While understanding the underlying structure of blockchain technology, we only see what is on the surface. We see a ledger that maintains the records of all transactions, gets updated through a consensus mechanism and stores information cryptographically. But a lot of backend processes never meet the eye of a layman or a person who isn’t an actual participant/node in a network.
One such process is the ‘forking’ of the blockchain network. It is the event when any upgrade takes place in the blockchain and its processes. For that to happen, most developers have to agree to the upgrade. Forking works in two ways – soft fork and hard fork. Understanding the working and differences between the two will add to your knowledge of how upgrades happen in the blockchain world. Ok, let’s get into a deeper knowledge of soft fork vs. hard fork.
What are Forks?
While working with blockchain, the blockchain developers reach a consensus before they process any software upgrades or minor change in the network rules. They must agree to the upgrades, and as the process gets completed, the blockchain splits into two, which is called a blockchain fork. The old path of the original blockchain works on the same set of rules as earlier, but the new one carries forward protocols of the earlier one with all the enhancements to the transactional processes post the upgrade. Some of the recent examples of a blockchain fork include Ethereum’s Merge upgrade and Cardano’s Vasil upgrade.
Why are Forks so Important?
Unlike centralized financial platforms, which have a central entity approving and invoking advancements, there is no clinical method for blockchain technology to keep up with the requirements of the developing world. It falls upon the miners and the developers on a blockchain to understand the need for upgrades and then come to a consensus with the majority to agree to a fork. Forking is important to maintain the blockchain and support the participants on the network.
Who Determines a Fork Formation?
A lot of times, the collective decision of the miners to bring about an improvement via an upgrade or a fork prevails on a blockchain. This is simply because the miners provide security and block validation to the network by allocating computing resources. Blockchain is, however, an open-source network, and the authority of fork formation is shared with all the participants in most cases. Developers take care of the coding script and protocol automation on a blockchain, and they take care of changes on this front. The full node participants validate the records on the blockchain and suggest upgrades based on the maintenance of the records.
What is a Hard Fork?
Now, as we get a deeper comprehension of soft fork vs. hard fork, let us understand the hard fork first. Consider this a process in which the creation of a new blockchain is imminent, with a few miners disagreeing to bring the upgrade. A hard fork is essentially the permanent divergence of a new side chain from the original one. The consensus of nodes and developers that agree to the new set of rules follow the newer version of the blockchain. The old blockchain no longer considers the newer one valid, meaning it is not backward compatible. A hard fork generally degrades the network’s security and efficiency since the consensus between network validators and security breaks.
Why do Hard Forks Happen?
Since hard forks can make the blockchain network vulnerable, why do the nodes even consider them? The answer is to move forward with the requirements of the nodes. There can be requirements related to new functionalities, security procedures, resolving a disagreement in the network, or even resolving some faulty transactions on the network. Sometimes they occur by accident, too, when two miners work on the same block and the blockchain splits due to different consensus results on the same block. The participants follow the old block, and the new one is called the orphan block.
What is a Soft Fork?
A soft fork is considerably simpler than a hard fork since there are no major changes to the consensus mechanism. It can occur when the majority of nodes or miners agree to smaller upgrades to the protocol without changing the original rules of the network. There is no requirement for all the nodes on the network to upgrade to the new version. An original singular chain with minor upgrades move forward in the network, and the risk of ‘double spending’ goes away. Soft forks are backward compatible and can sometimes be used by hackers to manipulate the nodes and bring malicious changes to the chain.
Difference Between Hard Fork and Soft Fork
|Characteristics||Hard Forks||Soft Forks|
|Authority level||They often make a change to the original protocol, thus requiring a stronger consensus of nodes and miners||The changes are made on the network level and can occur even when a small section of developers want to add small upgrades.|
|Split in the chain||The original chain splits into two.||There is no splitting as the original chain moves forward with minor upgrades.|
|Need for upgradation||All the users on the network need to agree to the new chain in order to use it.||Only the ones that have the use of upgrades need to upgrade their network.|
|Vulnerability||It is not backward compatible. Hence hackers can take the majority consensus by manipulation and create a hard fork.||It is backward-compatible, so attackers can reinstate earlier model by manipulating the nodes.|
|Power Requirements||Hard forks require high computational power since a new side chain generates out of the original one.||Generally, 51% hash power is required for a soft fork.|
Examples of Hard Forks
1. The Bitcoin Cash Hard Fork
Several nodes on the Bitcoin network did not agree to the changes after SegWit’s upgradation to the chain. This resulted in a hard fork which is comparatively well known too, the Bitcoin Cash. It happened on August 1, 2017, when the nodes understood that the community supports SegWit. The creators of Bitcoin Cash look at the split as a carry forward of the original BTC creator’s vision.
2. Ethereum’s Dilemma
To return $40M of the users on the network as a result of a hack, the ETH chain had to undergo a hard fork in July 2016. The funds were transferred to the original owners by making changes to the protocol and adding a new smart contract. The retrieval occurred in the form of DAO tokens. The network participants who were against this backward-compatible process due to its conflict with the very essence of a public blockchain, are now keeping the original Ethereum network which goes by the name Ethereum Classic.
Examples of Soft Forks
1. The SegWit Soft Fork
To increase the block size and transaction speed on the original Bitcoin blockchain, a ‘Segregated Witness’ soft fork took place in August 2017. The soft fork was not welcomed by all the miners and nodes on the network, which led to a hard fork shortly.
Which One is More Beneficial: Soft Fork or Hard Fork?
There is no simple answer to this question, as the differences between a soft fork and a hard fork are vast. Hard forks occurring consecutively harm blockchain technology, while soft forks cannot bring about significant changes to the blockchain protocol. Although soft forks are considered diplomatic and kinder to the network and with complete consensus on the changes, even major upgrades can be done on the blockchain. So, the needle slightly shifts towards soft forks in the current scenario.
Every software and technology requires upgrades to evolve. Similarly, the upgrade in a blockchain is necessary for adding new features, maintaining the chain, and upgrading to a better network. ‘Blockchain hard fork vs. soft fork’ is a notable rivalry, but since we have been into complete comprehension of both, we understand that both are equally important for blockchain technology. Without these forks, there will be a centralized system again, avoiding blockchain’s principle motive.
Frequently Asked Questions (FAQs)
1. What is the Difference Between a Soft Fork and a Hard Fork?
What is the difference between hard fork and soft fork? Hard forks involve a significant change to the rules of a blockchain, whereas soft forks are more subtle changes that are backward compatible, meaning that nodes that do not upgrade will still see the chain as valid. Soft forks are often implemented to add new features without changing the rules of the blockchain.
2. Does a Hard Fork create a New Coin?
A big factor in the soft fork vs hard fork debate is that a hard fork can create a new coin if the community of users and developers decide to split from the original blockchain and create a new version with a different set of rules and protocols. This new version will have its own separate blockchain and its own set of tokens which will be different from the original one.
3. Why are Hard Fork and Soft Fork Required in Blockchain?
Hard forks and soft forks are required in blockchain to improve and update the network. Hard forks involve significant changes to the rules of the blockchain, while soft forks are more subtle changes that are backward compatible. Both types of forks are necessary to add new features, address security risks, resolve community conflicts, and make other improvements to the network.
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