What Happens When Bitcoin Forks?

There have been a number of Bitcoin forks since the world’s oldest crypto launched in 2009. Some are hard forks, which are radical changes that effectively establish a new blockchain. Others are more like modifications to the Bitcoin protocol, called soft forks.

A Bitcoin hard fork happens when miners or developers vote for a significant change to a blockchain protocol, which typically results in a new form of cryptocurrency. A soft fork is similar, but is usually a more subtle shift in the blockchain software that miners and developers can adapt.

Keep reading to learn more about the top Bitcoin forks, how different forks work, and what the forking process may mean for investors.

What Is a Bitcoin Fork?

What is a fork in crypto? A fork is a natural extension of blockchain technology, which uses open-source code that’s designed to be updated and improved upon. Thus Bitcoin forks aren’t bad news, but rather a naturally occurring aspect of the blockchain, which is decentralized and doesn’t adhere to a central authority.

Bitcoin forks generally happen when there is a strong disagreement among miners and developers about how to handle a platform’s protocol or growth. This can happen with any established blockchain, although the number of forks and how they occur can vary considerably from network to network.

While there have been many Bitcoin forks, there have been only a handful of forks on Ethereum, for example.

•   A Bitcoin hard fork is a split of the original blockchain, which enables a new platform to be established, often with its own crypto.

•   A soft fork is a modification of the existing blockchain.

•   There are also instances when a coin forks its code from Bitcoin’s code while creating a new blockchain entirely from scratch.

Hard Forks, Soft Forks, and Other Innovations

A Bitcoin hard fork is a radical change to the Bitcoin protocol, whereas soft forks are subtle software modifications. Also, some different types of cryptocurrency have cloned their source code from Bitcoin to get started, but these aren’t technically considered forks. (See the Bitcoin forks list below.)

The creation of altcoins like Litecoin (LTC) or Bitcoin Cash (BCH), for example, established new blockchains with completely different rule sets. These platforms even use different mining algorithms, meaning the computers that mine them run a different kind of software.

In these cases, the altcoins spawned their own networks from day one, without cloning the existing Bitcoin blockchain and picking up where it left off, as Bitcoin Cash (BCH) did. “Forks” like these are really new projects that just took the core code of bitcoin as a starting point.

The other common kind of fork is known as a user-activated soft fork (UASF). This process is much different than a hard fork because it gets initiated by users of the cryptocurrency rather than the computers maintaining the network (miners).

A UASF works by users adopting a certain action with regard to how they interact with the network of a given cryptocurrency. Then, miners can choose to follow suit afterward if enough users hop on board.

10 Famous Bitcoin Forks

Envision the original Bitcoin blockchain as the center of a large family tree. Emerging from the original trunk of that tree are the many offshoots of Bitcoin, including hard forks, soft forks, and other innovations.

To understand the whys and hows of Bitcoin forks, it helps to review a Bitcoin forks list of some of the most notable forks in Bitcoin’s history.

1. Litecoin

Litecoin (LTC) is a cryptocurrency created in 2011 by former Google engineer Charlie Lee. It was one of the first “altcoins.” Though it’s built on Bitcoin’s original source code, Litecoin was designed to improve upon Bitcoin, especially in terms of transaction speed.

Like Bitcoin, Litecoin uses a proof-of-work system (PoW) to verify transactions on the blockchain, but owing to certain modifications it’s considered a “lighter,” faster version of Bitcoin. The main difference between Litecoin and Bitcoin is that LTC uses a mining algorithm called scrypt, to enable faster transaction times.

Years later, Litecoin also underwent a hard fork of its own, with Litecoin Cash.

💡 Want to learn more about Litecoin? Check out our guide on Litecoin.

2. Bitcoin XT

Bitcoin XT was launched in 2014 by Mike Hearn, one of Bitcoin’s original developers. While the original version of Bitcoin allowed up to seven transactions per second, Bitcoin XT aimed for 24 transactions per second. In order to accomplish this, it proposed increasing the block size from one megabyte to eight megabytes.

While Bitcoin XT gained some traction initially, it eventually lost its momentum and is no longer available.

3. Bitcoin Classic

Bitcoin Classic was a similar story to Bitcoin XT. But instead of increasing the block size dramatically from one megabyte to eight, they created a two-megabyte block. This project has become less popular but still has some active nodes.

4. Segregated Witness

The Bitcoin SegWit update took place on August 23, 2017 and changed the way information was transferred on the blockchain.

Bitcoin developer Pieter Wuille originally proposed the update in 2015. He and others believed that transactions took too long to process and that they had some security issues.

SegWit stands for “segregated witness,” and it’s a key turning point in the history of Bitcoin and cryptocurrency. The SegWit innovation allowed for larger blocks by removing signature (or witness) data from Bitcoin transactions.

This frees up more space for the transaction itself.

5. SegWit2x

SegWit2x was set up to be a Phase Two of SegWit: a hard fork that would also transform the block size allowed on Bitcoin. Unfortunately, SegWit2x didn’t gain the same widespread support as the first SegWit phase, and the hard fork did not occur.

But the failure of SegWit2x helped pave the way for the Bitcoin Cash hard fork.

6. Bitcoin Cash (BCH)

The next time Bitcoin went through a hard fork was in August 2017. The new coin was called Bitcoin Cash (BCH). BCH is similar to Bitcoin (BTC) but with a few key differences.

The biggest difference, and the one that spawned the split, is that BCH has a larger block size. This means that one block in the blockchain can hold a larger number of transactions, resulting in greater throughput. Basically, more money can be processed in less time.

7. Bitcoin Satoshi’s Vision (BSV)

Bitcoin SV is a second-generation fork of Bitcoin; BSV was derived from a fork of the Bitcoin Cash (BCH) protocol which was a fork of the original Bitcoin (BTC) protocol.

As noted above, BCH’s goal was to increase transaction speed to improve Bitcoin’s scalability. Bitcoin SV broke off to become its own cryptocurrency with its aim to maintain the original Bitcoin protocol and become more technologically advanced.

8. Bitcoin Gold

Bitcoin Gold (BTG) is a Bitcoin fork that utilizes an ASIC-resistant proof-of-work mining algorithm. That means it’s meant to be a coin that anyone can mine at home without the need for expensive specialized computer hardware. According to the Bitcoin Gold website:

“BTG is a cryptocurrency with Bitcoin fundamentals, mined on common GPUs instead of specialty ASICs. ASICs tend to monopolize mining to a few big players, but GPU mining means anyone can mine again — restoring decentralization and independence.

“GPU mining rewards go to individuals worldwide, instead of mostly to ASIC warehouse owners, recreating network effects that Bitcoin used to have.”

9. Bitcoin Diamond (BCD)

Bitcoin Diamond, launched in 2017, is yet another Bitcoin fork that aimed to make transactions faster and cheaper.

10. Bitcoin Private

Instead of being a standard blockchain fork, the aim of Bitcoin Private (BTCP) was to create a fork-merger that would create a merge with the ZClassic (ZCL) blockchain via a fork of the Bitcoin blockchain.

This project was driven by Rhett Creighton, who also founded ZClassic, with the idea of combining the privacy of ZClassic with the popularity and security of Bitcoin.

Bitcoin Private launched in March of 2018 and was designed for both transparent and shielded or private transactions.

Up to $100 in bitcoin2 – just for you.

With 30 coins available, our app offers a secure way to trade crypto 24/7.

Pros and Cons of Bitcoin Forks

Given the range of alterations to the original Bitcoin protocol, there are a number of advantages and disadvantages for investors to consider when Bitcoin forks.

Benefits of Bitcoin Forks

Some forks can create greater efficiencies by speeding transaction times, which increases the number of transactions per second.

Forks can also help to solve security issues.

Downsides of Bitcoin Forks

Bitcoin forks can also create some instability, however. This may impact the price of the crypto in question.

A fork may also make the crypto platform more vulnerable to hacks (like replay attacks), at least temporarily.

How to Claim Bitcoin Forks

Most cryptocurrency exchanges and hardware wallets make it easy for users to access their new coins not too long after a hard fork happens, whether in a few weeks or a few months. There will typically be a new wallet created with the name of the new coin. The balance in the new wallet should be identical to that of the old one.

For more technical users who had their coins on a paper wallet or desktop wallet, however, the process gets tricky.

Basically, a user would have to move their entire balance to a new wallet and then use the private keys from the old one to claim their new coins. This process can be risky and is typically only considered by tech-savvy users.

When done incorrectly, it could result in total loss of all funds for both coins.

In cases like these, less tech-savvy users might end up not claiming the forks at all, as the risk of total loss could be high.

How Has Forking Affected Crypto Prices?

Typically, hard forks can be seen as a money grab by the programmers who create them, because prices tend to rise initially (although they often decline afterward).

Depending on the type of fork, circumstances involved, reason for the fork, user anticipation, and a host of other factors, the resulting impact on price can be unpredictable.

One significant historical example to look at would be the BTC/BCH hard fork of August 2017.

In the period leading up to this fork, there was a great deal of speculation about different possible outcomes:

1.    The new coin (Bitcoin Cash) would overtake the old, and most users would migrate to the new network.

2.    The original Bitcoin would reign supreme while the new Bitcoin Cash faded into obscurity.

3.    The fork would break the entire cryptocurrency and result in the value of both coins going to zero.

Several years later, it appears that those in camp number two were the closest to being correct. Although BCH is still among the 30 largest cryptocurrencies by market cap, as of July 1, 2022, it’s valued at about $108 USD, while BTC is valued at about $19,400.

But at the time, it wasn’t clear at all what would happen. The price of both BTC and BCH surged after the fork.

One BCH rose to as high as $3,000 in late 2017 and early 2018, but has since fallen by over 95%.

As far as the price of BTC goes, there have now been so many hard forks that most people pay no attention, and the impact on price appears to be negligible.

Investing in Bitcoin

In its 13-year history, Bitcoin has seen dozens of forks, both hard and soft. Developers have also used the Bitcoin blockchain to copy and create basic source code for new projects. Some of these forks have resulted in well-known new crypto — like Litecoin and Bitcoin Cash. Some have led to innovations like SegWit, which restructured transaction blocks to make them easier to process.

Interestingly, none of the Bitcoin forks have had a significant long-term impact on BTC’s price over time.

If you’re ready to start investing in crypto, consider the convenience and security of using the SoFi Invest investment app. You can open an account with SoFi Invest, and from there set up a crypto trading account in minutes. SoFi offers dozens of different crypto that you can trade 24/7, right from your phone or computer.

Get started trading crypto on SoFi Invest today.

FAQ

How many Bitcoin forks have there been?

There have been dozens of Bitcoin hard and soft forks over the last 13 years. It’s hard to say exactly how many, owing to the complexity of some forks (some of which were successful and others that were not).

Do Bitcoin forks double your money?

It’s impossible to predict. A fork can sometimes drum up investor interest, and the price of BTC could rise, but there is also the risk that a fork that’s viewed unfavorably could cause the price to drop. Similarly, having access to the newly forked coins may or may not give investors a windfall — there’s no way to know in advance.

Is Litecoin considered a fork of Bitcoin?

Yes, Litecoin was created in 2011 as a fork of Bitcoin to create a lighter blockchain that would increase transaction speeds.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount
Bonus Payout

Low
High

$50
$99.99
$10

$100
$499.99
$15

$500
$4,999.99
$50

$5,000+

$100

SOIN20197