In the cryptocurrency world, Soft fork vs. hard fork? can be two different types of forks. So what is the difference between them? Let’s look at both of these types of forks to learn more!
Understanding Hard Forks
A hard fork occurs when a single cryptocurrency splits in two. It happens when a change in protocol is not backwards compatible. Bitcoin thorns had occurred more than once since the introduction of Bitcoin, as was the case last summer when Bitcoin Cash was created.
However, it’s important to note that hard forks are not intrinsic to blockchain technology—they’re specific to some cryptocurrencies. Other blockchains themselves can create solid forks without forks.
Also, this means that other blockchains can upgrade their protocols without splitting into two separate chains. The majority of new coins that launch today use Ethereum’s ERC-20 standard, used by more than 80% of ICOs in 2017.
Most projects on Ethereum don’t require their blockchain because they can be built on Ethereum using smart contracts (more on those later). So why do we even need a distinction between soft and hard forks?
Well, most blockchains work differently from one another because they were designed with different purposes in mind. Some were made for digital payments while others focused on storing data; some allow users to create new tokens, others don’t.
Why Do Hard Forks Happen?
A hard fork is used to make software changes when there’s no way around it. For example, you had a bitcoin wallet stored on your computer, but one day you lost your laptop. Opening another wallet on another device will create an entirely new address for your bitcoin.
A hard fork is also used when developers want to change some part of how cryptocurrency transactions work—not just fix bugs but also add features. The most famous recent example of a hard fork is Bitcoin Cash (BCH). On August 1, 2017, a group of miners began mining blocks with different rules than those in place.
The result was two versions of Bitcoin: BTC and BCH. If you owned BTC before August 1, then you own BCH now. Since then, other coins have had hard forks as well: Ethereum Classic (ETC), Litecoin Cash (LCC), Dogecoin Dark (DOGED), and many more. But what happens if we don’t like a hard fork?
Accidental Hard Forks
In these cases, an unintentional hard fork can occur if two miners find a block at nearly the same time. Both partnerships will show up in everyone’s blockchain, but one of them will eventually become discarded as invalid by consensus.
Because there’s no way to prevent accidental hard forks except by waiting until they expire, they can sometimes do more harm than good. If a user’s balance drops due to an unexpected hard fork, it might seem like their funds are lost forever.
Also, some users prefer soft forks over hard forks—they’re less risky because they don’t require every node on a network to upgrade software. However, soft forks have other risks that make them impractical for some use cases—for example, when upgrading from Bitcoin 0.1 (which used SHA-1) to Bitcoin 0.2 (which used SHA-256).
To avoid creating two Bitcoins, developers had to work around existing code that didn’t support SHA-256 mining; ultimately, all nodes were upgraded so that users could still mine coins with their old computers.
Difference Between Soft fork vs. Hard Fork?
A soft fork is an update to a blockchain that makes previously valid blocks/transactions invalid and vice versa. This type of fork requires only a majority of miners to upgrade to enforce new rules.
The advantage is that old nodes will still see recent transactions as valid (as long as they follow specific criteria), avoiding the fragmentation caused by hard forks. In other words, no one is forced to upgrade their software to remain compatible with other clients.
A hard fork is an update to a blockchain that makes previously invalid blocks/transactions valid and vice versa. It’s an upgrade that breaks compatibility with older versions of nodes. A hard fork may be necessary when significant changes to network rules or consensus mechanisms.
Notable Hard Fork Examples:
The two most notable hard forks were likely Ethereum’s Byzantium hard fork, which upgraded its blockchain with additional intelligent contract capabilities, and Bitcoin Cash, which spun off from Bitcoin to fix Bitcoin’s perceived issues. Forks can also be planned as opposed to unplanned.
Ethereum has two planned forks in 2018 that will change some of its code. One is called Constantinople and is set for October 2018; another is called St. Petersburg and is scheduled for January 2019. Both are designed to improve Ethereum.
Also, the best way to explain it is like this: A soft fork means the software has been updated so that blocks (or groups) created after a certain block number follow new rules, while blocks created before that block number still follow old traditions.
As long as miners are building blocks on both chains simultaneously, everything should be fine—but if there’s ever a divergence where miners begin mining on one chain or another exclusively, there could be trouble.
SegWit2x and Bitcoin Cash
The much-awaited SegWit2x fork happened on November 16, 2017. At block height 494784, miners implemented a hard fork to increase network capacity by creating blocks with increased block size limits. SegWit2x was a proposal for Bitcoin Improvement Proposal (BIP) 91, which aimed to upgrade Bitcoin’s transaction capacity.
BIP91 was activated in August 2017, and it required 95% of mining power to signal readiness for SegWit activation before it could be locked in. BIP91 signaled a willingness in July 2017, but due to a lack of consensus between stakeholders, BIP91 failed to lock-in.
Also, this led to a split chain where one part went ahead with its plan as per BIP91 while another rejected it ultimately. The part that refused BIP91 is known as Bitcoin Cash or BCC, whereas the other part that stuck with its original chain is now known as BTC or legacy bitcoin.
However,the main difference between a soft fork and a hard fork is that soft forks are backwards compatible, i.e. old nodes can still validate new transactions. Also, they don’t understand them;
However, new nodes will not be able to validate old transactions. Also, old nodes will reject them as invalid since they are incompatible with their ruleset if they know them. On the other hand, hard forks are not backward compatible i.e.
The DAO Hack
In 2016, a blockchain project called The DAO was hacked for $55 million. A so-called white-hat hacker—someone who finds vulnerabilities in blockchain code to help fix them before someone else can exploit them—bought some ETH.
The DAO then rewrote their version of Ethereum’s history, replacing it with one that instead gave his balance back to him. This controversial move resulted in a hard fork: nodes running old software were cut off from those running new software, creating two separate versions of Ethereum.
Today, there are still two versions of Ethereum: Ethereum (ETH) and Ethereum Classic (ETC). This hack resulted in multiple lawsuits against both parties involved and numerous debates about whether hard forks should be used at all.
The discussion has cooled down considerably since then, and developers have created several tools to ensure similar situations don’t happen again. There is no plan for another hard fork soon; however, Ethereum Classic continues to exist as an alternative version of Ethereum because some users prefer its non-forked nature.
Hashrate Wars: ABC vs SV
The Race to 90% Hashrate—and What It Meant for Bitcoin Cash in 2019: In 2017, we saw Bitcoin Cash fork (or split) into two separate blockchains. On November 15, 2018, two different blockchains claimed to be Bitcoin Cash.
The networks are named ABC and SV (Satoshi’s Vision). So what’s going on here? Here’s our simplified explanation of Soft fork vs. hard fork—and why you should care about these terms. A Soft Fork is an update to software that changes how things work without changing any rules.
For example, if Bitcoin’s mining difficulty were set to adjust every block instead of every 2016 block, it would require miners to use older software versions to upgrade or risk being left behind by more powerful miners with more efficient machines.
This type of change doesn’t change any rules, so everyone keeps working together just fine; it allows people with new software features to work better together.
A Hard Fork is an update that requires all users or miners to switch over at a particular time, or they will not be able to continue working together with everyone else who has updated their software. You might also hear Soft Forks can turn into Hard Forks at any time! This is true!