Before we start talking about words like hard fork, Soft fork blockchain, and other strangely used words, I’d like to explain each term briefly.
- Blockchain Protocol: The code agreement defines the communication, mining, and transaction rules. To be part of the network, you must adhere to the protocol.
- Fork: The moment you get a different protocol version from the main protocol.
Now, let’s talk about each term in a more detailed way.
The first question we must answer before talking about forks or anything else is: Why must we update the protocol?
Why do we need to update the blockchain protocol?
- To fix important security risks found in older versions: Since cryptocurrencies are a relatively new invention, they have recently entered a service period, which fiat has been through for years. It took many paper versions, colors, fonts, layers of security, and much more to produce the dollar we know today. Now it’s even harder to fake it. In the same way, it will take some time to research and fix all the risks related to crypto security.
- To add new functionality: The fact that we have Windows 11 today means, that the first Windows required some improvement. Lots improvements. Blockchain code is also upgraded from year to year. Since it is an open-source development, developers are working on it worldwide and suggesting their improvements to the community. If the suggestion is good enough, it will be added to the next version.
- To reverse transactions: Remember counterfeit fiats? The government can put the counterfeiter in jail, but it can hardly compensate all the people who took it as real money. Very bad. And in the world of cryptocurrencies, you can minimize the damage. Once the community detects a security breach, all transactions from a specific date can be considered non-existent. As if it never happened. Have you ever wanted to go back in time? There you go, enjoy. For the good guys, such a reverse process means we just need to make the transactions again. But for the “bad” ones – the money will be harder to steal. But it’s not impossible though.
What is blockchain Soft Fork?
As I mentioned before, it is a change in the protocol, but in backward compatibility.
I’ll take traffic rules as an example (they are very similar).
Suppose the United States has a rule, where the minimum highway speed must be 30 and the maximum 60.
One day, the government decides that from now on, the minimum will be 40 and the maximum will be 70.
So what will happen? For most drivers, who drive at an average speed of 55 miles – nothing will change.
They are still qualified to drive and do not violate the new low level. But if you’re driving at mile 30 – you have to hurry.
In the same way, you won’t have to upgrade your blockchain version to a soft fork right away, and you can work just as you did before unless you want to do something against the new protocol.
What is blockchain hard fork?
If we continue with the traffic example, hard work is essentially the creation of a new parallel universe. With its highways and drivers.
So if a driver lives in Nebraska and has a Jeep – then there is now a “Cash Driver”, who lives in “Nebraska Cash” and has a “Jeep Cash”. So, both drivers live separate lives in separate universes. But the Nebraska Cash driver will never be able to visit his mate or apply for a job in Nebraska – there is no portal between the two worlds. Sounds like a “Black Mirror” plot.
Let’s go back to the cryptocurrency phrases. After any hard split, the previous copy and the new one separate completely.
There is no communication or transaction option between the two. Typically, the new version inherits all previous transactions, and from now on, each version will have its transaction history.
Blockchain hard fork Cases
1. Bitcoin Cash
The difference between Bitcoin Cash and the original Bitcoin: is higher transaction speed, and less decentralization.
What happened after the hard fork? Bitcoin Cash became a new separate currency, and everyone who owned Bitcoin before the hard fork got the same amount in their Bitcoin Cash wallet.
In a previous article entitled: What is Bitcoin Cash, I talk more about the hard fork between Bitcoin and Bitcoin Cash.
2. DAO
What happens on the Ethereum blockchain is different from Bitcoin and Bitcoin Cash fork.
DAO was built as a smart contract on the Ethereum blockchain and was meant to operate like a venture capital fund.
After creation, all Ethereum holders can exchange it for DAO tokens.
What happened: DAO was hacked, and as a result, 3.6 million ether were drained.
To prevent the hacker from cashing out the tokens, the community voted for a soft fork.
But after a short while, the majority voted for a hard fork.
