What is a fork?
First off, you need to understand what the blockchain really is… I’ll explain that in my post “What the hell is the blockchain?”
For now, I’ll presume you understand what the blockchain is. A fork is when a blockchain is separated into 2 different ledgers. This can happen in different ways, but most commonly it is done on purpose to spawn a new chain that is required to act in a slightly different way from the original. Some reasons are a functionality changes or a security update are known as a soft fork, creating an entirely new product is known as a hark fork.
This ‘fork’ process allows the two different blockchains to exist at the same time and diverge away from each other. These forks copy the original blockchain up to a certain point in time, then they are cut off to form its own blockchain. Therefore, they both have the same base blockchain, but will have no effect on each other from then on.
When discussing cryptocurrency, most hard forks are done to create a new currency. When this happens, often the wallets in the original blockchain that contain coins are automatically awarded the same amount of coins in the new cryptocurrency. So, it pays to have been lucky enough to have owned and have kept a hold of coins from the early stages of successful cryptocurrencies.
(July 19, 2019) Update: here is a really well made map of bitcoin forks over the years – https://www.visualcapitalist.com/major-bitcoin-forks-subway-map/
Often, a fork will see a coin’s value fall. If the fork isn’t done correctly it has the potential to the coin’s long term survival at risk. Conversely If the fork improves the systems stability a fork can be an excellent buying opportunity for a multitude of reasons.
Sometimes forks can happen naturally and for smaller forks the network can sort itself out, However there is a issue that many have large concerns about. It’s called the 51% attack and it’s not just Bitcoins Biggest problem.
The 51% attack is a theoretical attack that could arise if a single party becomes greater than 51% of the networks hashing power and has the potential to grant the the ability to modify transactions from the past as well as control future transactions. This in essence, is a fork. A really bad fork.