In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.
|Definition||A Hard Fork is a significant and intentional divergence or split in a blockchain’s protocol, resulting in two separate and incompatible chains. It occurs when there is a fundamental change in the underlying rules or consensus mechanism of a blockchain network. In a Hard Fork, the blockchain’s transaction history up to the point of the fork remains the same, but the new chain follows a different set of rules, potentially leading to the creation of a new cryptocurrency. Hard Forks are often driven by disagreements within the blockchain community regarding network upgrades, governance, or security features.|
|Key Concepts||– Blockchain Protocol: The set of rules and algorithms that govern how a blockchain network operates. – Consensus Mechanism: The method by which nodes in a blockchain network agree on the state of the blockchain. – Node: A computer or device that participates in the operation of a blockchain network. – Cryptocurrency: Digital or virtual currencies that use cryptography for security. – Community Consensus: Agreement among participants in a blockchain community regarding proposed changes. – Immutability: The principle that past transactions on a blockchain should be unalterable.|
|Characteristics||– Creation of a New Chain: A Hard Fork results in the formation of a new blockchain that follows the updated protocol. – Incompatibility: The new chain is not compatible with the old one, leading to a split in the network. – Changes in Rules: The Hard Fork typically introduces changes to the blockchain’s rules, such as block size, transaction validation, or consensus mechanism. – Community Division: Hard Forks often reflect disagreements within the blockchain community. – Historical Continuity: Transaction history before the fork remains the same on both chains. – Potential New Cryptocurrency: Depending on the changes, a new cryptocurrency may be created on the new chain.|
|Implications||– Blockchain Governance: Hard Forks highlight challenges in blockchain governance and decision-making. – Community Split: They can lead to a division within the blockchain community, with some participants supporting the original chain and others the new one. – Impact on Miners: Miners and nodes must choose which chain to support, potentially affecting their rewards. – Risk of Double Spending: Transactions occurring simultaneously on both chains can lead to double spending. – Market Reaction: Hard Forks can lead to volatility in cryptocurrency markets as traders react to the changes. – Evolving Technology: They demonstrate the ability of blockchain technology to evolve and adapt.|
|Advantages||– Upgradeability: Hard Forks allow for significant upgrades to a blockchain’s technology and features. – Resolution of Conflicts: They provide a mechanism for resolving disagreements within the blockchain community. – Innovation: New chains created by Hard Forks can introduce innovative features and improvements. – Choice: Users and developers can choose which chain aligns with their preferences and objectives. – Adaptability: Hard Forks demonstrate the adaptability of blockchain networks to changing needs and requirements. – Market Dynamics: They can stimulate interest and investment in the cryptocurrency market.|
|Drawbacks||– Community Division: Hard Forks can lead to division and polarization within the blockchain community. – Network Security: The split can temporarily reduce network security as miners and nodes shift between chains. – Double Spending: Double spending risks increase during a Hard Fork. – Complexity: Managing the transition and upgrade process can be complex and require technical expertise. – Market Volatility: Cryptocurrency markets may experience significant price volatility in response to Hard Fork announcements. – Reputation Risks: Failed or contentious Hard Forks can harm the reputation of a blockchain project.|
|Applications||Hard Forks are typically employed in the context of blockchain networks and cryptocurrencies to implement significant upgrades, resolve disputes, or introduce new features.|
|Use Cases||– Bitcoin Cash (BCH): Bitcoin Cash resulted from a Hard Fork of Bitcoin (BTC) in 2017, primarily over disagreements about block size limits. – Ethereum (ETH): Ethereum has undergone multiple Hard Forks to implement network upgrades and improve scalability. – Bitcoin SV (BSV): Bitcoin SV emerged as a result of a Hard Fork of Bitcoin Cash, focusing on larger block sizes and scaling. – Monero (XMR): Monero has had several Hard Forks to enhance privacy features and security. – Tezos (XTZ): Tezos has implemented Hard Forks as part of its governance model to introduce protocol changes and upgrades. – Zcash (ZEC): Zcash has undergone Hard Forks to address security vulnerabilities and improve network performance.|
What are soft forks and hard forks?
In a Blockchain, a soft fork occurs when an alteration to the software protocol keeps it backward compatible. In other words, the new forked chain follows new rules while also honoring the old rules.
In a hard fork, a divergence of the new chain is permanent. Nodes running older versions will no longer be accepted by (or be able to communicate with) the new version.
Understanding soft forks and hard forks
When a consumer updates a digital banking app on their smartphone, the process is painless and seamless. Updates only take a few minutes and some apps do so automatically. What’s more, there are rarely any usability issues with the new version.
Open-source cryptocurrencies are very different. There is no central authority releasing updates or making changes as it sees fit. There is also no requirement for Bitcoin users to understand the code that underpins it. Nevertheless, freely accessible code is an important facet of a decentralized, open-source platform.
Soft and hard forks are the cryptocurrency versions of updates for computer programs, allowing networks to be upgraded in the absence of a central authority. Forking as a term describes any scenario where a cryptocurrency project needs to make technical updates to its code.
Forking necessitates that a Blockchain splits into two branches. The nature of the split can be categorized as either hard or soft.
In the next section, we’ll take a look at each in more detail.
As noted earlier, a soft fork is backward compatible with the original chain continuing to follow old rules. Upgraded nodes can still communicate with non-upgraded nodes, which is another way of stating that new rules do not clash with old rules.
This kind of fork requires that a majority of miners upgrade before the new rules are enforced. A recent example of a soft fork is the Segregated Witness (SegWit) fork which occurred after the Bitcoin/Bitcoin Cash split. This update changed the format of transactions and blocks, but old nodes could still validate them without breaking the rules.
Hard forks are backwards-incompatible updates. Since nodes add rules that conflict with older nodes, new nodes can only communicate with those operating on the latest version.
Here, the blockchain must split into two, parallel chains that continue to propagate blocks and transactions separately. One operates under the old rules while the other under the new rules.
It’s important to note that until the point of divergence, each separate chain has a shared history. If a user held Bitcoins before the split, they end up holding coins on each of the two subsequent chains.
An example of a hard fork is the 2017 split that saw Bitcoin separate into two chains: Bitcoin and Bitcoin Cash. This occurred before the aforementioned SegWit soft fork and was the result of disagreement over increasing the block size.
Since an increase in block size required a rule change, nodes only accepted blocks smaller than 1MB. This meant that an otherwise valid 2MB block would be rejected and thus be incompatible with the previous version.
- Forking helps cryptocurrency Blockchain make important updates to its code in the absence of a central authority. Hard and soft forks describe the nature of these updates as Blockchain networks split in two.
- A soft fork is backward-compatible with the original chain. Older nodes can communicate (and are compatible with) new nodes without breaking rules.
- A hard fork is backward-incompatible with the original chain. This split is a permanent divergence from a previous version of the Blockchain. As a result, nodes running previous versions are no longer compatible with the newest version.
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