Hard and soft forks are changes to the protocol of a blockchain network that essentially act as an update or upgrade to the latest version of the protocol software.
What are hard forks and soft forks?
The main difference between the two is that hard forks require all nodes to be upgraded to the latest version and can invalidate previously invalid transactions and/or invalidate previously valid transactions, while soft forks only require upgrading the majority of users and only previously valid. transaction blocks are rendered invalid.
Thus, soft forks result in a single valid blockchain that is backward compatible where users adopt the new update. Hard forks alternately create two valid blockchains that exist side by side and the software must be upgraded to work with the new protocol.
Reasons for a fork
Either type of fork can be initiated due to growing dissatisfaction among crypto users and developers with the existing blockchain or as a way to fund new crypto projects and offerings. In this way, forks act the same as traditional updates received on a computer or phone.
Large companies such as Microsoft or Apple update software programs to fix issues with previous versions while generally providing new quality of life changes in addition to major updates such as the addition of Siri. Both hard and soft forks provide updates to the blockchain network and depending on the route chosen by the developers, users may need to update to the new protocol.
Whether it’s a hard fork or a soft fork depends on what the developers and the community are looking for. The most common reason for an update is increased security, as there are security risks in older versions. Another is to reverse transactions, like when Ethereum (ETH) created a hard fork to reverse the Decentralized Autonomous Organization (DAO) hack. Increased safety and inversions are the main reasons most developers today opt for hard forks over soft forks, even when soft forks could theoretically do the job.
Advantages for each variant
Following the DAO hack on the Ethereum network, the Ethereum community voted to initiate a hard fork to rollback transactions. The hard fork allowed DAO holders to recover their ETH and did not actually unroll the network’s transaction history, but instead transferred funds to a newly formed smart contract. Since hard forks allow two versions to exist side by side, DAO holders saw their funds returned and the hacker’s transactions could be undone. The current Ethereum blockchain exists because of this fork, while Ethereum Classic is the old chain.
Increased security measures, privacy, and reversals are the reason most major platforms opt for hard forks. Soft forks are always valuable because they require much less computational cost and allow easier upgrades to implement new features that are also backwards compatible. Nodes do not need to switch to the new protocol and since all new protocols in the soft fork follow the old rules, old users accept them. Yet, the more miners that update and accept the new rules, the more secure the network will be, thus, hard forks are more secure given that all nodes must be upgraded. Also, soft forks cannot be reversed by their nature as they only accept the set of valid blocks as a subset of what was valid before the update.
Hard forks and soft forks act as an update to a cryptocurrency network in much the same way as software updates for other technologies. Hard forks are the most commonly used because they provide increased security, and security enhancements are often at the center of any update to a blockchain network. Both hard and soft forks can be used in updates for new features and implementations with soft forks not all requiring the update and at lower computing cost. Finally, when transaction rollbacks are required due to a security breach, hard forks are required in order to reallocate the funds to their original location.