Fork
A forkA fork in cryptocurrency occurs when there is a divergence in the blockchain, resulting in the creation of a new cryptocurrency. There are two types... More in cryptocurrencyCryptocurrency is a digital or virtual currency that uses cryptography for security and operates independently of a central bank. Cryptocurrencies use decentralized technology called blockchain... More occurs when there is a divergence in the blockchainThe blockchain is a digital ledger that records transactions in a secure and decentralized manner. Think of it like a shared spreadsheet that is constantly... More, 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 CashBitcoin Cash (BCH) is a fork of Bitcoin that was created in 2017 by a group of developers who wanted to increase the block size... More (BCH) fork, which occurred in August 2017. BitcoinBitcoin is like a digital treasure that you can use to buy things online. It's like having a secret code that only you know, and... More Cash was created as a result of the fork, with the aim of increasing the blockA block is a collection of transactions that have been verified and added to the blockchain. Each block typically contains a cryptographic hash of the... More 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)Segregated Witness, or SegWit, is a technology upgrade that was implemented on the Bitcoin network in 2017 to improve the scalability and security of the... More fork, which occurred in August 2017 for Bitcoin. SegWit was introduced to addressString of text that designates the location of a particular wallet on the blockchain. Often a hashed version of a public key. More 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 volatilityVolatility is a common characteristic of cryptocurrency markets, meaning that the prices of cryptocurrencies can fluctuate rapidly and unpredictably over short periods of time. This... More 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.