for the majority of the nodes in the Bitcoin network to adopt the proposed changes for it to still be considered the real Bitcoin. 

Should a minority of nodes adopt the proposed code changes, the new chain separates from the original Bitcoin, creating a new network that is not Bitcoin. In this case, the original Bitcoin network remains intact and continues to function as intended.

Throughout Bitcoin’s history, several groups have proposed modifications to the source code of Bitcoin and attempted to gain community consensus to hard fork the network in favor of their changes. These modifications often included new rules or features to be added to the Bitcoin network, however, none of the modifications achieved consensus from the Bitcoin community.

Discontent with Bitcoin’s current consensus mechanism, these groups opted to hard fork from the original Bitcoin network, creating their own networks with the desired modifications. Despite their efforts, these newly formed networks have failed to garner significant adoption or market share. This highlights the entrenched network effects of Bitcoin and the market’s appreciation for its core protocol design, which has remained unchanged by any hard or soft forks since its inception.

On the other hand, soft forks are backwards compatible meaning these changes remain interoperable with previous versions of Bitcoin. Soft forks do not require universal adoption from all the nodes in the network. Nodes running slightly different code are still compatible with those running updated versions of Bitcoin because the core protocol design remains unchanged. As such, soft forks avoid a network split making them more commonly employed in the Bitcoin ecosystem for minor improvements or bug fixes.

Examples of Bitcoin Forks

Hard Fork: ‘Bitcoin Cash’

A prominent example of a Bitcoin hard fork is Bitcoin Cash (BCH). This hard fork occurred in August of 2017 at the height of the Blocksize Wars, driven by a disagreement within the community regarding the scalability of Bitcoin. Advocates for Bitcoin Cash aimed to increase the blocksize of Bitcoin, allowing for more transactions to be processed in each block. The hard fork resulted in a chain split and the emergence of Bitcoin Cash as a separate cryptocurrency and network, distinct from Bitcoin (BTC). Despite the fork, Bitcoin Cash has failed to garner widespread adoption or market share compared to the original Bitcoin.

Soft Fork: ‘Taproot’

On the other hand, the Taproot upgrade is a great example of a soft fork to the Bitcoin network. First activated in November 2021, Taproot introduced changes to the transaction format of Bitcoin resulting in improved privacy, scripting abilities, and overall efficiency. Most importantly, Taproot achieved this without causing a permanent split of the Bitcoin network. Soft forks like Taproot are designed to be backwards compatible, allowing nodes that haven't upgraded to coexist with those running the updated software. Taproot illustrates a formidable example of the effectiveness of soft forks in introducing beneficial changes to Bitcoin while still maintaining network cohesion.

Looking Ahead

In conclusion, forks represent a crucial mechanism for decentralized networks to introduce changes and improvements to the network's underlying protocol. Hard forks introduce substantial changes, potentially leading to a split in the network and a new cryptocurrency, while soft forks maintain backward compatibility, avoiding divisions of the blockchain. Despite multiple attempts to hard fork Bitcoin and introduce substantial changes to its source code, it has resisted any changes thanks to a dedicated community committed to upholding the immaculate design of its core protocol. Conversely, soft forks like Taproot showcase how beneficial changes can be introduced to Bitcoin while maintaining the core protocol design and network cohesion. Understanding these fork dynamics is essential for navigating how changes are made to decentralized networks like Bitcoin.