If you're new to cryptocurrency, you may have heard the term "fork" thrown around. Like a fork in the road, a cryptocurrency fork is a point at which there are two paths for a blockchain's development.
However, you're not alone if you do not understand what it means, especially for the blockchain networks you support. So, what is a blockchain fork?
What Is a Fork in Blockchain Terms?
Forks are quite common in the blockchain development process. A blockchain fork can be good or bad, depending on what it offers and users' reception. While there are varying degrees of intensity, there are two main types of blockchain forks: soft and hard.
The difference between soft and hard forks is more than just semantics. Each type of fork calls for different actions on the part of a crypto wallet, node, or miner software. So, here is what a hard fork and a soft fork are and how they affect the market.
What Is a Soft Fork?
A soft fork is similar to a software update in that it improves the network and is backward compatible with the existing pre-fork blocks. This means everyone, not just the people who use the newer software, see all of these new blocks and accepted transactions as valid.
For those running older software versions, soft forks shouldn't cause any issues because those blocks and transactions should still be accepted within the chain.
What Is a Hard Fork?
A hard fork is a significant change to the protocol that effectively removes backward compatibility from the blockchain. The blockchain is, quite literally, at a fork in the road. The general rule for this type of fork is that you will not be part of the new network if you don't upgrade your software. Of course, you may rumble on as part of the old blockchain protocol, but that in itself may also require a soft fork to keep functioning.
A hard fork is a permanent divergence in the blockchain. After the hard fork, non-upgraded nodes can't validate blocks created by upgraded nodes that follow newer consensus rules.
In fact, as a prime example, Ethereum infamously has two versions: Ethereum and Ethereum Classic, as a result of a hard fork. Because of a security breach early in its development, the Ethereum development team decided to invalidate blocks relating to the exploited vulnerability, excluding the stolen Ether from the network.
What Is the Difference Between Hard and Soft Fork?
Knowing this, you may be wondering what the real differences are between the two. So, here is how you can tell a blockchain hard from a soft fork.
- A hard fork is when a software program diverges into two separate versions, usually because one group of users wants to add new functionality to the program while another group does not. In general, hard forks are difficult to roll out. However, because they solve problems that cannot be resolved with a soft fork and can introduce other issues, many developers push for it as a last resort.
- A soft fork, on the other hand, is when an update is made to existing software, which requires backward compatibility so that older versions of programs continue to function properly with newer updates. This update does not cause splitting of the blockchain, and often the update is also optional while some users may choose to stay on older software if they prefer not to upgrade.
Forks Are Part of Blockchain Development
As with all things in life, things change. With blockchain, changes happen to come in forks. With this, blockchain networks need to be forked if new features are added to the blockchain, developers want to experiment, or any kind of bug is found in code which will make previous valid blocks invalid.
Whether forks are hard or soft has different implications on token owners. In some cases, it can significantly increase the value of a cryptocurrency. However, at times, it can do the opposite.
Forks are almost always a sign that developers are still actively working to improve their blockchain platform. So, if a project is undergoing a fork, you can rest assured that the blockchain project has not been abandoned.