Bitcoin is governed by consensus rules that determine which transactions and blocks nodes consider valid. When those rules change, the change can be described as a fork. Hard forks and soft forks alter consensus differently, affecting network participants.

Every Bitcoin full node independently validates blocks according to its software’s consensus rules. Nodes reach consensus when they independently validate the same blockchain.

Temporary forks can occur when two miners discover valid blocks simultaneously. The network eventually converges on the chain with the most cumulative proof of work, leaving the competing block stale. Protocol forks instead change validation rules. 

A soft fork makes previously valid transactions or blocks invalid under new, stricter rules while remaining backward compatible. Older nodes can still recognize blocks produced under the new rules as valid, although they do not enforce the additional restrictions. 

Bitcoin has used this approach repeatedly. BIP34 introduced block heights in coinbase transactions, BIP66 required strict DER encoding for ECDSA signatures, and BIP65 introduced CHECKLOCKTIMEVERIFY. 

Segregated Witness, activated in 2017, and Taproot, activated in 2021, are later examples of soft forks. Soft forks can use different activation mechanisms, including miner signaling or node enforcement. This allows new restrictions to be adopted while older software can continue to follow valid blocks safely during the transition period.

A hard fork introduces rules that older nodes cannot fully accept. If upgraded nodes accept blocks rejected by older nodes, permanently divergent chains can emerge. 

Bitcoin Cash shows this outcome. On August 1, 2017, Bitcoin Cash split from Bitcoin at block 478,558 amid disagreements over scaling and block capacity.

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