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What is a Fork in Blockchain | Hard and Soft Fork

31 Aug 2022 By : Anirudh
Southeast Asia’s Lar

Key Takeaways

  • A fork is a network update in blockchain started by developers or community members that can be either radical or modest. 

  • A hard fork is a significant modification to the protocol of a network, in which a blockchain is split into two parts and newly modified blocks won't be accepted by the old nodes.

  • A soft fork is a minor modification to a network and old nodes continue to operate. 

Updates are always necessary for a system or software. However, a sophisticated system such as Blockchains cannot call for top-down maintenance to execute modifications as centralized systems can because the power is centralized and changes are simple. On the other hand, blockchains are made up of nodes operating from all over the world and lack a single point of control or failure.

As blockchains are decentralized, they require forking to make modifications to the blockchain, such as new rules, bug patches, or soft additions. Let’s look at how to upgrade crypto networks without a centralized control system.

What is a Fork?

A fork is a modification to the protocol that controls a blockchain. A blockchain fork is a network update started by developers or community members that can be either radical or modest. It is the concept of changing underlying protocols or rules of a network by the community.

The projects in forking are developed on familiar ground but are advanced according to various objectives. These elements were there long before the invention of cryptography and are fairly typical in open-source projects. Disagreements regarding embedded features are the primary cause of crypto forks.

Forks are not always intentional. When not all nodes are copying the same data, a fork might unintentionally occur in a widely dispersed open-source codebase. These unintentional forks are often located and fixed. Intentional forks can also be divided into soft forks and hard forks.

What is a Hard Fork?

A hard fork is a significant modification to the protocol of a network that makes previously invalid blocks and transactions valid or vice versa. A hard fork requires that all nodes or users upgrade to the most recent version of the protocol software. The blockchain splits into two parts: the old blockchain and a new blockchain with reforms.

It modifies the blockchain protocol's rules in a way that renders the previous blockchain and the new one incompatible. As a result, the newly modified blocks won't be accepted by the old nodes, and the new blockchain will function according to new rules that consistently reject blocks from the previous blockchain. 

What is a Soft Fork?

A soft fork is a minor modification that does not change the rules a blockchain must follow. It permits non-updated nodes or old nodes to continue operating on the network. Unlike a hard fork, this type of fork requires merely a majority of miners to upgrade in order to implement the new rules.

Soft forks do not require any nodes to update to maintain consensus because all blocks with the new soft forked-in rules also match the old rules, so old clients accept them. However, a soft fork cannot be reversed without a hard fork, as a soft fork only permits the set of valid blocks to be a correct subset of what was valid before the fork.

Accidental Forks

When many miners mine a new block at almost the same moment, the whole network may disagree on the new block's selection. Some may accept the block mined by one party, resulting in a new chain of blocks from that point on, while others may agree on the other block possibilities available. 

This occurs because it takes a certain amount of time for information to travel throughout the whole blockchain network, resulting in conflicting perspectives on the chronological sequence of occurrences. Two or more blocks in this fork share the same block height. Accidental forks are resolved by the blockchain itself. 

Why do forks happen?

  • To resolve a disagreement within the community: In 2017, the Bitcoin network was split into two different chains: Bitcoin (BTC) and a new one, Bitcoin Cash (BCH). The fork happened because certain members of the community sought to fix Bitcoin's scalability issue. The hard fork supporters wanted to raise the block size, while the opponents did not.

  • To add functionality: The Blockchain code is updated on a regular basis. Because most public blockchains are open source, they are created by people from all over the world. When the time is right, changes are made, problems are fixed, and new versions are launched.

  • To address security risks: Updates are pushed and patches are published to address any security concerns that develop along the route. For instance, Polygon quietly carried out a soft fork in November 2021 after finding out about a vulnerability in one of its verified contracts.

  • To reverse transactions on a blockchain: If a given period's transactions are proved to be stolen and hacked, the community can actually void them altogether.

How do forks work?

Basically, a blockchain is a collection of data blocks linked together by safe cryptographic keys that form a chain of blocks going back to the first block. As all the blocks are linked together by a consensus that all of the blocks agree on, each system update requires a change in agreement on all of the blocks. But it is impossible to achieve such a consensus.

Thus, rather than rewriting each block, updates to a blockchain are sometimes accomplished through the use of a fork. In a fork, the original software is copied and the desired changes are made to it. Forks work by making updates to the blockchain's software protocol. They are often linked to the generation of new tokens. Common methods of producing new coins is from scratch or to 'fork' the existing blockchain.

The most popular way is to create fresh tokens from scratch. This approach entails copying and pasting existing code, which is subsequently launched and launched as a new token. The network must be rebuilt from the ground up, and individuals must be persuaded to utilise the new coin. The other option is to split the existing blockchain. Rather than beginning from scratch, this strategy modifies the current blockchain. As the network divides, two copies of the blockchain are formed.

A fork can only be done when participants on the network agree on a course of action and execute improvements that improve overall efficiency. For example, since miners provide the computing resources required to maintain the network, any forked version that is approved by the miners is likely to prevail. Other subset jobs include developers, who write and update the code that runs inside the blockchain, and full node users, who serve as the network's backbone and auditors by validating and maintaining the blockchain's history.

Impact of Forks 

The impact of any hard or soft fork on the blockchain is determined by the environment and other factors. Forks affect the following entities and institutions in the blockchain process:

Miners: Crypto miners are the primary driving force behind the adoption and inclusion of any upgrade process or fork. They must assess if incorporating the Improvement Proposal will optimise functionality and income, among other benefits.

Developers: Developers might be considered a resource as well. If a fork occurs as a result of development concerns or software faults, human resources are going to be divided, resulting in vacancies that may not be readily filled, hurting service and operations.

Exchanges:  The split does not divide the number of digital assets held by an address, but it may divide the value of the digital assets or cryptocurrencies held by the address. For example, if a user/address has 2 BTC prior to the fork (Bitcoin to Bitcoin Cash), the value after the fork remains 2 BCH (Bitcoin Cash), but the valuations of the same amount of Bitcoin and Bitcoin Cash in today's crypto market are substantially different. It is up to the exchanges to implement features that allow users to get tokens based on the new or old fork.

Investors: When it comes to investing in forked commodities, the market is quite volatile. This upheaval caused by a controversial hard fork causes a dramatic price change. Uncertainty exists in new forks, as well as in existing forks, depending on public and market perception. This is one of the elements that blockchain communities must examine while deciding on the proposal that may result in blockchain splits.

Conclusion

Whatever the sort of split, it is evident that more work has to be done to enable a smooth transfer of blockchain updates and upgrades. Hard forks are preferred by the majority of blockchain miners and merchants because they reduce the danger of validating or mining faulty blocks. On the other hand, they use a large number of computing resources and are seen to be damaging to the future of cryptocurrencies.

Despite their inherent hazards, soft forks provide a considerably speedier alternative to blockchain software changes without consuming excessive computing resources. Soft forks are also praised for their ability to introduce upgrades without dividing the community.

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