What Is A Hard Fork And A Soft Fork?

Forks are created when parties maintaining the blockchain are not in agreement and the blockchain diverges into two potential paths forward. To illustrate, two teams are asked to work on an article named Bitcoin 1.0 and one team wants to change the font of the article without changing the content. So the team make a copy and named it Bitcoin 2.0. Now people can either choose to work on the original Bitcoin 1.0 or the Bitcoin 2.0 version.

In the blockchain, one fork continues to support the old protocol that makes previous rules valid, while the other updates to the new rules. However, most forks are short-lived as the parties working on them fail to reach a fast consensus. The forks that are permanent can add new features to a blockchain, reverse the effects of hacking, or eliminate bugs. 

In the following article, we will take a look at two typical forks. 

What Is A Hard Fork?

According to the official definition, a hard fork is “a permanent divergence in the blockchain, commonly occurs when non-upgraded nodes can’t validate blocks created by upgraded nodes that follow newer consensus rules”. In order to do effective mining and discover new valid blocks, upgraded nodes need to switch to a news chain and continue mining by following the new rules. The newly produced chain is the result of the hard fork. Put it simply, a hard fork will split one blockchain or one kind of cryptocurrency into two.

What Is A Soft Fork?

Different from the hard fork, a soft fork is an update that is backward compatible. In other words, a soft fork changes the protocol which only makes the previous valid blocks or transactions history into invalid, while the old nodes can still recognize the new blocks as valid.

Hard Fork vs. Soft Fork

The difference is that soft fork updates the protocol which is compatible with the previous one, where the older version of bitcoin software will recognize the new blocks as valid, and all nodes will continue to agree on previous consensus and rules. Hard fork changes the protocol which is not compatible with the previous one, which requires nodes to upgrade their software in order to mine and discover the new valid blocks and get block reward.

What Are Bitcoin Forks?

Essentially, Bitcoin’s hard fork is to solve several problems existing in the Bitcoin network. Three prominent problems of Bitcoin are:

1) Low transaction speed

2) PoW mechanism is resource-wasted

3) Low scalability

In order to solve the latter two problems within the Bitcoin network, it may require changing to a new consensus algorithm in which a massive amount of code refactoring is necessary. Furthermore, the risks of recreating a new algorithm and refactoring codes are unknown. Even if developers agree to recreate the consensus algorithm, miners/nodes will not easily agree either.

Owing to Bitcoin’s open-source, developers can clone and modify the Bitcoin blockchain original codes, then create a new blockchain, consensus and cryptocurrency. Nodes/miners who support the upgraded blockchain will start mining in it. That’s how Bitcoin hard fork occurs.

Cases Of Bitcoin Hard Fork

According to incomplete statistics and the latest research, up to now, there are 44 hard fork cryptocurrencies of Bitcoin, but only 3 have value and can be traded: Bitcoin Cash (BCH), Bitcoin Diamond (BCD), Bitcoin Gold (BTG).

1) Bitcoin Cash (BCH)

BCH is created in August 2017. It increases the maximum block size from 1MB to 8MB, which makes the transaction verification and processing much faster.

2) Bitcoin Diamond (BCD)

BCD, which came out in November 2017, aims at lowering the cost of the participant as well as transaction fees. And its total amount is 10 times as much as Bitcoin’s.

3) Bitcoin Gold (BTG)

Forked from BTC in October 2017, BTG mainly changes the mining algorithm to avoid centralized computing power problems caused by ASIC mining machines and adjust the mining difficulty.

Forks, bitcoin forks in particular may have further development or challenges in the future. Let’s wait and see.