HARD FORKS VS SOFT FORKS: PRACTICAL DIFFERENCES EXPLAINED

Explore how hard and soft forks change blockchain protocols, impact users, and influence cryptocurrency ecosystems.

2025-04-12

In blockchain technology, a fork refers to a split in the protocol or codebase of a blockchain network. This split results in diverging paths, where one continues with the existing rules, and the other introduces changes. Forks are a vital part of maintaining, upgrading, or governing decentralised networks. They typically occur due to:

Updates or upgrades to the blockchain protocol
Differences in community consensus on governance
Bug fixes or addressing security vulnerabilities
Disagreements on fundamental principles, such as scalability or transaction fees

Forks are categorised into two main types: hard forks and soft forks. Each has different implications for backward compatibility, consensus, and chain continuity. Understanding the technical mechanics and real-world examples of each is essential for developers, investors, and users navigating the blockchain ecosystem.

A hard fork is a radical change to a blockchain's protocol that is not backward-compatible. Nodes or users that have not upgraded to the new version of the software cannot validate or interact with blocks or transactions produced on the new chain. As a result, a hard fork creates a permanent divergence from the previous blockchain version, leading to two separate ledgers if there is no unanimous adoption.

Key characteristics of a hard fork include:

Non-backward compatibility: Older nodes reject blocks from the new chain.
Chain split: The blockchain splits into two if not all nodes upgrade.
New token creation (often): The fork can result in a new cryptocurrency.
Requires consensus: Community participation is necessary for the fork’s long-term viability.

Practical example: Bitcoin Cash (BCH)

In August 2017, a hard fork occurred on the Bitcoin network, resulting in the creation of Bitcoin Cash. The main dispute within the Bitcoin community at the time was about how to scale the network to accommodate more transactions. Bitcoin Cash increased the block size from 1MB to 8MB (and later raised it further), allowing more transactions per block and reducing fees.

This upgrade was not backward-compatible, and Bitcoin Cash became a separate blockchain with its own rules and token (BCH), distinct from Bitcoin (BTC). Users who held Bitcoin at the time of the fork received an equivalent amount in BCH after the split.

Other notable hard forks:

Ethereum Classic (ETC): Forked from Ethereum in 2016 after the DAO hack, due to disagreements on reversing a theft.
Monero Hard Forks: Occur periodically to upgrade privacy protocols or resist ASIC mining.
Cardano Alonzo Hard Fork: Introduced smart contracts to Cardano in 2021, requiring a protocol upgrade incompatible with older versions.

Hard forks are typically more disruptive than soft forks but offer a clean solution when the community is sharply divided or when a fundamental change is necessary.

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In contrast to hard forks, a soft fork is a change to the blockchain protocol that is backward-compatible. This means that even non-upgraded (older) nodes can still recognise and validate blocks created by the upgraded nodes, as long as those blocks comply with the old rules. Soft forks do not necessarily result in a chain split, provided the majority of the network agrees on and enforces the new rules.

Essential attributes of a soft fork:

Backward compatibility: Older nodes continue to function on the modified network.
No new coin creation: The existing cryptocurrency remains intact.
Requires majority hash power: New rules are enforced by the majority of mining power.
Security through consensus: Encourages uniform protocol alignment within the network.

Practical example: Bitcoin SegWit Upgrade

One of the most well-known soft forks occurred in August 2017 when the Segregated Witness (SegWit) protocol upgrade was activated on the Bitcoin network. SegWit altered the way transaction data is stored, effectively removing the signature data (witness) from the transaction block and placing it in a separate structure. This change allowed more transactions to be stored in one block without increasing the block size limit.

Since SegWit transactions were still valid under the rules of the old Bitcoin protocol (albeit not fully utilised by older clients), the change was backward-compatible. As a result, older nodes could still validate blocks, and no new coin was created.

Other major soft forks include:

Ethereum’s Byzantium Upgrade: Implemented privacy and efficiency improvements while retaining network integrity and ensuring backward compatibility.
Litecoin MimbleWimble integration: Implemented as a soft fork for optional, non-compulsory confidential transactions.
BIP66 (Bitcoin Improvement Proposal): Enforced strict DER signatures through a soft fork to improve consensus rules securely.

Soft forks are generally preferred when incremental changes or optimisations need to be made while maintaining network coherence and avoiding the risk (and cost) of a split.

However, soft forks can be contentious if not all users agree, and an attempted soft fork can still result in a hard fork if consensus fails, as seen in some historical upgrades.

Ultimately, the choice between hard and soft forks depends on the goals of the upgrade, the level of community agreement, and the nature of the change to the protocol.