Ever seen the applications installed on your mobile auto-updating themselves the moment your phone is connected to the Wi-Fi? At times we might get pissed with this auto-updating feature of our applications but it’s a necessary process after all. If one does not install the latest version of the software, one is denied the use of the latest services.
However, with the adoption of Abstract programming, where the lines of code need not be necessarily understood by common folks to use the technology, tech has become to every individual. Nevertheless, the blockchain industry which is still in its infant stage requires knowledge and poses a challenge to implement new features. If you are wondering how a decentralized network gets upgraded without a central authority catering to it then you are thinking just in the right direction. To do these tasks in the Blockchain and crypto industry we need two different mechanisms like Hard Forks and Soft Forks. So, before we understand the difference between Hard Fork and Soft Fork, let us first understand what forking is?
What is Fork in Blockchain?
In short, a fork means separating the existing blockchain network. In technical terminology, a fork is a phenomenon which takes place when a blockchain splits into two separate branches. The two branches however, continue to share their transaction history up to the point when the split occurs. From there on, both the branches start working independently; i.e. both work in their own direction.
What causes a Fork Formation?
There can be a number of reasons why developers decide to implement a hard fork. Quite common ones are as follows:
- Correcting important security risks that have been found in the older versions of the blockchain
- In order to add new functionality
- The decision to reverse transactions.
A fork in crypto basically takes place when there is a disagreement among the community people about the main blockchain network. For example, Bitcoin was the main chain that was forked to form Litecoin; as the community had a split opinion on Bitcoin’s power consumption.
Thus, the crypto community now has two similar blockchains that use the same consensus mechanism but have slight differences between them
What is Hard Fork?
Hard forks are non-backward compatible changes that cause a permanent divergence from the original blockchain. Transactions following the new rules will not be recognized by nodes still running on the old protocol, resulting in a split of the network.
Hard forks can be a contentious issue within the crypto community, as they often represent a disagreement between developers and users over the direction of a project. Some argue that hard forks are necessary to improve the technology and address issues such as scalability, while others believe that they can be disruptive and cause market instability.
Hard Fork Examples
The most well-known hard forks include the Ethereum and Ethereum Classic split, resulting from the infamous DAO hack, and the creation of Bitcoin Cash and Bitcoin SV from Bitcoin’s original blockchain. These hard forks were due to disagreements among community members and developers on the direction of the projects.
Another example of a hard fork is the recent split of the Bitcoin Cash blockchain into Bitcoin Cash ABC and Bitcoin Cash Node. This hard fork was the result of a disagreement over the implementation of a new protocol upgrade, and has caused some uncertainty in the market as users and miners decide which version to support.
What is Soft Fork?
A soft fork is a backward-compatible upgrade where the old and the new nodes can communicate with each other. In a soft fork, new rules are added that do not clash with the existing rules. Taking the example of Bitcoin, although we cannot increase the size of the block due to the existing rules, there is no rule which says the block size cannot be decreased. In that case, this would be a soft fork to Bitcoin. This would not disconnect the new block from the network and the communication between all the nodes remain un-hampered. A real-life example of the soft fork is Segregated Witness (SegWit) fork that was done right after Bitcoin Cash forking took place. SegWit was the update that changed the format of the blocks and their transactions.
Although the old nodes could validate the transactions they couldn’t understand them. Few information fields are only visible when the nodes switch to the latest software allowing them to parse additional data.
Soft Fork Examples
The notable example of a soft fork is the activation of SegWit (Segregated Witness) on the Bitcoin network in 2017. This upgrade improved the scalability and transaction capacity of Bitcoin without causing a split in the community, as nodes could still recognize transactions from before and after the change.
Why Do Forks Occur?
Forks can happen for several reasons. Sometimes they occur due to a need for improvements or updates to the underlying protocol, effectively addressing technical limitations, security issues, or enabling new features. For example, the implementation of SegWit in Bitcoin was a soft fork that aimed to increase transaction capacity and reduce fees.
Other forks may arise from disagreements among community members and developers about the direction of a project, prompting them to create a separate version based on their own vision. This can be seen in the case of Bitcoin Cash, which was created as a result of a disagreement over the block size limit in Bitcoin.
It is important to keep in mind that while some forks are intentional and planned, others can occur as unintentional consequences of software glitches or other unforeseen factors. These unintentional forks can result in temporary splits in the chain, but they are usually resolved quickly through consensus.
Key Differences between Hard Fork and Soft Fork
- Compatibility: Hard forks are non-backward compatible, while soft forks maintain backward compatibility with the previous protocol.
- Impact: Hard forks can create new crypto and community splits, whereas soft forks enhance the network without causing a division.
- Consensus: Hard forks require a majority consensus before being implemented, while soft forks are often easier to enforce.
Pros and Cons
Hard Fork Pros:
- Allows for significant improvements and updates to the protocol.
- Can create a new crypto asset with potentially higher value.
- Offers a clear separation for diverging visions within a community.
Hard Fork Cons:
- May cause community splits and market uncertainty.
- Requires users and miners to decide which version to support.
- May introduce security risks due to a reduction in the network’s hashing power.
Soft Fork Pros:
- Allows for network updates without drastic changes or community divisions.
- Easier to implement and enforce the new rules.
- No new coins are created, maintaining a unified currency.
Soft Fork Cons:
- May not address larger issues or allow for significant updates to the protocol.
- Miners who do not upgrade may experience reduced income due to their inability to validate new transactions.
- Some users may be unaware of new features, limiting their adoption.
Hard Fork Vs Soft Fork: Which one is better?
Hard Fork and Soft Fork serve different objectives. Although Contentious hard forks often divide the community but well planned and clever ones can also lead to software modification with everyone in agreement.
Soft forks are the more gentle and diplomatic solution to hard forks. One does not need to worry about fragmenting in case the updates are crafted in a way that they do not conflict with the existing rules.
Additional Read: Which is the best crypto to invest in?
Summing it Up!
Every application needs updates and similarly, every blockchain network needs to be upgraded for the software to serve bigger and better purposes. Hard Forks and Soft Forks allow us to modify the software in a decentralized fashion without the intervention of any central authority. The forks help the networks integrate new features without which a centralized system would be required for complete control.
Blockchain network congestion: Imagine rush hour on the digital highway!