Lesson 20 of 20
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20. What is a soft and hard fork?

The world of cryptocurrencies has many terms that are worth knowing. Especially  when you start your adventure with digital assets. The cryptocurrency industry does  not stop even for a moment. Every day something new appears in it, which is named  differently and also has its own acronym. In today’s lesson we will take a closer look  at two terms that you have surely heard of – hard and soft fork. Ready? Here we go. 

Fork 

We’ll start with… a fork. Although the cryptocurrency fork has nothing to do with it. A  fork is when there are changes to the blockchain of a given cryptocurrency. A fork  can even cause a new cryptocurrency to spin off from the original one. This happens  when some miners do not accept the changes and stay with the old chain, while the  rest of them will mine the new one. An example of this happening is the fork on ETH  and the creation of Ethereum Classic

Forks can also be economic e.g., a fork on Bitcoin and the creation of Bitcoin Gold.  The whole change was to privilege GPU miners over ASIC miners. As you’ve also  managed to notice, they are divided into hard forks and soft forks. 

What are forks for? 

Decentralization is the goal of cryptocurrencies. The desire to abandon centralized  intermediaries for the storage and exchange of value is the main challenge of the  various protocols proposed

All network participants follow similar rules to ensure decentralization. These  principles are defined in a consensus protocol. Regardless of the protocol used,  whether in Proof of work or proof of stake, each blockchain communicates  information in a decentralized manner. 

These consensus rules are used to confirm the validity of transactions and blocks.  Nevertheless, the direct involvement of users according to these rules creates the  possibility of confronting a blockchain with a soft fork or, in the worst case, with a  hard fork as these evolve. 

Soft Fork 

This is the opposite of a hard fork. During a soft fork, new changes introduced are  backwards compatible with old versions. Imagine a protocol that introduces new rules  or some cosmetic change. There is no impact on the blockchain structure. In such a  situation, the blocks of the “new version” will be accepted by the blocks of the “old  version”, but not vice versa – the improved “new” version of the block will reject the  blocks of the old version. This is how a soft fork works. 

Let’s use an example – bitcoin. Its community decided to reduce the size of the  current block to 0.5 MB from the current 4 MB. New versions of nodes – those with  0.5 MB, would reject blocks with the old limit (4 MB) and build nodes on the previous 

block. This behaviour would result in a temporary fork of blocks, which is an example  of a classic soft fork. In fact, it has even happened several times. 

In the case of Bitcoin, a soft-fork can occur either via MASF (Miner-Activated Soft  Fork) or via UASF (User-Activated Soft Fork). Regularly, the choice between these  two solutions is subject to a long debate in the Bitcoin community. 

Hard Fork 

In its case, things get a bit more complicated and require more knowledge, especially  blockchain knowledge. It is often referred to as a “fork in the blockchain” or a “branch  in the blockchain”. As we know, a blockchain consists of a chain of blocks based on  blocks of data. Each new block is valid and only added to the network once it has  been validated by miners. Hard Fork is a departure from the last version of the  blockchain. It leads to a separation of the chain, so that nodes do not reach  consensus and the resulting two versions of the network operate separately. 

Imagine a split on a blockchain where one blockchain operates under the old rules  and the other operates under the new rules. Hard Fork does not work like Soft Fork,  so it is not backwards compatible. 

Hard Forks are dangerous because they often cause the chain to fracture. If there  was a split between miners at the same time, the network would be very vulnerable.  Nevertheless, they are essential. They go with the spirit of blockchain technology  development and improve a given network or cryptocurrency. Additionally, hard forks  increase the functionality of the network, nevertheless removing security risks and  resolving disputes in cryptocurrency communities. Interestingly – hard forks can be  accidental. 

Hard versus Soft Fork 

Hard Fork Soft Fork
This is not the only way to update your  cryptocurrency software.They are a safer update alternative.
Changes the rules of the blockchain. Adds new features and functions to the  chain without changing its rules.
Can result in the creation of a new  cryptocurrency.Often used to introduce new features,  especially from a developer level.
Changes the entire cryptocurrency  ecosystem.

Summary 

The reliability and immutability of blockchain should not make the principles inherent  in the evolution of society disappear. Soft fork and hard fork are solutions to  overcome technical, economic or social problems that may arise on the blockchain.  Updates have the advantage of constantly ensuring the will of users while respecting  consensus. This short lesson will allow you to see the differences between hard fork and soft fork. Both definitions are common in the cryptocurrency world, so it is useful  to distinguish between them.

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