Hard Fork and Soft Fork in Blockchain: What You Need to Know

What is the fork in the blockchain

Forking is the creation of a copy of the software and its modification. A fork in a blockchain refers to a situation where a blockchain network splits into two or more separate chains, usually due to a disagreement among the network participants about the rules governing the blockchain’s operation. At the same time, the original project continues to function, but the fork is developing separately in its direction. These projects are built on the same basis and have a common history, just like one road is divided into two paths.

There are two types of forks in the blockchain:

1. Soft fork: A soft fork is a backward-compatible upgrade to the blockchain that invalidates previously valid blocks. Soft forks are implemented to fix bugs or add new features; most of the network usually adopts them.
2. Hard fork: A hard fork is a permanent divergence in the blockchain that occurs when nodes follow different rules. This type of fork usually occurs when a group of nodes decides to adopt a new set of rules that are not compatible with the existing rules of the network. As a result, a new chain is created, and the old chain continues to exist with the original rules.

Hard forks can be intentional or accidental. Deliberate forks are planned upgrades designed to improve the network’s functionality, while accidental forks can occur due to software bugs or network disruptions.

In general, forks can create uncertainty and disruption in the blockchain network. Still, they can also lead to the creation of new cryptocurrencies or the adoption of new features that benefit the network.

Forks can only occur in open-source projects, and cases like this had existed long before Bitcoin or Ethereum existed. However, hard forks and soft forks can only take place on blockchain networks.

Hard fork

A hard fork is a software update that is incompatible with previous versions. This usually happens when nodes add changes that are against the existing rules of the old nodes. New nodes can only interact with nodes using the latest version. As a result, the blockchain is split into two separate networks: one with the old rules and the other with the new ones.

So now the two networks are running in parallel. They will continue working with blocks and transactions but not on the same blockchain. All nodes worked on the same blockchain before the fork was created (this fork will have the same history as the original blockchain), but their blocks and transactions will be different in the future.

Since the networks share a common history, user funds are duplicated in the new network if they had coins before the fork. Suppose you had 5 BTC at block 600,000 during the fork. Even if you spend those 5 BTC in the old chain at block 600,001, they will remain in block 600,001 of the new blockchain. If the fork uses the old currency, your private keys will also contain funds from the original fork.

An example of a hard fork is the 2017 fork that split Bitcoin into two chains, the original Bitcoin (BTC) and the new Bitcoin Cash (BCH). The fork came about due to a long debate about the best approach to scaling. Supporters of Bitcoin Cash wanted to increase the block size, while supporters of Bitcoin opposed this change.

You can increase the block size only with a change in the rules. This was before the SegWit soft fork (more on that later), so nodes only accepted blocks smaller than 1MB. A 2 MB block that met all other requirements would still be rejected.

In the fork, only nodes with new software could approve blocks larger than 1MB. Of course, this meant complete incompatibility with the original version, so only nodes with the same modifications could interact.

Pros of the hard fork

There are several potential benefits of a hard fork in a blockchain network:

1. New features: A hard fork can allow for new features or improvements to the existing blockchain. For example, Bitcoin’s hard fork in 2017, which led to the creation of Bitcoin Cash, was designed to increase the block size limit to improve transaction speeds.
2. Improved security: A hard fork can be used to address security vulnerabilities or other issues with the blockchain. Adopting new rules or protocols makes the network more secure and less susceptible to hacking or other attacks.
3. Decentralization: A hard fork can promote decentralization by allowing network participants greater participation and control. For example, a hard fork could be used to create a new cryptocurrency that is more accessible or inclusive than the original.
4. Innovation: Hard forks can encourage innovation by creating new opportunities for developers and entrepreneurs to experiment with different approaches to blockchain technology. This can lead to new applications and use cases for blockchain technology.
5. Community building: Hard forks can also help to build and strengthen communities around a particular blockchain. By creating new networks or communities, hard forks can allow for greater collaboration and cooperation among participants.

While hard forks can be disruptive and controversial, they can also be useful tools for improving and evolving blockchain networks.

Cons of the hard fork

There are several potential drawbacks of a hard fork in a blockchain network:

1. Fragmentation: A hard fork can fragment the network and create competing chains, leading to confusion and reducing the overall network effect. This can also result in a split in the community, with some members supporting the new chain and others remaining on the old chain.
2. Security risks: Hard forks can create security risks for old and new chains. This is especially true if there is a need for more consensus among network participants, as this can generate weaker or less secure chains.
3. Loss of value: Hard forks can sometimes result in a loss of value for the original chain or cryptocurrency. This is because a hard fork can create competition for resources, reducing the weight of the original chain.
4. Complexity: Hard forks can add complexity to the network, making it more difficult for developers and users to navigate and use the system. This can create additional costs and barriers to entry for new users and developers.
5. Reputation damage: Hard forks can damage the blockchain’s reputation and associated cryptocurrencies. This can lead to a loss of trust and confidence among users and investors, which can harm the value of the cryptocurrency.

Hard forks can provide benefits but also introduce significant risks and challenges to the blockchain network. Therefore, careful consideration and planning are required before implementing a hard fork.

Key usages of the hard fork

A hard fork in a blockchain network is usually used for the following key purposes:

1. To introduce new features or improvements: A hard fork can be used to introduce new features or improve the functionality of the blockchain network. For example, a hard fork could increase the block size limit, improve transaction speeds, or add new security features.
2. To address security vulnerabilities or other issues: A hard fork can address security vulnerabilities or other issues with the existing blockchain. Adopting new rules or protocols makes the network more secure and less susceptible to hacking or other attacks.
3. To create a new cryptocurrency or blockchain network: A hard fork can create a new one that operates independently of the original network. This can be done to address issues with the existing network, create a more inclusive or decentralized system, or experiment with new approaches to blockchain technology.
4. To resolve disagreements among network participants: A hard fork can be used to resolve disputes among network participants about the rules or direction of the network. By creating a new chain with different rules, participants can support the chain that aligns with their beliefs or interests.
5. To promote innovation and experimentation: A hard fork can encourage innovation and experimentation in the blockchain. By creating new opportunities for developers and entrepreneurs to experiment with different approaches to blockchain technology, hard forks can develop new applications and use cases for blockchain technology.

Hard forks can be a powerful tool for improving and evolving blockchain networks, but they should be used carefully and thoughtfully to minimize the associated risks and challenges.

Soft fork

A soft fork is a backward-compatible update, meaning updated nodes can interact with old nodes. A weak division usually occurs when new rules are added that do not contradict the old ones.

For example, a soft fork can reduce the block size. To illustrate this with Bitcoin, although there is a maximum allowed block size, there is no minimum. It would help if you rejected larger blocks to approve blocks smaller than a certain size.

This will not automatically disconnect from the network. The soft fork nodes will still be able to interact with the nodes from the original blockchain – they will filter the information they receive.

A good example of a soft fork is the Segregated Witness (SegWit) fork, which happened shortly after the Bitcoin/Bitcoin Cash split. The SegWit update has been carefully thought out, and changed the block and transaction format. The old nodes could still validate blocks and transactions (changing the format wasn’t against the rules), but they needed to understand them. A switch to the new software is required to read certain fields and analyze additional data.

Even two years after the activation of SegWit, not all nodes have been updated. The upgrade has its benefits, but there is no urgency because the changes do not have a disruptive effect on the network.

Pros of the soft fork

There are several potential benefits of a soft fork in a blockchain network:

1. Compatibility: A soft fork is designed to be backward compatible with the existing network, which means that it can be adopted by nodes that have not yet updated their software. This allows for a smooth transition to the new rules without creating fragmentation or confusion in the network.
2. Lower risk: Soft forks are generally considered lower than hard forks, as they do not create a new chain or cryptocurrency. This means there is less chance of network fragmentation or loss of value for the original chain.
3. Increased efficiency: Soft forks can sometimes improve the efficiency of the network by introducing new rules that reduce the amount of computational work required to validate transactions. This can reduce the time and cost of processing transactions, making the network more attractive to users.
4. Improved security: Soft forks can be used to enhance the safety of the network by introducing new rules or protocols that address security vulnerabilities or other issues. This can make the network more resilient to hacking and other attacks, which can help build users’ trust and confidence.
5. Community support: Soft forks are more likely to have the support of the entire network community, as they do not require a complete overhaul of the network. This can ensure the new rules are widely adopted, and the network remains healthy and vibrant.

Soft forks can be a powerful tool for improving and evolving blockchain networks, as they allow for introducing new rules and protocols without disrupting the existing network. However, they should be carefully planned and implemented to ensure they are compatible with existing infrastructure and avoid unnecessary risks or complications.

Cons of the soft fork

While a soft fork in a blockchain network is generally considered to be less disruptive than a hard fork, there are still potential drawbacks to this approach:

1. Reduced network efficiency: A soft fork can reduce the efficiency of the network by creating more work for nodes to validate transactions. This can slow down the web and increase transaction costs, disadvantaging users.
2. Centralization: Soft forks can sometimes lead to network centralization, requiring all nodes to update their software to support the new rules. This can create a situation where only a few large nodes control the network, which can be detrimental to the overall health and security of the blockchain.
3. Complexity: Soft forks can also add complexity to the network, making it more difficult for developers and users to navigate and use the system. This can create additional costs and barriers to entry for new users and developers.
4. Potential for security risks: Soft forks can sometimes create security risks if not implemented correctly. This is because a soft fork invalidates previously valid transactions, which can create an opportunity for attackers to exploit the network.
5. Lack of community support: Soft forks may only sometimes have the help of the entire network community. This can create a situation where some nodes continue to operate using the old rules, leading to network fragmentation.

While soft forks are generally less disruptive than hard forks, they can still have drawbacks and should be carefully planned and implemented to minimize the associated risks.

Key usages of the soft fork

Soft forks in blockchain networks are often used for the following key purposes:

1. Implementing new features or improvements: Soft forks can be used to introduce new features or modifications to the blockchain network. For example, a soft fork could be used to reduce the block size limit, improve transaction speed or add new security features to the network.
2. Addressing security vulnerabilities: Soft forks can also address security vulnerabilities or other issues with the existing blockchain. Adopting new rules or protocols makes the network more secure and less susceptible to hacking or other attacks.
3. Upgrading the network: Soft forks can be used to upgrade the network by introducing new rules or protocols that improve the efficiency and scalability of the blockchain. This can help ensure the network remains competitive and relevant in the fast-moving blockchain space.
4. Enhancing interoperability: Soft forks can also improve interoperability between different blockchain networks. By adopting new rules or protocols that align with other networks, the blockchain can become more compatible and accessible to a wider range of users and developers.
5. Resolving network disagreements: Soft forks can be used to resolve disputes among network participants about the rules or direction of the network. By introducing new rules or protocols that align with the interests of different groups, the network can become more inclusive and supportive of diverse perspectives.

Soft forks can be useful for evolving and improving blockchain networks, as they allow for introducing new features and improvements without disrupting the existing network. However, they should be carefully planned and implemented to ensure they do not create unnecessary risks or complications for users and developers.

Conclusion

Hard forks and soft forks are critical to the long-term success of blockchain networks. They allow you to make changes and updates to decentralized systems despite lacking a single governing body.

Forks allow blockchains and cryptocurrencies to integrate new features as they are developed. Thanks to these mechanisms, the need for a centralized system with vertical control disappears. With them, the development of blockchains would be improved by the same rules.