Fork

A fork in cryptocurrency occurs when there is a divergence in the blockchain, resulting in the creation of a new cryptocurrency. There are two types of forks: hard forks and soft forks.

A hard fork happens when there is a permanent split in the blockchain, creating a new blockchain that is incompatible with the original one. This results in a new cryptocurrency being created, with its own set of rules and protocols.

An example of a hard fork is the Bitcoin Cash (BCH) fork, which occurred in August 2017. Bitcoin Cash was created as a result of the fork, with the aim of increasing the block size limit to allow for more transactions to be processed.

A soft fork, on the other hand, is a temporary divergence in the blockchain that is compatible with the original one. This means that the new blockchain is still recognized by the network and can be merged back into the original blockchain.

An example of a soft fork is the Segregated Witness (SegWit) fork, which occurred in August 2017 for Bitcoin. SegWit was introduced to address the scalability issues of Bitcoin by separating the signature data from the transaction data, which allowed for more transactions to be processed in each block.

Forks can impact trading strategies with bots as it can cause market volatility and uncertainty, leading to potential gains or losses. Some bots may be programmed to automatically adjust their trading strategies in response to forks, while others may be programmed to avoid trading during periods of high volatility.

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