What Is Hard Fork?
A hard fork is a fundamental change to a blockchain protocol that is not backward-compatible, creating a permanent split in the chain. After a hard fork, nodes running the old software reject blocks produced under the new rules, and nodes running the new software reject blocks under the old rules. This creates two separate, incompatible blockchains from a single history.
How Hard Fork Works
Famous hard forks include: Bitcoin Cash (BCH) forking from Bitcoin (BTC) in 2017 over block size disagreements, and Ethereum (ETH) forking from Ethereum Classic (ETC) in 2016 after The DAO hack. In a hard fork, holders of the original token typically receive an equal balance of the new token on the forked chain. The market then determines the value of each chain independently.
Why It Matters for Traders
Hard forks create trading opportunities: before a fork, the original token often rallies as speculators accumulate to receive the forked token "airdrop." After the fork, the minority chain token (the less popular fork) typically dumps as holders sell the "free" token. Strategy: accumulate before the fork to receive both tokens, then evaluate which chain has more developer and community support. Sell the weaker chain and hold (or add to) the stronger one.
