At some point, every cryptocurrency needs to go through major changes that shake up the way it works. That’s where hard forks and soft forks come in. These are updates to the protocol that make significant adjustments to how the system operates.
In this article, we’ll break down what hard fork and soft fork in blockchain are, why they’re necessary, and, most importantly, how they’re different from each other.
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What is a hard fork in blockchain?
A hard fork in blockchain is a radical change to the protocol of a blockchain network. In simple terms, it is a software upgrade in a cryptocurrency network with which all nodes need to agree.
Should the hard fork be contentious, i.e., not all miners conform to the new rules set in place for the network, a chain split can occur, resulting in both the legacy blockchain as well as the upgraded blockchain functioning alongside one another as some miners continue to mine the “old” chain. This, for example, was the case with Bitcoin (BTC) and Bitcoin Cash (BCH) in August 2017.
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What is a soft fork in blockchain?
A soft fork in blockchain is a change to the software protocol of a cryptocurrency that is backward-compatible with the previous version of the protocol. In other words, a soft fork is a change to the cryptocurrency that does not require all users to upgrade to the new version of the protocol.
Soft forks can be used to add new features to a cryptocurrency or to reverse transactions (as in the case of a blockchain re-organization). In a proof of work system, when a majority of miners (by hash power) upgrade to the new software, the soft fork will end and the blockchain will revert to a single congruous chain.
Hard fork vs. soft fork in blockchain: key difference
So, what’s the bottom line? Hard forks and soft forks are both ways of updating a blockchain, but they go about it differently.
A hard fork in blockchain is like starting a new chapter in a book where the plot completely changes, and you can’t go back to the old story. It creates a permanent split, often resulting in two separate blockchains — one for those who embrace the new rules and one for those who stick to the old ones.
On the other hand, a soft fork in blockchain is more like editing a chapter to improve it without changing the overall story. It’s backward-compatible, meaning those who don’t upgrade can still follow along (though their experience might be a bit clunky). It’s less disruptive and doesn’t lead to a split, making it the “gentler” approach.
In short, hard forks are about big, fundamental changes that demand everyone to get on board or go their separate ways. Soft forks, however, are smaller tweaks that aim to bring improvements without breaking the flow.
Why do forks happen in blockchain?
Firstly, forks may occur as a result of a developer and community decision to upgrade the network. This decision is usually a planned event and does not feature any contention due to its prearranged nature. This type of fork is undertaken to introduce features that will enhance a cryptocurrency project. However, because all participants within the network agree, it does not result in the formation of a new cryptocurrency.
Secondly, forks can happen as a result of disagreement within a cryptocurrency community. Some members may seek to institute changes in the protocol of a coin or token while others do not. If the community is unable to come to a compromise and subsequent agreement, then there is likely to be a hard fork followed by a chain split. This results in the formation of an entirely new blockchain with a new native cryptocurrency.
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Thirdly, forks can be initiated as a way to make specific events null and void and are sometimes referred to as rescue hard forks. This happens when an undesirable event, such as widespread hacking or theft, affects the community of a token. In this scenario, the developers, in conjunction with the majority of the community can decide to fork the ledger to render the stolen tokens useless. This would also return the affected members their funds.
Lastly, a hard fork can happen with the sole intention of creating a new coin. Because most projects within the crypto community operate on an open-source basis, it is possible to view the code and use it to create a new token. The new token may have similarities to the parent ledger but will usually have distinct features that its developers deem to be a necessary upgrade. The new tokens will often seek to differentiate themselves from the parent coin with their name as well as branding.
Examples of hard forks and soft forks
An excellent example of a hard fork is the creation of BCH. The proponents of this fork wanted to increase the block size in the Bitcoin network from 1MB to 8MB. They believed this would help address the scalability issues facing bitcoin as the ledger would be able to accommodate more transactions per block. Moreover, this upgrade would result in lower fees charged per transaction. Because the bitcoin community was unable to agree on the matter, the “bigger blocks” proponents initiated the changes in the software, and the Bitcoin ledger split to form BCH.
An example of a soft fork is the SegWit update that Bitcoin implemented in 2017. This update was designed to address the problem of transaction malleability while also enhancing Bitcoin’s scalability.
Benefits and challenges of hard forks and soft forks
Generally speaking, a fork happens when there is a disagreement among the developers of a cryptocurrency project about how the project should move forward. This can often lead to a split in the community, with some people supporting the new fork and others remaining on the old chain.
If a fork is successful, it can bring a lot of new attention and investment to a project. It can also help to resolve any existing problems with the project by giving the community a fresh start. However, forks can also be very risky. If they are not carried out correctly, they can lead to the complete collapse of a project.
