Fork, Soft Fork or Hard Fork are all long-standing terms. But thanks to the public expectations for Ethereum’s Hard Fork London update and Bitcoin’s Soft Fork Taproot have made these terms hot again.
So what exactly is fork? What does Soft Fork and Hard Fork mean for cryptocurrencies that make people so buzzing? Let’s take a look at the forks with Ola City through the following article.
I. What are forks, soft forks and hard forks?
Before we learn the terms hard fork and soft fork, we need to take a look at what fork is first.
Fork is a technical word commonly used by Bitcoin developers in particular or in the programming world. In the cryptocurrency sector, fork is a form of bug fix or upgrade by creating a new version of blockchain with better features from the old blockchain itself. From there these two blockchains run in parallel on different parts of the network.
There are two types of forks in the cryptocurrency sector: Soft Fork and Hard Fork. Both of these types have fundamentally changed the way the cryptocurrency protocol works.
2. Soft Fork
A Soft Fork is a change in the cryptocurrency protocol in a backward-compatible manner. This means:
Nodes that haven’t updated will still be able to process transactions and push new blocks onto the blockchain, as long as there’s no violation of the rules of the new protocol.
Blocks on Soft Fork all adhere to the old consensus rule and have new consensus rules. It therefore does not require nodes on the network to upgrade to maintain consensus.
Blocks created by nodes that follow the old set of consensus rules will violate the new set of consensus rules. Therefore, it may be faulty when authentication on nodes that have updated the new version.
3. Hard Fork
The Hard Fork is a change of cryptocurrency protocol that is not compatible with previous versions. This means that older nodes that are not updated with the new version will not be able to process transactions or push new blocks onto the blockchain.
Hard Fork introduces an entirely new version of blockchain and nodes running on the old version will no longer be accepted on the new version. Therefore, all users must update and upgrade the software to be able to perform transaction authentication and verification.
Hard forks are used to change or improve existing protocols, or can create a new and independent blockchain protocol and.
Depending on the situation, the hard forks may be approved and executed as planned or will not have high approval and cause much controversy.
- With a fork made as planned, the participants will voluntarily upgrade their software to meet the new rules, removing the old versions. Non-updated nodes will continue the mining process on the old blockchain and very few users.
- If the fork does not have a high consensus rate, causing a lot of disagreements about upgrading issues in the community, then often the protocol will be divided into two separate blockchains that are incompatible with each other → which means the emergence of two different cryptocurrencies. Both blockchains will have their own communities for each side, and developers will continue to build in a way that they think is best.
II. What is Bitcoin Hard Fork? Why is there a Bitcoin Hard Fork?
The Bitcoin Hard Fork is simply an event that changes the rules of the Bitcoin protocol that cause old blocks and transactions to be disabled.
Once the Hard Fork takes place, all nodes and users are required to upgrade to the latest version of the software to be able to use it normally.
In the event that some nodes do not accept the new rule but still use the old rule, the network will occur the phenomenon of splitting the blockchain into two different blockchains with different visions and missions. And most of Bitcoin’s Hard Forks are parting the blockchain. But this doesn’t mean that the Hard Fork is a blockchain split.
There are many reasons why developers create hard forks.
- After being active for a while, the network will need to change to be compatible with user needs and change existing rules.
- Security: It is possible that due to a serious risk or error in the old software, it is necessary to add new features to or reverse transactions to prevent hackers from taking advantage of the vulnerability.
- Conflict in the development team’s vision: Hard Fork is generally a positive change for Bitcoin but the change will create conflict due to the absence of the same vision and direction. Forcing Bitcoin Hard Fork to split from the chain forms two separate chains.
- Personal interests and developer groups: Because when a coin is created from a Hard Fork, before the Hard Fork, the holder of BTC will airdrop the coin in a ratio of 1:1. Then when they complete the Hard Fork, they will find a way for those coins to be listed on the exchange, causing the token price to rise and give the opportunity to flush the later buyers to make huge profits.
However, this does not mean that Bitcoin will rise after each Hard Fork update.
So here’s the knowledge of two types of cryptocurrency forks: Soft Fork and Hard Fork. Hopefully, it will bring useful knowledge for you in the process of learning and investing in cryptocurrencies.
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