Soft fork vs Hard fork: What's the difference between blockchain forks?

When it comes to blockchain technology, the road to progress is not always straightforward. Cryptocurrency developers often disagree about the direction of a project, which can create a split in its evolution and future.

Blockchain forks naturally allow the technology to evolve, adapt, and improve over time. You can think of a fork in a blockchain like a software update for your smartphone or laptop computer. These updates can add new features, fix security issues, or improve performance.

However, in the case of cryptocurrency, these updates can sometimes create different versions of the original blockchain. This can happen through either a hard fork or soft fork.

This article will help you understand the differences between soft forks and hard forks, along with some examples of each.

What is a hard fork?

A hard fork is a radical and non-backward-compatible change to a blockchain protocol that results in the permanent divergence from the previous version. This type of fork creates a split in the blockchain, where the new version is incompatible with the old chain.

Since hard forks require all nodes or users to upgrade to the latest version of the protocol software, nodes that continue running the old version will reject the new blocks, while nodes that upgrade to the new version will accept them. This split can lead to the creation of a completely new blockchain and cryptocurrency if a portion of the community decides to continue with the old protocol.

How hard forks work

Hard forks involve fundamental changes to the blockchain’s underlying protocol:

Non-backward compatibility: Hard forks introduce changes that are not compatible with the previous version of the blockchain. This means that nodes running the old software cannot validate blocks created by nodes running the new software, leading to a split in the blockchain network.

• Permanent split: When a hard fork occurs, the blockchain is divided into two separate chains. One chain follows the old rules, and the other follows the new rules. This split is permanent, and each chain operates independently from the other.
• Consensus requirement: For a hard fork to be successful, it typically requires a broad consensus within the community. However, because it is a radical change, it often leads to disagreements and can result in a faction of the community choosing to stick with the old version, thereby creating two distinct blockchains.
• Upgrade necessity: All participants who wish to follow the new protocol must upgrade their software. This includes miners, nodes, and cryptocurrency wallets. Failure to upgrade will result in these participants remaining on the old chain, which can lead to confusion and fragmentation within the community.

Why do hard forks happen?

Hard forks occur for various reasons, each impacting the blockchain network in significant ways.

1. Protocol upgrades: Developers may introduce new features or make changes to improve the blockchain's functionality. These upgrades often aim to enhance things like scalability, security, or performance.
2. Security patches: Addressing critical security vulnerabilities may necessitate a hard fork. When a major flaw is discovered, a hard fork can ensure that the issue is resolved across the entire network.
3. Community disagreements: Differences in opinion within a community about the direction of the project can lead to a split. These disagreements can stem from ideological differences, governance models, or proposed technical changes.
4. New features: Sometimes, the introduction of new functionalities or features requires changes that are not compatible with older versions of the protocol. A hard fork ensures that these new functions are implemented effectively.
5. Restoring network integrity: In some cases, hard forks are used to reverse transactions or mitigate the effects of hacks, fraud, or significant technical issues that can compromise the integrity of the blockchain.

Accidental hard forks

Accidental hard forks occur when different versions of the software produce blocks that are not recognized by other versions. These types of forks are unintended and often arise from inconsistencies or bugs in the codebase.

Here are some common causes of accidental blockchain forks:

• Software bugs: Coding errors or bugs in the blockchain protocol can lead to discrepancies between different versions of the software. When these bugs cause nodes to disagree on the validity of blocks, an accidental hard fork can occur.
• Inconsistent upgrades: If not all nodes upgrade to the new software version simultaneously, discrepancies can arise. Some nodes may continue following the old protocol, while others adopt the new one, resulting in a split.
• Network latency: Delays in communication and synchronization between nodes can cause temporary blockchain splits. If different parts of the network produce conflicting blocks, an accidental fork can occur until the network resolves the inconsistency.
• Conflicting consensus rules: Changes in consensus rules that are not uniformly adopted by all nodes can lead to accidental forks. When nodes apply different rules to validate transactions and blocks, the blockchain can split unintentionally.

Resolution of accidental hard forks

It is best if accidental hard forks are identified and resolved quickly. When they occur, like with Ethereum in 2020, network participants work to identify the cause of the fork and coordinate to ensure all nodes operate on the same version of the protocol. This usually involves rolling back to a common point before the fork and revalidating subsequent blocks to ensure consistency.

While they can be disruptive, the swift resolution of accidental forks helps reinforce the resilience and robustness of blockchain networks.

What is a soft fork?

A soft fork is a backward-compatible upgrade to the blockchain, where only previously valid transactions are made invalid. Since old nodes recognize the new blocks as valid, a soft fork does not require all nodes to upgrade. Soft forks are often used to implement new features or changes without causing a split in the blockchain.

How soft forks work

Soft forks function by introducing changes that do not break the existing rules, but rather strengthen them. Here are the key characteristics of how soft forks operate:

• Backward compatibility: One of the defining features of a soft fork is its backward compatibility. This means that even nodes that have not upgraded to the new protocol can still participate in the network and recognize new blocks as valid. The old rules continue to apply, ensuring that the network remains unified.
• Tightening rules: Soft forks typically involve changes that impose stricter rules on the blockchain. For example, they might reduce the block size limit or introduce new validation criteria for transactions. These stricter rules ensure that new blocks remain compatible with the old protocol.
• Majority consensus: For a soft blockchain fork to be successfully implemented, it requires majority consensus among the network participants. Usually, this means that a significant portion of miners must adopt the new rules. Once the majority of the network enforces the new rules, the rest of the network will naturally follow suit, as they recognize the majority chain as the valid one.
• No network split: Unlike hard forks, soft forks do not result in a split of the blockchain into two separate chains. Because the new rules are backward compatible, the blockchain remains a single entity, and all participants continue to work on the same chain.

Difference Between Hard Forks and Soft Forks

The primary differences between hard forks and soft forks can be summarized using the following table:

Advantages of hard forks

Hard forks offer several significant advantages that make them a crucial mechanism for the development and maintenance of blockchain networks:

• Implementation: Hard forks enable the introduction of substantial changes to the blockchain protocol that would be impossible to achieve through backward-compatible updates. These major changes can include new features, improved scalability and enhanced security measures.
• Resolution and reversal: Hard forks can be used to resolve disputes within the community or reverse transactions in cases of fraud, hacks, or significant technical issues. For example, the Ethereum hard fork that created Ethereum Classic was implemented to reverse the effects of the DAO hack, reflecting a controversial decision that led to a community split but also restored trust in the network.
• Community-driven development: Hard forks allow communities to pursue different visions for the blockchain. When there are significant disagreements over the direction of a project, a hard fork enables each faction to implement their preferred changes without compromising the other group's goals. This can lead to increased competition, innovation, and diverse approaches within the blockchain ecosystem.

Challenges of hard forks

While blockchain hard forks can bring significant improvements and address critical issues, they also come with several challenges:

• Community division: A contentious hard fork can lead to divisions within a cryptocurrency community. Disagreements over the fork can result in factions, each supporting a different version of the blockchain. This division can weaken the overall community and create confusion among community members and potential users.
• Technical risks: Implementing a hard fork involves significant technical risks. If not executed properly, it can lead to security vulnerabilities, loss of funds, and instability within the network. Thorough testing and coordination are necessary to minimize these risks.
• Market impact: The creation of a new cryptocurrency through a hard fork can have severe market implications. It can lower the price of the original cryptocurrency, create market confusion, and impact potential user adoption. The market response to a hard blockchain fork is often unpredictable and can lead to significant price volatility.

Advantages of soft forks

Soft forks offer several advantages over hard forks, making them a preferred choice for certain types of cryptocurrency upgrades:

• Network stability: Since soft forks do not result in a split of the blockchain, they better help maintain network stability and continuity. This is crucial for preserving the integrity and security of the blockchain protocol.
• Ease of adoption: Soft forks require only a majority of the network to adopt the new rules, making the upgrade process smoother and more manageable. Non-upgraded nodes can continue to operate without any immediate disruption.
• Backward compatibility: By maintaining backward compatibility, soft forks ensure that existing applications and systems can continue to function without requiring extensive modifications. This reduces the risk of disruption to the broader ecosystem.

Challenges of soft forks

While soft forks offer several benefits, they also come with their own set of challenges:

• Majority consensus requirement: Achieving majority consensus can be difficult, especially in large and decentralized networks. Ensuring that enough crypto miners and nodes adopt the new rules can be a complex and time-consuming process.
• Security risks: Although soft forks are designed to be backward compatible, there is always a risk that the new rules could introduce unforeseen security vulnerabilities or compatibility issues. Thorough testing and review are essential to mitigate these risks.
• Network partitioning: If not enough miners or nodes adopt the new blockchain rules, a network could become partitioned. This means that some parts of the network might follow the new rules while others continue to operate under the old rules. Although this won't lead to a permanent split as with hard forks, it can still cause temporary disruptions and inconsistencies in the blockchain.

Notable forks examples

Bitcoin vs Bitcoin Cash (Hard Fork)

In 2017, the Bitcoin community experienced a significant split due to disagreements over scalability solutions. One group wanted to increase the block size limit, while the other preferred to implement SegWit. This disagreement led to the creation of Bitcoin Cash, a new cryptocurrency designed for daily transactions with a larger block size limit.

Today, there is now the original Bitcoin blockchain for BTC and the newer Bitcoin Cash blockchain for BCH.

Ethereum vs Ethereum Classic (Hard Fork)

The Ethereum network underwent a hard fork in 2016 after a major hack exploited a vulnerability in The DAO, a decentralized autonomous organization. To reverse the effects of the hack, the Ethereum community decided to implement a hard fork, creating two separate chains: Ethereum (ETH) and Ethereum Classic (ETC).

SegWit (Soft Fork)

Segregated Witness (SegWit) was a soft fork implemented in the Bitcoin network in 2017. SegWit aimed to solve transaction malleability and improve scalability by separating the transaction signature from the transaction data. This change was backward-compatible, allowing non-upgraded nodes to continue operating without causing a split.

BIP-66 (Soft Fork)

Bitcoin Improvement Proposal 66 (BIP-66) introduced strict DER (Distinguished Encoding Rules) encoding for signatures. This soft fork tightened the rules for signature validation, ensuring greater consistency and security in the verification process.

Monero (Hard Fork)

Monero has undergone several hard forks to enhance its privacy features and maintain ASIC resistance. These forks reflect the community’s commitment to improving the cryptocurrency’s security and privacy while ensuring it remains accessible to a wide range of miners.

P2SH (Pay-to-Script-Hash) (Soft Fork)

The Pay-to-Script-Hash (P2SH) soft fork in Bitcoin allowed users to send transactions to a script hash rather than a direct public key hash. This added flexibility in creating complex transaction scripts without breaking compatibility with the existing protocol.

Access hard and soft fork cryptocurrencies

Many popular cryptocurrencies have emerged from both hard and soft forks.

MoonPay makes it easy to buy cryptocurrency created from forks, such as Bitcoin Cash (BCH) and Ethereum Classic (ETC), as well as their original forms of Bitcoin (BTC) and Ether (ETH).

Easily purchase forked crypto via MoonPay or through any of our partner wallet applications with a credit card, bank transfer, Apple Pay, Google Pay, and many other payment methods. Just enter the amount of cryptocurrency you wish to purchase and follow the steps to complete your order.