9 Differences Between a Crypto Hard Fork and Soft Fork

What are the differences between a crypto hard fork and soft fork? When a coin update is released on the blockchain and the old version is able to interact with the new version in spite of the new features included, it is called a soft fork.

On the other hand, a hard fork is just the opposite and typically runs on an entirely different blockchain.

However, that is not the only difference between a hard fork and a soft fork. This article deals with the other major differences between them to help you understand things in a much better way.

The blockchain developers add new features and functionalities to the newly released coin in order to better its performance and utility.

However, it is important to know about the hard fork and soft fork so that you know when and why you need to upgrade a network, if at all, so that you are not left on a separate blockchain entirely.

9 Differences Between a Crypto Hard Fork and Soft Fork

Differences Between a Crypto Hard Fork and Soft Fork

A crypto coin or a blockchain can be upgraded either with a soft fork or a hard fork.

Both these forks serve different purposes, which however is not the subject matter of this article.

Conforming to the title of this article, here are the few major differences between a hard fork and a soft fork for you to understand.

1. Acceptance

Soft forks are implemented when there are some small changes needed to be made on the network and applied on the blockchain.

Usually, these minor changes do not create any confusion among the users and most of them are in agreement with these changes and corroborate with the ideas of the developers to accept these changes readily.

In comparison, hard forks involve making major changes within the network which, more often than not, results in a new crypto coin altogether. Also, sometimes, these hard forks can be controversial.

The primary reason behind this is that the developers typically try to present totally different ideas through these changes.

How these hard forks will be accepted and used mainly depends on how others see these changes. Those who are in disagreement can carry on using the network as is.

2. Primary Difference

The primary difference between a hard fork and a soft fork is that a soft fork is an upgrade of the blockchain which is backward compatible.

In comparison, a hard fork is not backward compatible which means that there is no going back once a hard fork is implemented and utilized.

3. Accessibility

Related to the compatibility factor of a hard fork and a soft fork, you will need to upgrade to the new version of the hard fork in order to join the blockchain or you will be left out.

You will not be able to access the new features included in the coin or interact with the users using the new system in any way.

As for the soft fork, you will not need such an upgrade because these forks are backward compatible. This means that both the versions of the coin, new and old, can communicate with one another.

4. New Networks

Since hard forks are not backward compatible, the new rules created on the node typically conflict with the old rules.

This means that the new rules can interact with only those that are operating in the new version. This results in the splitting of the blockchain creating an entirely new and a completely separate network.

On the other hand, in the case of a soft fork, there is no conflict between the new and the old versions of the network.

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This means that both these versions will function on the same blockchain and continue to support making transactions and propagating new blocks.

5. Safety Aspect

One of the most significant differences between a hard fork and a soft fork is that the soft forks are considered to be a safer alternative than the hard forks when it comes to upgrading the software behind a crypto coin or blockchain.

In this process, the nodes are not required to be upgraded to the newer version in order to ensure the validity of the chain.

This is because, while creating soft forks, the new features are implemented at the programming level itself. It is much akin to upgrading the basic operating system of a computer or a mobile phone.

On the other hand, as for a hard fork, it is actually a complete upgrade of the blockchain which is similar to a complete change made in the operating system to make it new. There is nothing that can coexist in this scenario.

6. Users’ Choice

Since in a hard fork, an entirely new blockchain is created, the users need to make a choice between two.

It is up to them as to which particular network they want to continue using and do the necessary updating. However, in such a situation, every user needs to upgrade at once.

However, in comparison, in a soft fork, both the old and new nodes coexist, and therefore the users do not need to choose or update a network and still participate in transaction verification.

Most of the time, the users are typically ignorant about such updates and continue using the old network and crypto coin as usual.

7. Effects

A hard fork will have a significant effect on the performance and functionality of the coin or blockchain. If the users of a few nodes do not upgrade with the users who already have who are participating in a Bitcoin network, it can have two significant effects.

One, it will result in the failure in the basic validation checks of the incoming new block or transactions in the old node software. This means that these bocks or transactions will be rejected automatically from that node.

Two, the new blocks or transactions outgoing from the old node will also fail to pass the basic validations checks and therefore will be rejected automatically by the new nodes.

In contrast, the soft forks will not have such a notable effect on the functionality and performance of the blockchain or the coin even after the activation of the software.

8. Types

A soft fork that allows all users to participate in a network without needing any updating of the nodes is available in two types.

A few examples of soft forks are Bitcoin Segwit created on transaction signatures of Bitcoin, Bitcoin Improvement Proposal 66 created on signature validation of Bitcoin, and Pay to Script Hash or P2SH that lowers the transaction fees while sending crypto.

On the other hand, a hard fork that restricts the communication between the new and old nodes if not updated also results in two different types of blockchain.

A few examples of hard forks are Segwit 2x contentious hard fork which was designed to double the size of the block limit but failed, Bitcoin Cash contentious hard fork that enhanced the size of the block from 1 MB to 8 MB to allow making more transactions at low fees, and Monero planned hard fork that included the RCT or the Ring Confidential Transaction feature to improve the security and privacy of the entire network.

9. Preferred by

Most of the miners and merchants prefer hard forks simply because it involves less risk while mining or validating a block that is invalid.

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On the other hand, soft forks are preferred by those users who want a much quicker result to software upgrades within the blockchain in spite of their inherent risks.

This is because it will need a lot less computational resources. Apart from that, soft forks are also preferred by them because it allows them to implement the new rules without causing a split in the community.

Which is Better – Crypto Hard Fork and Soft Fork?

Typically, it is difficult to say which among a hard fork and a soft fork is better to upgrade the blockchain networks because a major section of the blockchain and crypto community itself disagrees over this aspect.

Ideally, a hard fork is a permanent divergence and a soft fork temporary divergence on the blockchain.

Moreover, both these types of forks come with their characteristic strengths and weaknesses. These are basically the features that the crypto community is concerned about more and that is the reason they are split.

A hard fork is typically a change made in the Bitcoin protocol. This will allow even those transactions that were considered to be invalid previously.

However, these are typically frowned upon, much unlike the soft forks, since these are allowed typically by the Bitcoin community and that too under specific conditions.

There is one significant issue with the hard forks, which is primarily due to the fact that the Bitcoin network is typically decentralized.

This means that the miners can validate each transaction independently and include them in the blocks to make the blockchain through consensus.

However, the logic behind determining the validity of a transaction is usually controlled by the Bitcoin software which the miners can download to run on their systems.

Since the network is decentralized, it cannot be said for sure that everyone is running the same new version and there is no dedicated central authority to push the users to update the software.

This means that those users who have not updated their software to the latest version can reject the transaction easily that are now valid actually.

Since there is no middle ground in hard forks as there is in soft forks, many crypto experts argue that this can be dangerous for the network because it will split the hashing power of it.

This, in turn, will lower the security as well as the capacity of processing by the network overall.

As for the soft forks, these are considered to be a gentler option but come with their own risks.

One of the most significant risks of the soft forks is that they can be used easily by the bad actors to swindle the miners and full-node users so that they validate even those blocks that breach the set rules of the blockchain.

Since the full node users are responsible for the ‘audit’ of the blockchain they need to maintain a full copy of the blockchain always in order to ensure that every new block added to the blockchain is compliant with the old rules of it.

However, if a group of users on the network is able to create a new rule that the full node users are not aware of, it can compromise the security of the entire network.

This will also hinder reinforcing the major economic policies such as the inflation formula of Bitcoin and the prevention of double-spending.

Apart from that, it will also start validating the blocks that are invalid which will eventually result in a complete collapse of the entire system.

It is for this reason that the blockchain makes all soft forks public in order to mitigate these particular risks.

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As said earlier, there are two specific types of hard forks and soft forks available. One of the soft forks is the MASF or the Miner Activated Soft Fork.

This soft fork provides the miners with a choice to accept the new update or reject it. If they do, they can activate it by using their hash power and then make the changes in the bit number of blocks that are mined.

If a specific number of mined blocks are reached with the new bit number version, the whole node can then enforce these new consensus rules.

The other type of soft fork is the User Activated Soft Fork or UASF. In this type the users or the nodes can activate it at a particular time and the changes are made according to the date and time set.

The new consensus rules are implemented at all nodes and all of those transactions and blocks that do not follow these rules are summarily rejected.

In this type of soft fork, the miners may or may not apply the new update and the users can accept their work or reject it.

However, this also increases the risks of the miners losing the resources they need to find a block.

As for the two types of hard forks, one is the planned hard fork which is typically a programmed software upgrade of a protocol.

This prearranged upgrade is made clear by the developers already to the users and stakeholders who can now reach a higher degree of consensus before the fork occurs.

The other type is the contentious hard fork. This occurs when there is a disagreement between the stakeholders of a project.

Few of them believe that there is no need for making such changes while the others believe that the changes will surely result in some improvements in the network.

Basically, the planned hard fork provides freedom to the users to amend the software when all agree to it and the contentious hard forks normally divide the community.

There is a lot of significance of these hard and soft forks irrespective of their types, though there are lots that need to be done to ensure a smoother transition of blockchain after updating. These are:

  • These forks allow improvements on the decentralized world of cryptocurrencies and make the blockchain more innovative.
  • The forks allow the community to take the responsibility of implementing the necessary changes, which is good since there is no central authority in charge of anything.
  • The forks also allow the crypto industry on the whole to grow and adapt to newer and better mechanisms staying within its decentralized nature.

Both hard forks and soft forks are important to ensure the success of the blockchain in the long term and prevent sticking to the same rules for the entire lifetime of a protocol.

Without these forks, the crypto industry would have needed a centralized system with full control over it.

Conclusion

Both hard forks and soft forks are pretty useful though they result in a split in the blockchain. Now that you know the differences between them and their worth through this article, there should not be any more doubts in your mind.