Hard Fork vs Soft Fork Explained

Hard Fork vs Soft Fork Explained-1

Changelly is watching cryptocurrency development closely as the year 2020 is going to be rich for blockchain events like BTC halving, the launch of new coins, and forks. We’ve already met Steem hard fork, Hive, and there are more splits to come. 

Different blockchains require different types of forks and sometimes, a fork changes the network dramatically. We are going to discover what is behind hard, soft, and temporary forks and see the most important forks that happened in the crypto industry. 

Forks: Basics

To show better performance and provide you with new features, applications in your smartphone require updates from time to time. In the blockchain industry, such upgrades call forks. 

To be able to produce blocks, miners must reach a consensus regarding the blockchain state. Once participants of the network fail at reaching the consensus, a fork can be proposed as a solution that will resolve the conflict.

A fork happens for several reasons: 

  1. There is no consensus between participants of a network;
  2. A blockchain requires critical updates.

Bitcoin is an open-source technology, which means anyone can see and use its source code. When interacting with the source code of a particular blockchain, one may start to develop it on his own. In this case, a completely new blockchain will be conceived, yet it will share the same genesis block (the first block of the chain) as the initial blockchain. 

Example: Bitcoin Cash, Bitcoin Gold

Litecoin (LTC) is considered to be another Bitcoin fork. However, it would be correct to say that LTC forked BTC source code, as Litecoin and Bitcoin do not share the same genesis block. 

What Is Temporary Fork?

When several miners discover one block at the same time, a temporary fork occurs. It is important to note that a temporary fork can be created once an un-updated node verifies blocks created by updated nodes and vice versa. The result of such a performance is a split within a blockchain. 

As two different chains are created, miners have to decide which chain will be submitted as the ‘true’ one. After that, miners continue to mine blocks on the ‘true’ blockchain.  

What Is Soft Fork?

A soft fork is an update of a cryptocurrency protocol’s software. To improve the work of a particular blockchain, the community together with developers decides to improve the software of the network.

Such updates bring new rules to the network, yet they are backward compatible. This means nodes that, for some reason, don’t want to update their software to the latest version, still can be full-fledged participants of the network. In fact, these nodes can create new blocks and process transactions as long as they follow new sets of rules. 

Imagine that nodes within a blockchain speak British English. The soft fork was implemented, and now to validate transactions and create blocks, miners have to use American English. However, British English will do too. This is backward compatibility.

btc segwit

The most famous soft fork is probably SegWit – a software update proposed on the Bitcoin network in 2017. Notably, due to disagreements within the community regarding the SegWit implementation, a soft fork led to the hard fork which revealed to the industry a new cryptocurrency – Bitcoin Cash.  

The recent scandal around the aforementioned Steem hard fork, Hive, has led to another Steem soft fork initiated by the Steem community. The soft fork 0.22.888 occurred at the beginning of April. 

“This temporary Softfork is to adjust the future of the Steem community, which is in the moment still influenced due to the Hardfork. Due to the uncertain threat that the leaders and main influencers of the new Hardfork represented to the Steem Blockchain, the Softfork will include accounts with the following rules, and restrict a group of operations by these accounts. The barrier for these rules can be lowered at any time when the circumstances require it and consensus is reached.”

What Is Hard Fork?

A hard fork brings more serious changes to the network’s protocol than the soft fork.  In this case, nodes that haven’t upgraded to the new version of the protocol, cannot perform at their full capacity. An update to the newest version is mandatory; otherwise, nodes will not be able to validate blocks and continue to maintain the network. 

Imagine that nodes within a blockchain speak American English. The hard fork occurred, and now to validate transactions and create blocks, miners have to use Spanish. If a node doesn’t speak Spanish or don’t want to learn it, it can’t participate in the blockchain’s operations and has to leave the network. 

The updates are so radical they can trigger the creation of a new blockchain. Hard forks can be planned like Ethereum’s Constantinople, but history knows cases of controversial hard forks. 

Bitcoin Cash (BCH) is a perfect example of a controversial hard fork. The separation from the main Bitcoin chain took place on August 1, 2017, at block number 478558. A small part of the BTC community did not agree to implement the SegWit upgrades. Once they knew they couldn’t persuade the majority of BTC miners, a new cryptocurrency (BCH) and a blockchain were created. A year later, this Bitcoin fork met its own hard fork currently known as Bitcoin SV

The notorious DAO situation splintered the Ethereum network into two independent ones. The hard fork of the blockchain has resulted in Ethereum Classic (ETC) and Ethereum (ETH) blockchains. It is fair to say that Ethereum Classic is considered to be the genuine Ethereum platform while ETH is a new chain since the block number 1,920,000. 

ethereum fork

The communities of both blockchains are devoted to two different philosophies and stay skeptical of one another. However, ETC and ETH are continuously under development; Ethereum (ETH) completed its ‘Muir Glacier’ hard fork while Ethereum Classic released ‘Agharta’ at the beginning of 2020. ETC is going to introduce the next hard fork, Phoenix, this summer. 

Bitcoin Hard Forks 

As the first cryptocurrency in the industry, Bitcoin has the most number of forks by right. Some of them are successful and hit the top 10 cryptos by market capitalization, some of them turned out to be a scam. 

  1. Bitcoin XT
  2. Bitcoin Classic
  3. Bitcoin Unlimited (BU)
  4. Bitcoin Gold
  5. Bitcoin Private (BTCP)
  6. Bitcoin Cash
  7. Bitcoin Diamond
  8. Bitcoin Pizza
  9. Bitcoin Zero
  10.  ….

The list of BTC hard forks is pretty long. Most of them split from the main chain at the end of 2017 when Bitcoin reached $20,000. The strongest ones have survived, while others are being left behind.  

Summary 

The crypto industry is developing rapidly and we will definitely see more forks, whether they are hard, soft, or temporary. Some of them may change the crypto game dramatically like Ethereum and Ethereum Classic, and some may not. One thing is certain, we are on our way to witness remarkable crypto events. 

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