What Is a Fork?

A fork occurs when a blockchain diverges into two separate paths. This can happen due to changes in the software that runs the blockchain or disagreements among network participants about the direction the blockchain should take.

Types of Forks:

1. Soft Fork

Definition: A soft fork is a backward-compatible update to the blockchain's software protocol. It allows nodes that haven't updated to the new version to still interact with the network, but they might be restricted from accessing certain new features.

How It Works: In a soft fork, the new rules are a stricter version of the old rules. For example, if the old rule allowed block sizes of up to 1MB, a soft fork might reduce this limit to 0.5MB. Nodes following the new rules will accept blocks up to 0.5MB, while nodes following the old rules will accept blocks up to 1MB.

Consensus: As long as the majority of the network updates to the new version, the network remains unified, with both updated and non-updated nodes continuing to operate on the same blockchain.

Example: Bitcoin implemented a soft fork to introduce Segregated Witness (SegWit), which changed how transaction data is stored, allowing for more transactions per block without increasing the block size.

2. Hard Fork

Definition: A hard fork is a significant and non-backward-compatible update to the blockchain's software protocol. This type of fork creates a permanent divergence in the blockchain, leading to two separate blockchains that no longer interact with each other.

How It Works: In a hard fork, the new rules are not compatible with the old rules. For instance, if the original blockchain allowed block sizes up to 1MB, a hard fork might increase the block size limit to 2MB. Nodes that adopt the new rules will follow the new blockchain, while nodes that continue using the old rules will remain on the original blockchain.

New Blockchain: After a hard fork, two blockchains coexist—each with its own history and rules. Often, this results in the creation of a new cryptocurrency on the forked chain.

Example: Bitcoin Cash is a well-known example of a hard fork from Bitcoin. The fork occurred due to a disagreement within the Bitcoin community about increasing the block size to handle more transactions. Bitcoin Cash was created with a larger block size, while Bitcoin continued with the original block size.

Why Do Forks Happen?

• Protocol Upgrades: Developers might want to introduce new features, improve security, or fix bugs in the blockchain protocol. These changes might require a fork to implement.
  Example: The introduction of SegWit in Bitcoin was a protocol upgrade implemented via a soft fork.
• Disagreements in the Community: Sometimes, the community of developers, miners, and users can't agree on the direction the blockchain should take. These disagreements can lead to a hard fork.
  Example: The Ethereum community experienced a hard fork after a debate over how to handle a significant hack. The original blockchain continued as Ethereum Classic, while the new blockchain, which reversed the hack, became the current Ethereum.
• Bug Fixes: If a critical bug is discovered in the blockchain's protocol, a fork might be necessary to implement a fix. Depending on the nature of the fix, this could be either a soft or hard fork.
  Example: A hard fork might be needed to fix a security vulnerability that could compromise the entire network if not addressed.