What are Hards Forks and Soft Forks? What's the difference?

When you are using the electronic banking application on your smartphone, you must have encountered a system prompting you to update. At this time, you usually have to consider and agree to the update before the system can be upgraded. Maybe your phone will update automatically without notifying you. After all, a software upgrade is a necessary process, and if you do not have the latest version of the software installed, you may not be able to continue using the associated service.

In open-source cryptocurrencies, the situation is quite different. You don’t need to read every line of code that underpins Bitcoin, but it’s helpful if you can. Because you will find that in a decentralized environment there is no hierarchy of governance and no bank to push updates and content modifications to you at will. Therefore, it is a challenge to implement an update of a new function in a blockchain network.

In this article, we will explore how cryptocurrency networks can be upgraded without centralized authority management. Hence, two different mechanisms have emerged: hard forks and soft forks.

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Who are the decision makers in the blockchain network?

To understand how forks work, it is first necessary to understand the actors involved in the decision-making process (or governance ) of a blockchain network.

In Bitcoin, you can roughly divide participants into three distinct subsets: developers, miners, and full node users. They are actually nodes of various parties participating in the network and contributing. And like widely used light nodes (for example, wallets for mobile phones, laptops, etc.), they are not real “participants” to the network.

Developer

Developers are responsible for creating and updating code. For traditional tokens as you know them, anyone can contribute code to the process. The code is publicly available so they can submit changes to other developers for review.

Miner

Miners are participants in securing the network. They run the cryptocurrency’s code and devote computing resources to adding new blocks to the blockchain. For example, in the Bitcoin network, they do this through proof-of-work. Miners will obtain corresponding mining income in the form of collective rewards.

Full node user

Full nodes are the backbone of cryptocurrency networks. They are responsible for validating, sending and receiving blocks and transactions, and maintaining a copy of the blockchain’s data.

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Within these different categories of identities, you may find overlap. For example, you can be both a developer and a full node, or a miner and a full node. You can also have all three of the above identities at the same time. But in reality, we don’t think many cryptocurrency users are in these roles. Instead, they choose to use lightweight nodes or centralized services.

With the introduction above, you now also have a solid understanding of the responsibilities of developers and miners in the network. The developers are responsible for creating the code, and without the code, you can’t run the software, and no one can fix bugs and upgrade new features. Miners are responsible for securing the network, and without healthy mining competition, the blockchain could be hijacked, or come to a standstill.

However, if developers and miners try to brute-force the network to behave as they want, it can have a negative effect. For most users, the real control is on the full node. They keep the network up and running, allowing users to choose the software they want to run.

Developers don’t break into your home and threaten you with a gun to download Bitcoin’s core binaries. If miners take a tough stance, take a stubborn attitude, and force customers to choose unnecessary changes, most users may not buy it.

In fact, neither miners nor developers are powerful overlords, but service providers. If the user decides to no longer use the network, the token loses value. The loss of token value will directly affect miners (whose compensation is less valuable when denominated in USD). Likewise, for developers, they can only be ignored by users.

You will find that none of this software is proprietary. You can make any modifications you want, and you can interact if someone else is running your modified software. In this case, you are essentially creating a new network by forking the software.

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What is a fork?

Soft forks are achieved by copying and modifying software code. While the original project continued to exist, a new project was produced separately, and the new project developed in a different direction. Let’s assume that the team at your favorite cryptocurrency content site has a major disagreement on how to develop it. Part of the team may replicate the site into other areas. However, as we look to the future, they will also publish articles that differ from the original content.

These projects are all built on a common foundation and have the same historical data. Just as one road later splits into two, their paths diverge from now on.

Note that such incidents are common in open source projects and have been around long before Bitcoin or Ethereum. However, only in the blockchain space is there a distinction between hard forks and soft forks. We will discuss in detail below.

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Hard forks and soft forks

Despite having similar names and serving the same purpose, hard forks and soft forks are very different. Let us describe them in detail.

What is a hard fork?

A hard fork is a software upgrade that does not support backward compatibility. Typically, these situations occur when a node adds a new rule in a way that conflicts with the old node’s rule. New nodes can only interact with software nodes running the new version. As a result, the blockchain split, producing two separate networks: one operating under the old rules and one operating under the new rules.

So now there are two networks running in parallel. They will continue to produce blocks and transactions, but will no longer work on the same blockchain. All nodes have the same blockchain (and the history still exists) until the blockchain network reaches the forked block, but after that, they will have different blocks and transactions.

Since there is the same history, if you held coins before the fork, you will get coins on both networks at the same time. Suppose you had 5 BTC in hand when the fork occurred at block 600,000. You can choose to spend the 5 BTC on the original blockchain when the block height reaches 600,001, but the consumption at the block height of 600,001 will not be recorded on the newly generated blockchain. Assuming the encryption has not changed, these 5 tokens will still be present in your private key on the new forked network.

Another example of a hard fork is the one that occurred in 2017 when Bitcoin split into two separate chains, the original Bitcoin (BTC) and the new Bitcoin Cash (BCH). The fork came after a lot of debate in the community over the scaling of block size. Bitcoin Cash (BCH) proponents want to increase the block size, while Bitcoin (BTC) proponents oppose the change.

An increase in the block size requires a modification of the rules. This was done before the SegWit soft fork (more on that later), so nodes will only accept blocks smaller than 1MB. If you create a 2MB block, other nodes will refuse to validate.

Only nodes that have upgraded their software to support block sizes greater than 1MB will accept these blocks. Of course, this makes them incompatible with previous versions, so only nodes with the same protocol can communicate with each other.

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What is a soft fork?

Soft forks are software upgrades that support backward compatibility, and upgraded nodes can still interact with non-upgraded nodes. Soft forks are usually upgraded by adding a new rule to the program that does not conflict with the previous old rule.

For example, a block size reduction can be achieved through a soft fork. Let’s take Bitcoin as an example again to illustrate this point: there is a limit on the upper limit of the block size in the Bitcoin network, but there is no limit on the lower limit of the block size. If you only want to accept blocks below a certain size, just reject blocks larger than that.

However, doing so will not automatically disconnect you from the network. You can still interact with nodes that don’t enforce these rules, but some of the information they pass to you is filtered out.

The aforementioned Segregated Witness (SegWit) is a good example, which happened shortly after the split between Bitcoin and Bitcoin Cash. Segwit is an update that changes the format of blocks and transactions, and it’s designed in a clever way. Old nodes can still validate blocks and transactions (in a format that doesn’t violate the rules), but for some fields, they can’t read them. Only when the node is upgraded to a newer version will some fields be readable and other data will be parsed correctly.

Even more than two years after the activation of Segwit, the upgrade of all nodes has not been completed. There are also many benefits to doing this, such as no network outages and less urgency for upgrades.

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Hard fork or soft fork, which one is more advantageous?

Essentially, these two types of forks work differently. Controversial hard fork upgrades will split the community in two, but planned hard fork upgrades allow all participants to freely choose whether to modify the program.

A soft fork is a more stable option. In general, you can only enforce certain restrictions as new upgrades do not conflict with previous rules. That said, if you can implement the upgrade in a compatible way, you don’t need to worry about the risk of network fragmentation.

Hard forks and soft forks are critical to the long-term success of a blockchain network. Despite the lack of a central authority, they are able to make changes and upgrades in a decentralized system.

Forks allow blockchains and cryptocurrencies to integrate more new features as they are developed. Without these mechanisms, we would need a centralized system with top-down control. Otherwise, we can only abide by immutable rules for the life of the software agreement.

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