A fork, in the blockchain sense, is a split. At some block height the single chain everyone was following becomes two chains, each continuing from that point with different rules or different histories. Sometimes this is planned — a coordinated upgrade where all nodes agree to switch to new rules on the same block. Sometimes it is not, and the split becomes permanent.
There are two technical distinctions to know about, plus a political one.
Hard fork. A protocol change that is not backward-compatible. New-rules nodes and old-rules nodes disagree on what blocks are valid, so they produce separate chains. If everyone upgrades, the old chain dies and there is no lasting split. If only some people upgrade, you end up with two permanently diverged chains. Bitcoin Cash splitting from Bitcoin in August 2017 was a hard fork driven by a disagreement about block size. Ethereum Classic splitting from Ethereum in July 2016 was a hard fork driven by the DAO hack and the decision to roll back the affected transactions.
Soft fork. A protocol change that is backward-compatible. New-rules nodes accept a stricter set of blocks than old-rules nodes, but old nodes will still accept new blocks because they pass the old rules. No permanent split — just an upgrade that works even if a minority of nodes refuse to adopt it. SegWit in Bitcoin (2017) and Taproot (2021) were both soft forks. Most Bitcoin upgrades are soft forks by design because they do not require unanimous consent to ship.
Why Forks Happen at All
On a centralised system, updates are easy: the operator pushes a new version and everyone runs it. On a decentralised network, there is no operator. Every node runs its own copy of the software and decides for itself whether to upgrade. If everyone agrees, upgrades happen smoothly. If they disagree, the only way to enforce different rules is to run a different client and accept that you will be on a different chain from the holdouts.
This is why forks are as political as they are technical. The community debates are long and often bitter (Bitcoin’s block size wars from 2015-2017 were years of increasingly hostile argument, with real money and real reputations at stake), and the outcome is decided by which chain accumulates more hash rate, exchange support, and user activity. A chain with no users is worth nothing regardless of how clean the code is.
What Forks Look Like for Holders
If you held coins on a chain that hard forks into two, you now have coins on both chains. That is how Bitcoin Cash got distributed to BTC holders in 2017 and how Ethereum Classic was distributed to ETH holders after The DAO split. Exchanges usually credit both sides automatically. Self-custodial wallet users need to use tools that understand the specific fork to claim the new asset.
Most forks of major chains die quickly. Bitcoin Cash is the main survivor of the 2017 split and it trades at a small fraction of Bitcoin’s value. Ethereum Classic has persisted but with a fraction of ETH’s hash rate and activity. The lesson across all of them is that a fork preserves the ledger state but not the network effect, and network effect is usually where most of the value lives.