A fork happens when a blockchain network undergoes an upgrade, creating a new blockchain that shares the same history as the original. Forks are important to maintain, enhance functionality, and ensure security. There are two types of forks, each with different outcomes:
- Soft fork: A soft fork involves updates to the protocol that remain compatible with older versions. It modifies the existing blockchain without creating a new one or invalidating the previous version.
- Hard fork: This happens when a blockchain’s code is changed, resulting in a new cryptocurrency while the original continues independently. This creates blockchain branches. For example, the split between Bitcoin and Bitcoin Cash is a hard fork.
Using the Fork category
You can change a receive transaction to the Fork category. Then, review your forked transactions by tax year on the Taxes page, along with your tracked capital gains. Learn more about how fork transactions are taxed.
Disclaimer: This information is for informational purposes only and should not be considered legal, tax, or financial advice. Please consult a tax professional for specific guidance. Please see our full disclaimer.