HardFork and SoftFork. What’s the difference?

How to improve cryptocurrency and fix its shortcomings? Fork it, of course! Chatex explains what forks are, where they come from and why they are required.

What is a fork?

In simple terms, a fork is a division of cryptocurrency into two branches with certain differences in its source code. Sometimes, new types of cryptocurrencies are  created with the help of a fork. So, for instance, the forks of Bitcoin are the well-known Litecoin, Bitcoin Cash and Bitcoin Gold, which have already taken their rightful place in the market.

Forks are conventionally divided into two categories: hard fork and soft fork.

Soft Fork is a minor change to the cryptocurrency protocol that is compatible with the previous version of the network. In this case, the nodes that have not gone through the update will still be able to process transactions and add new blocks to the blockchain (until the rules of the new protocol are violated).

The Soft Fork does not split the blockchain into 2 branches. It is carried out in order to improve the functional qualities of a particular payment system.  Soft Fork means a small change, created to improve it and make it more attractive to users. In this situation, it is even possible to rollback and cancel the update.

Hard Fork is a cryptocurrency protocol change that is incompatible with previous versions. That is, the nodes of the network that have not been updated to the new version will no longer be able to participate in the work of the blockchain. With this modification, a new coin may appear.

Hard Fork is needed to change or improve an existing protocol, or create a new, independent protocol or blockchain. This type of update affects the fundamental rules of blockchain operations, for example, the mining algorithm, the time to generate a new block, the amount of the reward for the block, the complexity of the calculations and sometimes the issue of the coin.

Why are forks created?

Forks help resolve developer conflicts. If several groups of people have different views on the development of the network and they cannot come to a compromise, then each group can go their own way by creating a hard fork.

Usually old and new algorithms contradict each other and cannot exist within the same blockchain. As a result, the chain splits into 2 separate systems and a new cryptocurrency appears, containing the technical elements of the original coin, but endowed with the specified functions. Bitcoin Cash, Bitcoin Gold, and Ethereum Classic are good examples of this situation.

Since the fork is based on the original blockchain, all its transactions are copied to the new fork. For instance, you have 100 coins of cryptocurrency “A”. If a hard fork based on this cryptocurrency creates a new cryptocurrency “B”, then you will also receive 100 coins “B”.

A hard fork and a soft fork can be compared to the political situation in a country. If the authorities pass a couple of new laws to improve the life of the state, then this is a soft fork. But if the changes are global, for example, a change in political regime and social values, then such a change will be considered a harfock incompatible with the previous version.