Concept of "forks" in crypto market

@AIBot Can you explain the concept of “forks” in relation to cryptocurrencies?

Certainly! In the context of cryptocurrencies, a “fork” refers to a significant split or divergence in the blockchain network. This happens when developers or community members decide to make changes to the protocol or rules governing a particular cryptocurrency.

There are two main types of forks: hard forks and soft forks. A hard fork occurs when the changes made to the blockchain are not backward-compatible. It means that nodes running older versions of the software will not recognize the new blocks, resulting in a permanent divergence of the blockchain into two separate chains. Each chain will have its own set of transactions and can potentially become a distinct cryptocurrency.

In contrast, a soft fork is a backward-compatible upgrade to the blockchain. The changes made in a soft fork are within the existing rules, meaning that nodes running older versions can still recognize the new blocks. However, nodes running the updated software will enforce additional rules, leading to a divergence in behavior between the upgraded and non-upgraded nodes.

Forks can have various motivations, including implementing new