On August 1st

What is a Bitcoin fork?

There has been significant news coverage and developments in recent weeks about changes to digital currency networks. These are sometimes called “forks”. I wanted to provide a simple, non-technical explanation to add context to recent discussions (previous blog posts here and here).
What is a “fork”?

A “fork” is a change to the software of the digital currency that creates two separate versions of the blockchain with a shared history.

Forks can be temporary, lasting for a few minutes, or can be a permanent split in the network creating two separate versions of the blockchain. When this happens, two different digital currencies are also created.
Why are changes made to digital currency protocols like Bitcoin and Ethereum?

Let us consider 3 digital currencies — Bitcoin, Ethereum and Litecoin. Each of these digital currencies use open-source software protocols with independent development teams responsible for changes and improvements to the network, much in the same way that changes to internet protocols allow web browsing to become better over time.

The idea of blockchain is to create an open financial system for the world and I believe digital currencies will be fundamental in achieving this mission. However, many of these digital currencies are still in early development. Making improvements to the software — such as the number of transactions the network can support.

Why do forks happen?

There are a few reasons why a fork can happen. For example, when a change is proposed to a digital currency protocol, users need to show their support for the new version and upgrade — in a similar way to people regularly update applications on their computer. In order for these changes to get approved many people need to agree, just as changes to cellphone networks require many phone companies to agree.