# Forks Some cryptocurrencies operate by consensus amongst that cryptocurrency’s community. When a significant portion of the community want to do something different, they may create a ‘fork’ in the blockchain or change the protocol within that blockchain to accept or reject future transactions. ***There are two types of forks: a soft fork and a hard fork.***\ The blockchain for the original and the new cryptocurrencies have a shared history up to the fork. If an individual held tokens of the cryptocurrency on the original blockchain they will, usually, hold an equal number of that cryptocurrency on both blockchains after the fork. ### **Soft fork** A soft fork updates the protocol and is intended to be adopted by all. During a soft fork, no new cryptocurrencies are created from the fork to go to a holder, as such the soft fork is not a taxable event. ### **Hard fork** A hard fork, however, can result in a new protocol that creates new cryptocurrencies. An example of a hard fork is when *Bitcoin Cash (BCH)* was created in 2017. This split in the Bitcoin blockchain, which allowed for a larger block size would not allow all future blocks to add to its blockchain. As such, when *Bitcoin Cash* went live, a new token (BCH) was created and anyone holding original Bitcoin (BTC) also received BCH tokens for the new fork. In this example, under current IRS guidance the IRS would consider the BCH tokens received at the time of that fork, or any other cryptocurrencies received as a result of a hard fork to be taxable income equal to the fair market value of the token when it was received. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.recap.io/us-tax-guide-for-individuals/cryptocurrency-tax/income-tax/forks.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.