Explaining Forks: Hard Forks vs. Soft Forks in Cryptocurrency

artist1111 (76)in PussFi 🐈 • 27 days ago

Greetings friends , The term "fork" in cryptocurrency is quite ubiquitous yet vague to individuals who are not initiated into it.

In simple words, the term "fork" identifies changes that take place in a blockchain protocol. Such changes may bring about either of two types- hard forks and soft forks.

Such a difference will really help out all interested parties in being able to determine the way in which blockchain technology itself evolves and/or changes with time.

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Therefore, in this post, I will write about main differences between hard forks and soft forks and how they have effects on cryptocurrency networks.

What is a Fork?

A fork, then, is where there is a divergence in the blockchain and two paths are created. This usually occurs when developers want to update or change some of the features of a blockchain's protocol.

It's a bit like updating the app software on your phone, but instead of updating the app on your phone, it is the actual code that runs a cryptocurrency network.

There are two flavors: hard forks and soft forks. Both of them represent an upgrade to a blockchain, but they differ in where the change is enforced as well as whether it's backward-compatible or not.

Hard Forks: Forging a New Chain

A hard fork is a kind of fork that implements extreme modifications to the blockchain, causing a splitting of the blockchain into two incompatible chains.

This happens if major updates of the protocol have been performed that were not identified by older versions of the software. In such a situation, it will be adopted only if all nodes in the network update to the latest version of the software.

The other heads go on to run on the older version of the software but never integrate again, and instead, there is a permanent split between the two networks.

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The greatest example of a very prominent hard fork is the Bitcoin split into Bitcoin and Bitcoin Cash in 2017. The Bitcoin Cash was created after a dispute in the community regarding how to scale Bitcoin for more transactions.

The developers of Bitcoin Cash increased the block size limit while Bitcoin kept the original block size.

That's to say that the following make a hard fork special:

Backward incompatibility: Both the existing chain and the new one cannot be used together any more. Instead it creates two entirely separate networks.
Permanent split: After a hard fork, the chains keep on diverging and the users who might otherwise have been holding the native currency are going to have coins in both chains.
Consensus requirement: The nature of a hard fork is often to enforce consensus by the community itself since all the nodes must decide whether to accept the new protocol or remain with the old one.

The primary usage of hard forks is related to a major update, security upgrade, or where the community can't agree on a simple matter.

Soft Forks: Forwards Compatible Changes

A soft fork is less devastating to the blockchain since it is backward compatible. That is, it allows nodes running the old version of the software to still validate and know transactions from the new version.

A soft fork will not cause a split in the blockchain because only certain rules within the protocol are being updated.

The most typical case of a soft fork in crypto is Segregated Witness in Bitcoin. This was going to solve the problem of scalability by reducing the sizes of transactions within the blockchain.

It was launched as a soft fork: that is, it could continue to operate the older nodes on the network without the changes, but only new nodes follow the improved protocol.

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Which One Is Better?

That would depend on the modification; significant, non-reversible changes must be implemented by a massive proportion of the community, or if an inherent disagreement about the way the project is headed exists between most members of the community.

In such scenarios, hard forks are necessary. Soft forks are preferred when only minor enhancements or updates could be implemented with less risk of division within the network.

On one side, users and traders will benefit from the hard fork since they may receive newly mined coins from a newly founded blockchain.

On the other hand, risks for soft forks will include confusion, security problems, and even the danger of being an unstable market.

Soft forks thus appear more moderate but safer for the whole network as well as for its users themselves.

Conclusion

The development and evolution of a blockchain network in the face of new challenges would not have been an endeavor without the existence of forks.

The focus, be it hard forks or soft forks, has always been on forks, ever since the cryptocurrency enthusiast's attention was piqued.

Since a hard fork always leads to permanent splits that tend to be the formation of entirely new chains, with soft forks it becomes possible to implement backward-compatible updates of the network.

Both are important to make sure cryptocurrencies are innovative yet secure and decentralized.