In the ever-evolving landscape of technology, most software users are well acquainted with the continuous need for maintenance and upgrades to enhance the efficiency of their programs. Therefore, it’s unlikely that you would overlook a notification from your device’s digital banking app prompting you to update. Conversely, your smartphone might autonomously undergo updates as soon as it establishes network connectivity. Neglecting to download the upgraded program version could lead to operational issues and the potential loss of access to its services.

Likewise, the blockchain platform operates on a similar principle of updates and enhancements. However, a distinct and more intricate approach is required when it comes to Decentralized Applications (DApps) and cryptocurrencies on a blockchain network. In contrast, centralized network operators can swiftly introduce innovative elements to their software with a simple click.

Consider blockchains, for instance, which are decentralized open-source ecosystems devoid of centralized authority. Consequently, any system update necessitates consensus among all network users. Within this context, a fork emerges as a distinctive technique for updating and enhancing a blockchain. Depending on their purpose, forks fall into two primary categories: soft forks and hard forks.

However, before delving into the differences between soft forks and hard forks, let’s first understand the concept of a fork.

What is a Fork?

Think of a blockchain as a digital container full of information about different actions. These containers are linked together using secret codes. Now, when we talk about a “fork” in a blockchain, we’re talking about a change in how things work. It’s like tweaking the process and abilities of the blockchain.

A fork in blockchain can be defined as:

• Changing the potential path of the blockchain: It’s like taking a different road in the development of the blockchain.
• Change in the protocol: It means adjusting the basic protocols that control how the blockchain works.
• A situation where blocks attain the Same Height: A fork happens when two or more blocks in the chain reach the same level, creating a split in the path of the blockchain.

Types of Fork

There are two major types of forks: soft forks and hard forks. Each type has its implications, and they can lead to varying outcomes in the blockchain ecosystem. Let’s check them out:

Soft Fork

A soft fork is an upgrade in a protocol that is backward-compatible with the existing rules of the blockchain. In other words, it introduces changes that are not considered to be a radical departure from the current protocol.

During a soft fork, nodes that have upgraded to the new protocol can still communicate and interact with nodes that have not been upgraded. This is achieved by imposing stricter rules that limit certain behaviors while maintaining compatibility with the older version of the protocol.

Key characteristics of a soft fork include:

• Backward Compatibility: Soft forks ensure that older nodes can still participate in the network without major disruptions, even if they don’t adopt the upgraded protocol.

• Consensus Rule Tightening: The rules governing the blockchain are tightened in a soft fork, meaning that certain previously valid transactions might become invalid under the new rules.

• Minor Changes: Soft forks usually involve minor changes or enhancements to the existing protocol, such as improving transaction efficiency or enhancing security measures.

• Lower Risk: Soft forks are generally considered less risky than hard forks since they don’t result in a permanent split in the blockchain.

• Upgrade Process: The upgrade process in a soft fork is usually faster and smoother, as it doesn’t require the entire network to adopt the changes simultaneously.

An example of a soft fork is the implementation of the Segregated Witness (SegWit) upgrade in the Bitcoin network, which aimed to improve the scalability of the blockchain by separating transaction signatures from transaction data.

Hard Fork

A hard fork, on the other hand, involves a more substantial change to the blockchain protocol, often resulting in a permanent divergence from the previous version.

During a hard fork, the new protocol is not backward-compatible, which means that nodes running the old version of the software will not be able to validate transactions or blocks that adhere to the new rules. This can lead to two separate blockchains, each with its version of the transaction history.

Key characteristics of a hard fork include:

• Not Backward-Compatible: Unlike a soft fork, a hard fork introduces changes that are not compatible with the previous version of the protocol. This results in a split in the blockchain.

• Major Changes: Hard forks typically involve significant changes to the protocol, such as introducing new consensus mechanisms, altering block size limits, or addressing critical security vulnerabilities.

• Community Disagreements: Hard forks can arise from disagreements within the blockchain community regarding the future direction of the network. A hard fork may be proposed as a solution when consensus cannot be reached.

• Higher Risk: Because of the potential for creating two separate chains and the need for network-wide adoption of the new rules, hard forks are considered riskier and more complex than soft forks.

• Upgrade Process: Hard forks require a coordinated upgrade by a significant portion of the network’s participants. If the upgrade is not widely adopted, it can expedite a chain split and the creation of a new cryptocurrency.

An example of a hard fork is the Ethereum hard fork that resulted in the formation of Ethereum (ETH) and Ethereum Classic (ETC) after a disagreement over how to handle the aftermath of a major hack.

Final Thoughts

In the world of blockchain and cryptos, forks play a vital role in the evolution and governance of networks. Soft and hard forks are two distinct approaches to upgrading blockchain protocols, each with its own characteristics and implications. Soft forks ensure backward compatibility and typically involve minor changes, while hard forks introduce more significant changes and can lead to a permanent chain split.

Understanding the differences between soft and hard forks is essential for anyone interested in blockchain technology, as it provides insights into how these upgrades shape the future of blockchain networks and cryptocurrencies.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.