Imagine that blockchain, as we know it, is a digital highway. It’s fast, secure, and constantly evolving. And on this highway, countless travelers are moving about, going from transaction to transaction. But from time to time, the path ahead changes and forks into different directions. One path follows the old rules, and the other takes you to roads untravelled and new possibilities. Welcome to the world of blockchain forks.
A blockchain fork is a massive update that breaks from the original structure. There are two types of forks that work separately from each other. These are known as Hard Fork and Soft Fork.
Both Hard and Soft Forks of Blockchains have different implementations, and they work entirely independently of each other. Understanding these forks is crucial to understanding how Blockchains work and how you can stay up-to-date with the latest technology.
What Is a Blockchain Fork?
A blockchain fork is essentially an update or a change to the protocols that govern a particular blockchain. As blockchains are independent and controlled by their users, a special instruction set called the Consensus Algorithm is required.
However, these protocols or consensus algorithms need modifications over time due to changes in technology or to improve the overall security of the Blockchain. When such a situation arises, new Blocks must be created with updated protocols.
Forks can happen for various reasons:
- Upgrades and optimizations
- Bug fixes
- New features
- Disagreements in vision
- Reactions to hacks or critical vulnerabilities
What Is a Hard Fork?
A hard fork is a major change to the protocol that is not backward-compatible. It essentially creates a new blockchain that runs in parallel to the original. As Hard Fork is a major change and anyone who wants to be a part of a new fork must update, it requires consensus from the majority of users or nodes to be implemented.
Hard Forks can be accidental if two or more miners come upon the same block at the same time, but continue mining towards different blockchains. As the longest blockchain is selected by its nodes, the one with the short blockchain loses, as the rest of the users follow the rules of the long ones.
When a hard fork occurs, nodes or users that upgrade follow the new rules. However, the nodes or users who don’t upgrade continue on the old path. This result is a split chain and often a split community. Transactions and blocks validated on the new chain may be considered invalid by the old chain and vice versa.
- Incompatibility: Older nodes cannot validate newer blocks.
- Chain Split: Creates two distinct blockchains post-fork.
- Consensus Required: Requires a broad consensus to gain traction.
- Token Duplication: Users often receive tokens on both chains.
What Is a Soft Fork?
A soft fork introduces changes to a blockchain that are backward-compatible. It changes or upgrades the rules but doesn’t break existing ones. Nodes or users that don’t upgrade to the new rules can still participate in validating blocks. The rules for the new blocks are narrowed, not rewritten. This means a unified chain despite some or new blocks having an updated set of rules.
- Compatibility: All nodes or users, regardless of their update status, can validate blocks under the new rules.
- Unified Chain: Maintains one consistent blockchain with new updated blocks.
- Less Disruptive: Easier to implement without dividing the community..
- Limited Scope: Not suitable for massive architectural changes.
Hard Fork vs Soft Fork: Key Differences
Both Hard Forks and Soft Forks work in entirely different manners. They also have different real-life implementations leading to different technologies. Below is a chart detailing the major differences between these two forks of a blockchain.
| Features | Hard Fork | Soft Fork |
| Compatibility | Not Backwards Compatible. Old and New Forks follow independent paths. | Backwards Compatible. Nodes on old blocks can access new blocks. |
| Result | Two different blockchains with different protocols. | Same unified blockchain with new updated protocols. |
| Impact on Nodes/Users | Major Divide. Some stay on old while the majority move to the new. | No divide as everyone is on the same blockchain. |
| Upgrade Scope | Major change in structure and rules. | Minor change in rules only. |
| Risk Involved | Very High. Can result in market confusion, leading to investment risk. | None to minor. |
| Real-Life Examples | Bitcoin Cash, Ethereum Classic. | Segwit, Taproot |
Notable Examples of Hard and Soft Forks
Both Hard Forks and Soft forks have some major real-life examples that have changed the course of Blockchain history in the process.
Hard Fork Examples
Bitcoin vs Bitcoin Cash (BCH)
Bitcoin Cash emerged in 2017 from a hard fork of Bitcoin due to the Block Size dispute. BCH aimed to increase transaction capacity with larger blocks (up to 32MB), while Bitcoin opted for SegWit and second-layer solutions like Lightning Network. As a result:
- Bitcoin Cash now operates independently with its own rules and regulations.
- BCH sees a massive surge in value initially, followed by a volatile trend shortly after.
Ethereum vs Ethereum Classic
After the infamous DAO hack in 2016, Ethereum developers chose to perform a hard fork to recover stolen funds. However, some in the community rejected this intervention, arguing it violated “code is law.” These community members decided to stay with the original Ethereum Blockchain.
- Ethereum Classic continued with the original blockchain.
- Ethereum (ETH) became the new hard fork and gained significant market capitalization due to support from its original developers.
Soft Fork Examples
SegWit (Bitcoin)
Implemented in 2017, Segregated Witness (SegWit) is a soft fork that separated transaction signatures from the main block data. This enhanced the capacity of the blocks and paved the way for the Lightning Network.
SegWit didn’t split the chain, as the nodes that didn’t upgrade could still validate blocks.
Taproot (Bitcoin)
Found as a new Soft Fork in 2021, Taproot improves Bitcoin’s privacy and efficiency by introducing Schnorr signatures. It was smoothly rolled out as a soft fork, maintaining consensus across the network.
Why Do Forks Occur in Blockchain Networks?
There is a major philosophy that marks the shift in the structure of a blockchain due to disagreement over its current procedure. Sometimes it can be scalability, speed, security, decentralization, or even the whole idea not acceptable to the majority of nodes. It sends a signal that says we are not happy with the current events and need a major overhaul, resulting in a hard fork.
However, a soft fork is a progressive change that represents the whole community agreeing that the current system requires improvement. It is done by collaboration and consensus and doesn’t fracture or destroy the current structure. The signal given by the soft fork is “We are doing good. However, we need some updates to our current system”.
What Do Forks Mean for Developers and Users?
New blockchain forks often introduce new features, bug fixes, or performance improvements. To overcome these issues, developers must adapt their applications to remain compatible with the updated chain. A hard fork may require maintaining two separate codebases if the community splits, increasing development overhead if the developer decides to stick with the old fork.
While forks can address vulnerabilities, they can also introduce risks if not properly coordinated across the network. Developers may be caught in ideological disputes over the direction of the project, especially during contentious hard forks. Blockchain forks demand rigorous testing to ensure that smart contracts and apps function correctly on the new chain. They can also cause temporary instability or fragmentation, affecting transaction reliability and wallet compatibility. This may result in users being locked out of their funds in case of an emergency.
The biggest problem for the users arises with the option to support the fork. Various factors can influence it and can lead to choosing the one with less value or growth. If users interact with the wrong chain or outdated software, they may be vulnerable to replay attacks or loss of funds.
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Frequently Asked Questions (FAQs)
Q: Can a soft fork lead to a blockchain split like a hard fork?
A: No. A soft fork can’t lead to a blockchain split like a hard fork. Soft Forks are backwards compatible and keep the blockchain unified.
Q: What is the purpose of a hard fork?
A: A hard fork splits a blockchain into two forks: a new fork with the updated rules or protocols, and the old fork with the same old protocols. It is created to innovate and evolve the current technology into a better one.
Q: Is a hard fork good or bad?
A: Hard Fork can be good or bad, depending on how it is implemented. They can provide new updated technology with new blocks. However, it can divide the users or nodes and can lead to market instability.
Q: What is the major risk of hard forks?
A: Primarily security risks. New hard forks can lead to a divide between the users and community, which can result in reduced network security.
Q: Can forks affect the price of a cryptocurrency?
A: Yes. Forks can lead to substantial fluctuations in cryptocurrency, especially hard forks. Before a new hard fork is created, it raises significant security concerns, which can negatively impact the value of the cryptocurrency.
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