Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) are powered by a decentralized open-source software called a blockchain. A fork is a change to the blockchain’s underlying protocol. A blockchain fork is an important upgrade to the network and can either represent a radical change or a minor one and can be initiated by developers or community members.

It requires node operators — machines connected to the blockchain that help validate transactions on it — to upgrade to the latest version of the protocol. Every node has a copy of the blockchain and ensures new transactions do not contradict its history.

A hard fork is a radical upgrade that can make previous transactions and blocks either valid or invalid and requires all validators in a network to upgrade to a newer version. It’s not backward-compatible. A soft fork is an upgrade to the software that is backward-compatible and has validators in an older version of the chain see the new version as valid.

Effectively, a hard fork, more often than not, leads to a permanent chain separation, as the old version is no longer compatible with the new version. Those holding tokens on the old chain are granted tokens on the new one as well because they share the same history. Hard forks can happen for a number of reasons.

Understanding hard forks

To understand what a hard fork is, it’s essential to first understand blockchain technology. A blockchain is essentially a chain made out of blocks of data that work as a digital ledger in which each new block is only valid after the previous one has been confirmed by the network validators. Data on the blockchain can be traced all the way back to the first-ever transaction on the network. This is why we can still see the first block on the Bitcoin blockchain.

A hard fork is essentially a permanent divergence from a blockchain’s latest version, leading to a separation of the blockchain, as some nodes no longer meet consensus, and two different versions of the network are run separately.

This essentially means that a fork is created on the blockchain where one path keeps following its current set of rules, while the second path follows a new set of rules. A hard fork is not backward compatible, so the old version no longer sees the new one as valid.

Hard forks are often seen as dangerous because of the chain split that often occurs. If a split occurs between the miners who secure the network and the nodes that help validate transactions, the network itself becomes less secure and more vulnerable to attacks.

A common way to undertake malicious action against a blockchain would be to perform a 51% attack, which is when a cabal of miners manages to have over 51% of the computing power that secures a network and use it to alter the blockchain’s history. Some networks created as a result of hard forks have, in fact, suffered numerous 51% attacks where bad actors double-spent the same funds. These attacks have bad actors leveraging their superior computing power in the network to reorganize blocks, allowing them to double-spend.

Another vulnerability that’s possible with hard forks is replay attacks. Replay attacks occur when a malicious entity intercepts a transaction on a forked network and repeats that data on the other chain. Hard forks without replay attack protection see both transactions become valid, meaning someone can move another users’ funds without controlling them.