In short: hard fork vs. soft fork

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Bitcoin is a protocol: a set of rules that everyone in the network adheres to. Sometimes opinions differ on what the rules should be. It may then happen that different groups see a different future for Bitcoin. When this leads to two different implementations, a fork can arise.

A fork in software development means that the source code is copied and modified by another party. Within Bitcoin, a fork is splitting the blockchain in two or more directions, so that new blocks from one chain are no longer accepted by the other. With Bitcoin, there are two types of forks: soft fork and hard fork. In short, you can say that with a soft fork in Bitcoin, the rules in the protocol are made stricter and with a hard fork, they are relaxed. This sounds contradictory, but it works like this.

Soft fork

With a soft fork, the rules are tightened: less is allowed than in the previous situation. An example of this is setting the block size of 1 MB in 2011. In the situation for setting the 1 MB block size, there was no limit. By setting the limit, the rules have become ?????stricter?????; blocks larger than 1 MB are no longer accepted by the new nodes. Old nodes that do not upgrade to the new version have no problem with the new situation: the new rules do not conflict with the existing rules. A block of 1 MB “fits” within the rules of the old nodes, so updating is not necessarily necessary. This is a soft fork.

Hard fork

When the rule is changed from 1 MB to 2 MB, the rules are relaxed. In the new situation, more is possible than before. If nodes don’t update, they won’t be able to follow Bitcoin’s new direction: the new 2 MB rule conflicts with the 1 MB size limit they have. This creates a blockchain that applies the old rules, and one that applies the new rules. This is a hard fork.

In the case of a hard fork, it is not always clear which of the two blockchains is the “true”. It may be that the entire community agrees on an upgrade to the protocol. In that case, a hard fork serves as an update to the network: everyone switches over and the old blockchain dies out. When there are disagreements within the community about what the right blockchain is, both blockchains may be supported and continue to grow. In this case we speak of a controversial hard fork.

Risky

There is regular talk about both soft forks and hard forks within the Bitcoin community. Due to compatibility with older versions, a soft fork is less drastic and less dangerous than a hard fork. Making adjustments to the Bitcoin protocol via a soft fork is therefore often preferred. However, both approaches can have detrimental consequences, as we previously wrote about Bitcoin Unlimited’s hard fork and more recently about user-activated-soft-fork . It is therefore important to secure your bitcoins during a soft or hard fork and to temporarily refrain from making any transactions.

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