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Fork refers to a division in the transaction history of a blockchain, which leads to the emergence of two distinct versions of the blockchain. These versions share a common history until the point of the fork.
Types of Fork?
A soft fork is a blockchain protocol upgrade that is backward-compatible with previous versions. It is a change to the software protocol that only requires some nodes to upgrade to the latest version in order to continue participating in the network.
A hard fork is a change in the blockchain protocol that creates a permanent divergence from its previous version blockchain. This occurs when nodes on a network no longer recognize the same blockchain as valid, resulting in a split in the network.
Why is this important?
Digital currencies typically have their own development teams that are responsible for improving and updating the network. Similar to how internet protocols are updated to enhance web browsing, these teams may occasionally create a fork to increase security or add new features to the cryptocurrency.