Crypto Guides

A Simple Guide To Cryptocurrency Fork & Its Types


We have discussed many topics concerning cryptocurrencies in our previous guides. Some of them are basic, and some belong to the intermediate and advanced category. If you have been following us, you would have realized that we have chronologically structured this Crypto Guide series. Because we want you to get a clear understanding of the entire crypto market from a very basic level. Since we have completed most of the basic concepts, let’s go a bit deeper to understand more complex aspects of this space. In our article today, let’s understand the concept of Forking in cryptocurrencies.

What is a cryptocurrency fork?

You must be aware of the software updates that we keep receiving in our smartphones. These software updates typically fix the reported bugs in the existing software version or may add many other features to it to make it more secure and robust. This applies the same for cryptocurrency networks as well. Every network needs an update, and that update is known as ‘Forks.’

However, this is only one of the reasons why Forking is done. There is another crucial reason behind every blockchain Fork that has happened until now. Before understanding that, let’s understand what a Protocol is. It is essentially a set of rules that must be followed by all the existing nodes in a crypto network. Some of the rules in a protocol include Block Size, Rewards, etc. Now, let’s see the actual purpose of a Fork.

The Purpose?

When a significant part of the existing stakeholders like Miners, Developers, etc. do not agree with the updated protocols, the need for the fork arises. In simple words, when a set of important individuals in the network are not ready to follow the newly updated rules, the entire network is forked, and the process is known as Forking. Once the fork is done, a part of the network follows the new rules, and the other set follows the previously existing rules. Now, let’s understand the different types of Forks that occur in a blockchain.

Types of Forks

There are two types of Forks in the world of cryptocurrencies – Hard Fork & Soft Fork.

🍴 Hard Fork

This kind of fork results in the permanent splitting between the existing blockchain. Meaning, the network is completely divided into two and results in two different cryptocurrencies altogether. In a Hard Fork, the old nodes that resist upgrading won’t be able to process the new transactions or add new blocks to the blockchain.

For instance, let’s say after the upgrade, the new block size is changed from 4 MB to 8 MB. If the new node, which is upgraded, processes a block of 6MB, the old nodes consider them as incompatible and reject the block altogether. Each of these blockchains will have a separate community, and developers altogether. One important thing to remember is that all the transactions for the parent blockchain are copied to both of the newly formed ones. That is, if you were a part of a cryptocurrency’s original blockchain, you would be getting cryptos of newly formed ones as well.

To explain this, we would like to take one best example of a hard fork which is the Bitcoin and Bitcoin Cash. Since Bitcoin is the original blockchain, and the hard fork occurred, if you were holding 10 Bitcoins, once the fork is done, you will be receiving ten coins of Bitcoin cash as well.

🍴 Soft Fork

Unlike hard fork, the old nodes that aren’t updated with the new rules can still process the new transactions and add new blocks to the network. Hence there is no need for dividing the entire network into two different networks. The older nodes can upgrade to the new ones whenever they want to, or they can remain the same way. Also, the transaction history will remain intact until the time of the fork.

The only rule here is that the old nodes must not violate the new rules after the soft fork is done. For instance, let’s say a soft fork is done in a blockchain, and the block size is decreased from 8MB to 4 MB. The older nodes can process new transactions and add newer blocks to the network, which are only of size less than 4 MB. If the older nodes try to add a block that is of 6MB, the new nodes will reject it as the updated rules aren’t followed.

That’s about Forking and types of forks in the world of cryptos. These forks are and will continue to be an integral part of the crypto space as the adoption is increasing with time.

Crypto Daily Topic

Bitcoin Cash ABC vs. Bitcoin Cash SV – Examining the Bitcoin Cash Hash War

The debate about Bitcoin’s scalability began almost with its very inception. A few years later, that debate tore the Bitcoin community right down the middle. The core of the matter was Bitcoin’s 1MB block size. Satoshi wrote a 1MB limit on the code to prevent the block size from being up to miners’ discretion, which would lead to some miners producing bigger blocks than others and potentially causing the chain to split.

However, Satoshi certainly didn’t envision the firestorms that would later erupt out of this issue. As transaction volumes increased on the chain, it became clear that some things needed to change. But what would change, and how, was the main bone of contention in the community.

This contention gave birth to the Bitcoin Cash hard fork, which, paradoxically, later split into Bitcoin Cash ABC and Bitcoin Satoshi’s Vision – for the same reasons Bitcoin Cash had split from Bitcoin.

What was the lead up to this perplexing chain of events? Let’s dive into the famous ‘hash war,’ how it began, its implications, and its conclusion.

What is Bitcoin Cash, and Its Origin? 

Before we delve into Bitcoin cash and its origin, we need to look at the events that precipitated its creation. These events are the scalability issues facing Bitcoin and the disagreements among ‘factions’ in its camp as to how to address them. 

Bitcoin’s block size limit of 1MB meant that as the network grew in popularity and more people used the network, the network became clogged, leading to slow transactions and high transaction fees. It also meant the network couldn’t compete with payment models like Visa, which processes thousands of transactions per second, as compared to Bitcoin’s seven transactions per second. 

This issue meant a scaling solution had to be created. The problem is the Bitcoin community couldn’t come to a consensus as to how it would be done. One group wanted to maintain the 1MB block sizes and look for a scaling solution that would operate off of the main blockchain. The other group wanted to increase the block size and allow for more transactions in each block while keeping transaction fees low. However, this idea was met with censorship and indignation from the other group.

In 2017, Bitcoin had achieved mainstream status, and its popularity had grown more than ever. The foreseen transactions backlog that would slow down the network were now a reality. Network users were already complaining of several days waiting time before their transactions could be confirmed. For your transaction to be confirmed fast, you had to pay higher transaction fees. This also meant that Bitcoin could not be relied upon to conduct everyday transactions like micropayments. 

At this point, one camp suggested ‘Bitcoin Unlimited,’ an upgrade to increase block sizes. The other camp suggested a Segregated Witness (SegWit), an off-chain technology that would retain the block size, but also allow for faster transactions. 

However, Bitcoin Unlimited meant the network had to hard-fork, which meant the new version would not be compatible with the older version, and users all over the world would have to migrate to the new version. The SegWit camp preferred to maintain the status quo and maintain Satoshi’s version, whilst working on a solution that wouldn’t necessitate hard-forking. Bitcoin Unlimited also meant that miners with large processing power would have an unfair advantage over those with limited resources – which was against the democratization that Satoshi envisioned. 

The SegWit’s camp idea was to ‘segregate’ some part of the transaction (mainly transaction signatures) and store it outside the main chain, hence creating more space in each block. SegWit proponents viewed it as a less risky approach. However, the opposite camp saw it as a temporary solution to a permanent problem. 

The 2017 Hard Fork and SegWit2x

On August, 1, 207, the vast majority of Bitcoin miners indicated their support for SegWit2x. SegWit2x meant a potential implementation of SegWit with an agreement to later increase the block size limit to 2MB. 

However, a pseudonymous contributor going by ‘Shaolin Fry’ suggested a user-activated soft fork (UASF) that would implement SegWit without the contribution of miners. A UASF would comprise users, Bitcoin exchanges, and Bitcoin businesses. Since the users outnumber miners, it was clear a SegWit implementation was going to be effected without the participation of miners. (Miners were against SegWit because it would supposedly expose a ‘covert’ algorithm that ASIC mining machines were using to boost their processing speeds). 

Even then, a part of the community was not satisfied with SegWit – electing to initiate a hard fork of the Bitcoin chain. The new blockchain was called Bitcoin Cash, and it has an 8MB block size compared with Bitcoin’s 1MB. Bitcoin Cash went on to become one of the most successful cryptocurrencies, entering the top ten in terms of market capitalization. 

Bitcoin Cash developers envisioned a blockchain that allowed faster transactions and hence be used as a payment system for everyday transactions. The argument was Bitcoin can be an investment asset, but Bitcoin Cash can be a cheaper and faster payment model as compared to the traditional system. This, they argued, was what Satoshi had intended. 

One Year Later, More Block Size Limit Wars 

When the world thought the Bitcoin block size push-and-pull was over, Bitcoin Cash itself split into Bitcoin Cash ABC (ABC for Adjustable Blocksize Cap) and Bitcoin Cash SV (SV for Satoshi’s vision). Bitcoin Cash ABC proponents wanted to further increase the block size as well as enable the running of smart contracts on the platform. 

Bitcoin Cash ABC (BCH ABC) has implemented some changes such as Canonical Transaction Ordering Route (CTOR). CTOR means that transactions are arranged by following a dictionary sequence, as opposed to the Topological Transaction Ordering Route (TTOR) used by Bitcoin. CTOR is supposedly a more effective and elegant way of arranging transactions. Bitcoin Cash ABC also maintained the simpler name ‘Bitcoin Cash.’ 

But not everyone was enthusiastic about the idea of making the BCH blockchain a smart contracts platform. The leader of the anti-BCH ABC crowd was Craig Wright, a controversial figure who insists he’s the original creator of Bitcoin (earning himself the pejorative moniker ‘Faketoshi’). Another vocal critic of BCH ABC was Calvin Ayre, owner of the powerful mining entity, Coingeek. On his part, Ayre argued that miners would not pick up CTOR. 

The anti-BCH ABC camp led to the creation of Bitcoin SV. The BSV camp argued that it represented the true vision of Satoshi Nakamoto. The new version also had some upgrades to facilitate faster transactions. 

The two most prominent figures in the BCH camp were Roger Ver and Jihan Wu. Ver is the owner of, the Bitcoin exchange, while Jihan Wu is the co-founder of Bitmain, a Bitcoin hardware manufacturer owner of mining company Antpool. 

Hash Wars

After the hard forks, what followed next was a battle on who would get to keep the BCH ticker. With both sides having heavyweight owners of mining companies, a ferocious war was impending. Each side used their mining power on their chains to push liquidity of each crypto in the market – hence the name ‘hash rate war.’

Soon, however, the hash war came to naught – with both sides burning millions of dollars into a mining contest that incurred losses amounting to millions, for both forks. According to, BCHSV incurred a loss of $2.2 million, while accruing a negative profit margin of 441%.On its part, BCHABC incurred $1.3 million in losses and a negative profit margin of 51%.

Both sides also implemented replay protection on their respective chains to prevent accidental use of coins on both chains by users.

The hash wars also hurt the whole cryptocurrency market. Bitcoin, in particular, tanked to its lowest level that year. And major crypto exchanges like Coinbase, Kraken, and Bittrex assigned the BCH ticker to the BCHABC hard fork.

The BSV side soon agreed to let go of the ‘Bitcoin Cash’ name as well as the BCH ticker and reluctantly agreed to adopt the name ‘Bitcoin SV’ and the BSV ticker.

The two coins went on to compete against each other in the market, just like any other cryptocurrencies.

Bitcoin Cash VS Bitcoin SV Today

After the war between the two coins, Bitcoin Cash stayed ahead in terms of price and market capitalization. Some crypto exchanges like Kraken and Binance have gone on to delist BSV.

BSV surprised everyone in early 2020 by surging past 300% to a price of $372 and briefly overtaking Bitcoin Cash to become the fourth largest crypto by market cap. Many people speculated the rise in BSV is attributable to Craig Wright’s current legal woes – which have helped increased publicity for the coin.

But BCH has since reclaimed its position over BSV. As of January 27, 2020, BCH is trading at $368.55, with a market cap of $6, 724, 517, 583, while BSV is trading for $284.05 with a market cap of $5, 176, 171, 633.

Final Thoughts

We don’t know who Satoshi is, but we’re certain he didn’t anticipate, neither would he have liked the acrimonious factions that arose out of his 1MB block size idea, and one that threatened to bring Bitcoin on its knees. Thankfully, Bitcoin has since rebounded from the hash war implications, as have the two hard forks that arose out of it. We can only wait and see future dynamics playing between both hard forks.