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Read This Stunning Review Of The Top Four Hard-Fork Coins Now

What does Fork Mean? How many types of Forks in are there in Cryptocurrency? What’s the difference between Soft Fork and Hard Fork? If you are also looking answers for all these questions, then you’ve come to the right place.

Each software requires updates to keep them up to date with the changing dynamics and to enhance their offering. In the dictionary of Crypto, it is termed as “forks”. As you have heard already, Soft Fork and Hard Fork are two types of forks. If put in simple words, the only difference between the two forks is that Soft Fork also supports the prior version of the software whereas Hard Fork is a permanent alteration which is not compatible with the earlier version.

What Is Fork And How Many Types Are There?

The crypto community is one big family, and each member of the chain is known as a node. To co-exist, each node needs to align by a bunch of rules called “protocols”. The basic rules of the protocol are decided by its creator. The blockchain size, the mining rewards, etc., are selected for the community, and they all then work together.

So, Fork is a sort of upgrade or update in the program code of the blockchain that modifies the working principle of the intact blockchain. Now, the question is what is Soft fork and Hard fork in blockchain? These are two types of Forks, one of which can be reversed, i.e. Soft Fork and the other is backwards-incompatible, i.e. hard Fork.

A soft fork indicates the minuscule modifications made to the chain, whereas as the name goes, hard fork changes are usually more substantial and radical.

Contrary to popular belief, a forking is possible in all blockchain-based platform and not just bitcoin. This is by virtue of the fact that all cryptocurrencies are primarily based on the blockchain technology only. Each particular block can be perceived as a crypto key which helps in pushing the block memory further forward.

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Now, let’s know both the forks separately with past examples in the crypto industry.

1. What is Soft Fork In Crypto?

The backwards-compatible upgrade to the protocol is called Soft Fork, which signifies that even after the Fork that resulted in the formation of a new chain, the earlier nodes can still process transactions. However, the older blocks should follow the new rules.

For instance, if according to the Fork, the block size of more than 3MB could no longer be processed, previous nodes would still be able to push blocks that are less than 3MB in size.

Since the earlier nodes were not as capable as the latest, it encourages it to update to the new protocol. But if a user is not interested in using the advanced version, he can still continue using the previous version but without the latest features.

To perform a Soft Fork, the approval of the majority of members in the chain is required.

Some of the examples of Soft Fork that happened in the crypto industry in the past are BIP (Bitcoin Improvement Proposal) and P2SH.

2. Hard Fork/Hard Fork In Bitcoin

Hard Fork is rather complicated than a soft fork as it implements significant alterations to the protocol. These changes are so extreme that it results in two distinct cryptocurrencies, one of which stays unchanged and the other is an entirely new altered version. After the division, the transactions occurring the former blockchain would not be identified by the new chain. This is why Hard Fork is followed by many controversies and uncertainty in the community.

Hard Fork forces the community to pick sides which is one of the reasons that it is implemented very rarely. However, if done correctly, it can result in an efficient upgraded network with enhanced immunity.

One of the well-recognized examples of the Hard Fork in Bitcoin is Bitcoin Cash, (the split between Bitcoin and Bitcoin Cash) and the split between Ethereum Classic and Ethereum, i.e. Ethereum Classic Hard Fork.

Types Of Hard Fork

While mostly, Hard Forks brings controversies, it can also be planned by the consent of the majority of members and developers in the community. Hard Forksare of various types among which the two most popular are Contentious Hard Fork and Planned Hard Fork.

1. Planned Hard Fork: The Fork which has been prepared from the very starting of the project and is agreed upon by the majority of developers with the consent of the community is called planned hard Fork. Planned Hard Fork brings in a much better version of the existing coin with enhanced chain abilities and features. In 2020, Monero went through a hard fork which brought aRing Confidential Transactions (RingCT), a new privacy feature to the chain.

Some other examples of planned hard Fork happened previously in the crypto industry includes Ethereum Byzantium and Segregated Witnesses (Segwit).

2. Contentious Hard Fork: A contentious hard fork occurs when there is conflict within the space regarding the Fork that results in two different chains, one unchanged and another, the better version of the original. One of the major Hard Fork of Bitcoin performed in the past is Bitcoin Cash. Crypto community had faced such controversies in the history regarding extending the block size of Bitcoin to 8MB from 1MB, which was deemed to make the transactions faster. Eventually, the disagreement emerged as the hard Fork of the chain.

Both Bitcoin Cash Hard Fork and Ethereum Classic were controversial hard forks. In the case of Ethereum Classic Hard Fork , most of the member, including their core developers, were in favour of hard Fork due to which they kept the original ETH name and symbol. However, other members who didn’t agree upon the Fork are now called Ethereum Classic (ETC).

Difference Between Soft Fork And Hard Fork

Both Soft Fork or hard Fork are implemented to upgrade the security and enhance the features of the chain. Where soft Fork applies minor changes to the blockchain, Hard Fork alters the protocol entirely, which then cannot be reversed. It is the reason Hard Fork is not readily accepted by the community, which becomes the reason for controversies. Now that you know what is Fork, let’s see the difference between Soft fork and Hard Fork.

Soft Fork Hard Fork
1.

Soft Forks are backwards-compatible.

Implements significant alterations that cannot be reversed.

Earlier nodes can process transactions even after the upgrade.

Results in two distinct cryptocurrencies, one of which stays unchanged and the other is an entirely new altered version. Earlier nodes cannot process new blocks.

Requires the approval of the majority of members in the chain.

Hard Fork forces the community to pick sides.

Examples: BIP (Bitcoin Improvement Proposal) and P2SH Examples: Bitcoin and Bitcoin Cash, Ethereum Classic and Ethereum

Conclusion:

Cryptocurrency forks, whether soft Fork or hard Fork, planned or Contentious is a topic of discussion. Forking can also also be seen as one of the core values of any-open source Cryptocurrency because it further enhances the security of the blockchain. Fork also provides the investors as well as miners with a voice in case of disagreement with the developers of the coin.

Hard forks are more controversial than soft forks due to the fact that they aim to alternate the blockchain drastically.

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About The Author

JaveriaJaveria is into the crypto world ever since she heard about it and is pursuing her interest through cryptoknowmics. She is a sensational poet, technical writer and content strategist. Not to mention that she can go crazy when it comes to vampires and Wonder woman.

Soft Forks and Hard Forks

Forking explained

If you’ve familiarized yourself with the relationship between blockchain and cryptocurrency, then you’ve probably also heard of the term “fork” or “forking.” To better understand what forks are, it’s important to be aware of the two types: soft and hard. Each of these present two separate cases that are extremely important for the world of blockchain and cryptocurrency as a whole. So, let’s dive into what forking is, why soft and hard forks are so important, and how they’re related.

This is not financial investment advice.
This article will touch discuss the relationship between soft and hard forks.

In this article

Terminology

Forking: “Fork” or “Forking” generally means a kind of software upgrade or update which is done in such a way that creates an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network.

Blockchain: The easiest way to understand blockchain is to think of it as a fully transparent and continuously updated record of the exchange of information through a network of personal computers, a system which nobody fully owns. This makes it decentralized and extremely difficult for anyone to single-handedly hack or corrupt the system, pretty much guaranteeing full validity and trust in each exchange of information.

Hard Fork: a hard fork is a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest version. This essentially creates a fork in the blockchain: one path follows the new, upgraded blockchain, and the other path continues along the old path.

Soft Fork: A soft fork (or sometimes softfork) is a change to the software protocol where only previously valid blocks/transactions are made invalid. Since old nodes will recognize the new blocks as valid, a softfork is backward-compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new rules, as opposed to a hard fork which requires all nodes to upgrade and agree on the new version.

Open Source: In general, open source refers to any program whose source code is made available for use or modification as users or other developers see fit. Open source software is usually developed as a public collaboration and made freely available.

Familiarize yourself with these terms to get a better understanding of how soft and hard forks work.

What Are Forks?

Before we can go into the differences between soft and hard forks, let’s go over what forking is in the first place. As we mentioned earlier, forking is a kind of software upgrade or update which is done in such a way that creates an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network. Further analysis will show that there are two types of forks: soft and hard. Each of these kinds of forks has different properties that significantly changed how the blockchain network is run.

Forks can result from two different events. An accidental fork occurs if coin updates are not truly compatible. People using different versions of the software create two different ledgers — one from the older version, and one from the newer version. In this circumstance, the coin developer must rapidly eliminate the bugs causing the incompatibilities and decide how to merge the different blockchains.

Overall, forking can be a pretty stressful event to a cryptocurrency community because it frequently increases risks associated with that particular coin. As coin investors weigh these risks, some will choose to sell in order to avoid any issues. During a fork event, the coin’s value often falls. If the fork puts the coin’s long term survival at risk, this drop in value is warranted. Conversely, if the fork ultimately improves the coin’s stability and structure through code improvements, a fork can actually be an excellent buying opportunity.

Forking is basically a software update that causes a blockchain network to split into two different ones: one for the new network and one for the new one which runs simultaneously. This is usually a stressful event in the crypto community for investors who do not want to deal with any unwanted price drops.

Soft Fork

The first kind of fork that exists is a soft fork, which as we mentioned earlier, is a change to the software protocol where only a majority of the miners need to upgrade to enforce the new rules, as opposed to a hard fork which requires all nodes to upgrade and agree on the new version.

Soft forks are how major changes are sometimes added to blockchain software, which is why they are such an important tool. They’re not always as exciting for investors, though, because either way the end result is a single chain. There’s no new, separate chain to grant investors with any additional assets which can be rewarded through a hard fork.

On the other hand, soft forks that succeed and introduce exciting new features can significantly impact the price of an asset. Soft fork failures can have the opposite effect, so it’s still important to keep your eyes out for forks both hard and soft even if you’re a casual investor. You don’t need to understand the intricacies of the code, but you’ll want to understand the reasons for why a fork is being discussed, and the ways that a hard or soft fork might impact your investment.

Soft forks introduce a new software update to an existing blockchain network without creating a completely new one. Investors might prefer hard forks because the creation of a new network means that they’ll receive additional assets.

Hard Fork

On the other hand, hard forks create a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest one. Essentially, a new blockchain network is created based off of an existing one, which differs from that of a soft fork because that still results in one network.

Hard forks can be good news for existing coin holders, who are usually granted assets on a new chain in proportion to what they had on the original chain, all without losing their assets on the original one. When BCH forked from BTC, for example, Bitcoin holders kept their Bitcoin. Any user that had Bitcoin prior to that block could claim a proportional amount of BCH on the BCH chain. In other words: a hard fork could potentially mean free money.

But hard forks can also be damaging, as they split a project’s community, often as the result of a divisive argument over proposed changes. When Bitcoin Cash forked from Bitcoin, both sides of the community were getting increasingly heated over what should be done. This can have a negative impact on the price of one or both assets following the fork, which is why hard forks tend to be much more dramatic and powerful in terms of its effects.

Hard forks create an entirely new blockchain network in addition to the original one, since the update cannot be compatible with someone who is still operating on the original one. For investors, this can actually be a great way to gain more assets since hard forks usually result in the accumulation of new coins from the new network.

Conclusion

Now that you understand the differences between soft and hard forks, we hope that you’ve gained a better understanding of how forking works as a whole. Although this may seem like a technical concept that only affects the blockchain side of the spectrum, crypto investors should also be aware of what this entails for them because they can also benefit from hard forks. For example, the entire Bitcoin Cash network resulted from a hard fork of the Bitcoin network, which is an extremely important event to understand from both a technical and financial perspective. Thus, moving forward, it’s important to keep in mind how impactful forks are for both developers and investors. As always, happy investing!

Have you ever invested in a coin that went through a fork?
Let us know in the comments!

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