Hard fork or soft fork: what happens to your coins in a split?

A fork is a change to the rules by which the computers of a blockchain network reach agreement. The practical question behind it is this: do you get new coins out of it, or not? The answer hangs on a single difference. In a hard fork, a blockchain can split in two, with both running on separately afterwards, and you then hold the same number of coins on each side. In a soft fork, one blockchain remains, and nothing new appears in your wallet.

This article explains both forms using two splits that actually happened, and answers the questions that come next: who credits you with the new coins, when the holding period starts and why an announced network upgrade brings you nothing at all in most cases.

Fork means a split: how the German finance ministry defines it

The tersest definition comes from a source you rarely expect here. In its circular on the income tax treatment of crypto assets of March 6, 2025, the German Federal Ministry of Finance writes: "Fork means the forking or splitting of a blockchain and its crypto assets." The paper runs to 34 pages and replaced the older circular of May 10, 2022.

Why a split is possible at all is set out by the same source: the source code of a blockchain is open, anyone may read it, download it and change it. If a dispute arises in the network about how to proceed, it can only be settled by consensus. Where no consensus is found, the software continues in two directions, and the blockchain with it.

Node is the technical term for a computer that stores the complete blockchain and checks every new block against the rules. How many nodes go along with an upgrade and how many do not is what decides whether a fork turns into two blockchains.

Hard fork: why one blockchain becomes two without consensus

A hard fork changes the rules in such a way that the old software rejects the new blocks. A node that does not update considers the new blocks invalid and keeps building on the old blockchain. From that block onwards there are two blockchains with identical history and separate futures.

For you as a holder, what follows is a process the ministry describes as follows: in the course of the split, the holders of the crypto assets of the previously existing blockchain acquire "the same number of crypto assets of the new blockchain without having to provide any consideration for them". So you pay nothing and do nothing, and still there is a balance of your size on the new blockchain.

That sounds like a gift and is worth less in practice than it looks. Whether the new coins get a price at all is only decided afterwards, and that depends on whether exchanges list them and whether anyone wants to buy them. Of the many bitcoin splits of 2017 and 2018, only a handful have a market worth mentioning today.

Soft fork: all nodes keep processing all blocks

With a soft fork, the new rules are narrower than the old ones. Every block that satisfies the new rule also satisfies the old one. A node that has not gone along with the upgrade therefore still accepts the new blocks. The ministry records in paragraph 28 that there is "no splitting of the blockchain or of its crypto assets", because all nodes can continue to process all blocks.

The best-known example is SegWit on Bitcoin, short for Segregated Witness. The change separates the signature of a transaction from the rest of its content and so creates room in the block. It was activated on August 24, 2017 at block 481,824. Nobody received new coins in the process, because there was no second blockchain on which a balance could have arisen.

For you that means: a soft fork is a non-event in terms of tax and custody. There is nothing to check, nothing to claim and nothing to declare.

Bitcoin Cash 2017: what the hard fork at block 478,558 set off

The dispute that led to the first large bitcoin split was about the size of a block. One part of the network wanted to fit more transactions into each block, another part wanted to leave the limit where it was. On August 1, 2017 the two camps parted ways, and Bitcoin Cash came into being.

On the block height the figures differ slightly, and there is a substantive reason for that: block 478,558 was the last block both sides still had in common, while the new software applied its own rules from 478,559 onwards. Some accounts therefore name the one value and some the other. What mattered to holders was the ratio: whoever held one bitcoin had one bitcoin cash in addition afterwards.

Ethereum Classic: how the DAO hard fork at block 1,920,000 left two blockchains behind

The second instructive case has a different cause. In 2016 a smart contract called The DAO was exploited, and a large part of the money locked in it was in the attacker's hands. The majority of the network decided to correct the state of the blockchain once by hand.

The Ethereum Foundation describes the process in its blog post of July 20, 2016: block 1,920,000 contained an irregular state change that moved around twelve million ether out of the DAO contracts into a withdrawal contract. Roughly 85 percent of miners were working on the new blockchain at that point.

The minority that rejected it stayed on the old blockchain. That one has run on since as Ethereum Classic, while the majority blockchain is the Ethereum traded on every exchange today. Both blockchains share every block up to 1,919,999 and none after it.

Planned network upgrades bring you no new coins

This is where the most common misunderstanding sits. When a project announces an upgrade and uses the word fork for it, that usually means everyone goes along. A planned hard fork of that kind changes the rules, but because nobody runs the old software any more, only one blockchain remains. No second balance comes into being.

Ethereum has been working for months on an upgrade named Glamsterdam, which was first meant to run on test networks. As our newsroom reported on October 24, 2026, the date on the Hoodi test network has been cancelled. There was nothing to be had for your balance on that date in any case, because a test network carries no tradeable coins and the upgrade provides for no split.

You can tell the difference by a single question: is there a group that deliberately keeps running the old blockchain? If the answer is no, it is an upgrade. If it is yes, a second balance can come into being. A current case of that second kind is the bitcoin split ECX scheduled for October 30, which we assessed with an eye on custody on October 21, 2026.

Holding period under section 23 of the German Income Tax Act: the acquisition date of fork coins is the old one

This is the point where most people get the sums wrong. You might assume the one-year holding period for the new coins begins on the day of the split. The ministry's circular says the opposite, in paragraph 68: "The acquisition date of the new crypto assets corresponds to the acquisition date of the crypto assets existing before the hard fork."

An example makes the consequence visible. You bought bitcoin in March 2024 and still hold it. If a split happened now, the new coins would count as acquired in March 2024 for tax. The one-year period had therefore long since expired before the new coins even existed, and a sale would no longer be a taxable private disposal under section 23 subsection 1 sentence 1 number 2 of the Income Tax Act.

The reverse applies to your disadvantage in the same way: if you bought the original coins four months ago, the period for the fork coins likewise only expires in eight months. Two further points belong here. The split itself triggers no income under section 22 number 3 of the Income Tax Act, so the inflow is not a taxable event. And the acquisition costs of the old coins are allocated across both sides, in the ratio of the market prices at the time of the split. If the new crypto asset has no price, the acquisition costs stay entirely with the old coins.

The 1,000 euro threshold: when selling fork coins stays tax-free

If you sell within the year, a threshold applies that spares many people the effort. Under section 23 subsection 3 sentence 5 of the Income Tax Act, gains stay tax-free if the sum of all gains from private disposals in a calendar year comes to less than 1,000 euros. Up to the 2023 assessment period that threshold stood at 600 euros.

Two things matter about this figure. It works as a threshold, not as an allowance: if your total gain is 1,000 euros or more, the whole amount is taxable and not just the part above it. And it applies to all private disposals of the year taken together; fork coins sit there alongside every other crypto sale within the one-year period.

You still have to keep records. Without the purchase receipt for the original coins, the acquisition date of the fork coins cannot be evidenced, and it is precisely that date which decides whether tax is due. A portfolio tracker that records every purchase with its date saves you that search later. For NFTs and for so-called liquidity mining, the ministry's circular expressly makes no determinations yet.

Exchange or your own wallet: who decides on crediting the new coins

Technically, the balance on the new blockchain sits under the same key as the old one. Anyone holding their own coins therefore already has the new coins, even if no software displays them. All they need is a wallet that supports the new blockchain.

If your coins sit on an exchange, by contrast, the exchange holds the key. Whether and when it credits you with the coins of the new blockchain is its decision, and it is under no obligation to do so. In practice, exchanges announce their approach ahead of a known split. Some credit the coins and list them, some credit them without offering trading, some do not take part at all. On top of that, deposits and withdrawals are often halted for hours around the time of the split.

If you want to compare how providers handle this ahead of an announced split, our overview of crypto exchanges helps. What to do step by step in a bitcoin split is something we set out on August 20, 2026 in the guide bitcoin fork: what happens to your coins.

Replay protection and bogus claim offers: the two risks after a split

After a split there are two dangers, and neither has anything to do with the price. The first is technical. Replay protection is the safeguard that prevents a transaction sent on one blockchain from being repeated on the other. Where that protection is missing, a transfer can move both balances unintentionally. Serious splits build it in, and the developers write it into their documentation. If you find no statement about it there, restraint is the better choice.

The second danger is the bigger one. Around every announced split, offers spring up promising to help you "collect" the new coins. If a site or an app asks for your recovery words or your private key to do so, the case is clear: nobody needs that data to credit you with anything, because the balance already sits under your key. Anyone who hands over the words loses both balances at once.

One practical piece of advice: leave a split alone for a few weeks before you touch the new coins at all. Whether there is a market for them and whether the software runs stably shows itself in that time, and the haste costs you nothing but a price that mostly falls anyway.

Total loss possible: what the coins of a new blockchain are worth

The coins of a split are not a bonus with a guaranteed value. They hold a price only as long as enough people buy them and enough computers keep the new blockchain alive. If either of those falls away, the price goes towards zero, and with a fresh split a total loss is the more common outcome than a lasting market.

The tax treatment hangs on that too: if the new crypto asset has no value, the acquisition costs stay with the original coins, according to the ministry. Nothing is lost to you for tax purposes. That changes nothing about the matter itself, and none of the rules described here is a reason to build a position because of an announced split.

Fork: only the split brings new coins, the upgrade brings none

The difference between the two forms decides whether you have anything to do at all. Three steps take you through the next fork you meet in an announcement.

1. Settle the type first. If a group deliberately keeps running the old blockchain, a second balance can come into being. If everyone goes along with the upgrade, it is a soft fork or a planned hard fork without a split, and nothing changes for you. What the individual providers announce for a split is gathered in our overview of crypto exchanges.
2. Settle who holds your key. If the coins sit with a provider, that provider's announcement applies; you have no claim to the credit. Whoever holds their own coins has the new ones automatically and needs only suitable software. Which devices manage that is set out in the hardware wallet comparison.
3. Secure the purchase receipt for the old coins. It determines the acquisition date of the fork coins and with it whether a sale is taxable. A tax tool or portfolio tracker holds that data before it disappears into old exchange statements.

(As of October 24, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)