Bitcoin (BTC) is one of the internet's most recognized digital assets. Since its launch in 2009, it's grown into a revolutionary peer-to-peer (P2P) currency, achieving a $2 trillion market cap by 2024.

But despite Bitcoin’s status as the "gold standard" of cryptocurrency, new investors often encounter projects with "Bitcoin" in their names. Coins like Bitcoin Cash (BCH), Bitcoin SV (BSV), and Bitcoin Gold (BTG) can lead to confusion, as many of these so-called "Bitcoin altcoins" are directly linked to the original BTC.

Understanding these variations and their role in Bitcoin's evolution starts with learning where they came from in the first place. 

In this guide, we’ll explore what a Bitcoin hard fork is and how Bitcoin hard forks impact the broader crypto ecosystem today.

What is a Bitcoin hard fork? Hard vs. soft forks

In cryptocurrency, a fork refers to a protocol change that updates a blockchain’s underlying software. Forks are categorized as either hard or soft, depending on their compatibility with the existing network. 

Hard forks are significant updates that aren’t backward compatible, requiring all participants to upgrade to the new protocol. This process essentially creates a new and separate blockchain, using the original as its foundation. If some participants reject the hard fork, the chain splits into two: one following the new rules and another maintaining the old framework.

In contrast, soft forks are backward-compatible updates. Nodes running the old software can still recognize and confirm transactions under the new rules. Soft forks introduce new features or improve functionality without disrupting the network, making them less contentious and avoiding chain splits.

Bitcoin’s history includes numerous upgrades, some of which have resulted in entirely new blockchains. Many altcoins bearing "Bitcoin" in their names, like Bitcoin Cash (BCH) and Bitcoin SV (BSV), are hard forks of Bitcoin’s original chain. While these networks share a common origin, each hard fork operates as a distinct ecosystem with its own rules, currencies, and developer communities.

Why do hard forks happen?

Although hard forks involve technical changes, they often stem from philosophical and ideological divisions within the crypto community. In many cases, one group of developers believes introducing a new coding standard is essential despite the challenges of migrating node operators and users to a different system. Advocates often argue that achieving certain goals, like enhancing scalability or security, necessitates fundamental changes to the blockchain's codebase. In the case of Bitcoin, most hard forks have concentrated on issues related to transaction speed and fees during times of high congestion.

Hard forks can also serve other purposes, such as reversing severe exploits like hacks or code vulnerabilities. One notable example is the split between Ethereum (ETH) and Ethereum Classic (ETC). In 2016, hackers exploited a community-governed treasury, the decentralized autonomous organization (DAO), on Ethereum's original blockchain, stealing $60 million in crypto. This breach sparked intense debate within the Ethereum community. Decentralization advocates opposed third-party interference, while others argued for action to protect DAO investors. Ultimately, Ethereum implemented a hard fork to erase the hack, creating the Ethereum blockchain as it exists today, while the original chain became Ethereum Classic.

A history of Bitcoin hard forks

The concept of hard forks gained traction in the Bitcoin community as transaction volumes increased. During the early bull run of 2013, developers began identifying scalability challenges as more users attempted to transfer BTC simultaneously. While the crypto market now features dozens of Bitcoin variations, a few have emerged as particularly noteworthy examples.

Bitcoin XT

In 2014, scalability concerns within the Bitcoin network led to the first proposed hard fork: Bitcoin XT. Introduced by developer Mike Hearn and supported by Bitcoin Core developer Gavin Andresen, this upgrade aimed to address scalability issues by increasing Bitcoin’s block size from 1 MB to 8 MB. To activate the proposed changes, the Bitcoin XT team required 75% of miners to signal support. Despite initial enthusiasm, the proposal faced strong opposition from other Bitcoin Core developers and ultimately failed to gain enough traction to implement the block size increase.

Bitcoin Cash hard fork 

While Bitcoin XT didn’t result in a significant shift within Bitcoin’s ecosystem, it set the stage for the influential Bitcoin Cash (BCH) hard fork in 2017. This contentious split arose from a community debate over implementing the "Segregated Witness" (SegWit) soft fork to address scalability issues. SegWit aimed to optimize Bitcoin’s transaction storage by rearranging data within blocks, maintaining the 1 MB block size limit without creating a new blockchain.

Conversely, Bitcoin Cash proponents chose a different path. They launched a new blockchain with an initial block size of 8 MB, later increased to 32 MB, to accommodate more transactions per block. While Bitcoin Cash has not surpassed Bitcoin in market dominance, it stands as the largest Bitcoin hard fork, complete with its own ecosystem and brand identity.

Bitcoin Gold 

In the same year Bitcoin Cash (BCH) launched, another hard fork emerged: Bitcoin Gold (BTG). Unlike BCH, which focused on scalability, Bitcoin Gold aimed to address concerns over mining centralization caused by specialized machines known as application-specific integrated circuits (ASICs). Critics argued that ASICs concentrated mining power in the hands of a few, making Bitcoin less accessible to everyday participants. To counter this, Bitcoin Gold introduced an ASIC-resistant proof-of-work (PoW) algorithm called Equihash, designed to level the playing field.

Despite its emphasis on equity and accessibility, Bitcoin Gold's launch was marred by controversy. Developers conducted a "pre-mining" event, creating 100,000 BTG coins before the network went public. Over the years, Bitcoin Gold has also faced significant security challenges, including multiple 51% attacks, which have raised questions about its long-term viability.

Bitcoin SV 

Bitcoin SV (BSV) stands apart from other Bitcoin hard forks by being one step removed from the original Bitcoin blockchain. Instead of originating within the Bitcoin network, Bitcoin SV emerged as a split from the Bitcoin Cash (BCH) chain in 2018. Entrepreneurs Craig Wright and Calvin Ayre led the effort, advocating for protocol changes to create what they believed to be a better version of electronic cash. The "SV" in Bitcoin SV stands for "Satoshi's Vision," emphasizing its alignment with Bitcoin's original goal of becoming a global peer-to-peer (P2P) payment system.  

From its inception, Bitcoin SV prioritized scalability, debuting with a block size limit of 128 MB and later expanding to an unprecedented 2 GB. Despite these technical advancements, Bitcoin SV has struggled to gain widespread traction and has faced security issues, including 51% attacks, which have raised concerns about its resilience and adoption.

When is the next Bitcoin hard fork? 

Debates over Bitcoin's future development persist, and it's always possible a new team of developers will create a hard fork from the Bitcoin blockchain. However, history suggests Bitcoin's core developers favor soft forks to introduce upgrades without disrupting network continuity. These backward-compatible updates aim to enhance scalability, improve transaction speeds, and lower fees while preserving Bitcoin's original blockchain. Notable examples include SegWit in 2017 and Taproot in 2021, both of which addressed critical issues without splitting the chain.

Soft forks have also paved the way for layer2 protocols, which build on Bitcoin's blockchain to introduce new scalability features. Bitcoin’s Lightning Network (LN), for example, enables instant BTC transactions with minimal fees, offering an alternative P2P payment system. Projects like Stacks (STX) and Rootstock extend Bitcoin's capabilities by enabling decentralized applications (dApps), bringing fresh innovation to BTC while maintaining the security of the main chain.

While hard forks may still occur, the Bitcoin community’s track record shows a preference for leveraging soft forks and layer 2 solutions to drive progress and address challenges.

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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.