Cryptocurrencies, such as Bitcoin and Ethereum, are powered by a decentralized open-source software called a blockchain. A fork is a change to the protocol that underlies the blockchain. A blockchain fork can be initiated by developers or community members and represents an important upgrade to the network which can either be radical or minor in nature. Learn more about crypto forks in this crypto tax calculator article today!
It is necessary for node operators – machines that help validate transactions on the blockchain – to upgrade to the latest version of the protocol in order to keep the chain running smoothly. Every node has a stored copy of all previous transaction history on the blockchain, which helps insure new transactions do not go against what has already been established.
A hard fork is an upgrade that can render previous transaction and blocks invalid, requiring all network validators to switch to the new version. It’s not compatible with older versions. A soft fork is an update that backward-compatible and makes old chain validators see the newer version as legitimate.
A hard fork is a permanent chain separation that occurs when the old version of a blockchain is no longer compatible with the new version. Those holding tokens on the old chain are automatically granted tokens on the new one, as they share the same history.
A hard fork is created when the blockchain undergoes a protocol change. This could be due to political disagreements or software updates. A key feature of blockchains is that all data can be tracked back to its source- the first transaction on the network. For example, we can still view Bitcoin’s original block even though it was created years ago.
Hard forking creates a permanent rift in a blockchain, where some nodes don’t follow the consensus anymore. As a result, two versions of the network run separately from each other.
When a hard fork occurs on the blockchain, one path of the blockchain continues to follow its current set of rules while the second path follows new rules. The old version is no longer compatible with the new one.
Hard forks are not the only way to upgrade a cryptocurrency’s software. Soft forks, which are seen as a safer alternative, are backward compatible; this means that nodes that do not upgrade to newer versions will still see the chain as valid.
A soft fork is a type of change to the software protocol of a blockchain that doesn’t result in radical changes. Instead, it usually leads to adding new features or functions that don’t alter the fundamental rulesets. Soft forks are commonly used when trying to add new elements at a programming level.
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