A Hard Fork in blockchain technology is a significant alteration to a network’s protocol that renders previously invalid blocks and transactions valid, or vice versa. It necessitates all nodes or users to upgrade to the latest version of the protocol software, resulting in a permanent divergence in the blockchain. This split creates two separate paths: one following the new, upgraded blockchain, and the other continuing along the old protocol. The change introduces a new set of rules, making it incompatible with the existing blockchain.
A hard fork may be initiated for various reasons, such as correcting security vulnerabilities in older versions, adding new functionalities, or reversing transactions in response to significant events like hacks. For example, the Ethereum hard fork in 2016 following the DAO hack was aimed at refunding the stolen funds to the original owners.
Hard forks have significant implications, including the creation of new cryptocurrencies, as seen with Bitcoin forks resulting in Bitcoin Cash, Bitcoin SV, and others. They are crucial events, often extensively discussed within the cryptocurrency community, as they can lead to disagreements and splits, where part of the community may form a new blockchain with different characteristics. Unlike soft forks, where only one blockchain remains valid, hard forks result in two functioning blockchains.