A protocol change that isn't backwards compatible. Nodes must upgrade to the new version of protocol or be unable to process transactions.

New York University

- An improvement or update to an existing protocol that is linked to the protocol's history
- Users have the choice of selecting the old or new protocol. If the new protocol is better and attracts sufficient mining power, it will win.
- Forking is a key mechanism in promoting and assuring efficiency in DeFi

Forking

Voshmgir, S. (2020). Token Economy: How the Web3 reinvents the Internet (Token Economy: How the Web3 reinvents the internet (English original & foreign language translations)) (Second ed.). Shermin Voshmgir, BlockchainHub Berlin.

Token Economy: How the Web3 is Reinventing the Internet

Hard Fork

Protocol change that is backwards compatible. Transactions can still be processed by out of date nodes as long as the nodes don't break any new protocol rules. The block produced, however, by out of date nodes are rejected by nodes on the new version of protocol. This incentivizes upgrading.

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