What are blockchain forks? The 2 types of forks in the blockchain are discussed here

What are Blockchain Forks?

Blockchain forks are splits in the network. There is no charge for using this network, as its code has been made open source. The code can be improved and changed by anyone. Blockchain software updates are also made easier by the option to test open-source software.

Misaligned software between different miners often results in forks. To keep using a certain blockchain, miners must choose. A disagreement can result in two versions of a blockchain if there is not a unanimous decision. In the aftermath of such an event, price volatility may increase. 

Two types of Forks:

Soft Fork

Backward-compatible software upgrades are known as soft forks.

As a result, those participants who did not update their software can still validate and verify transactions.

Keeping a soft fork easier is the fact that only the majority of participants need to upgrade the software. No matter how they update, all participants will maintain compatibility with the network and recognize new blocks as soon as they are published.

It should be noted, however, that non-upgraded participants will have their functionality affected. The block size is changing from 1MB (1,00KB) to 800KB in a soft fork.

Incoming new transactions will still be valid for non-upgraded participants. Miners who do not upgrade will have their blocks (and thus efforts) rejected by the network when they try to mine new blocks.

In this regard, soft forks serve as a gradual upgrading mechanism, as those who have yet to upgrade their software are incentivized to do so, or else they will lose functionality.

Hard Fork

In software upgrades, hard forks refer to upgrades that are incompatible with older versions.

Upgrades are needed by all participants to continue participating in and validating new transactions. In addition, those who don’t upgrade will not be able to validate the new transactions. Blockchain has permanently diverged as a result of this separation.

Both chains will exist concurrently as long as there is support for the minority chain – i.e. mining on the chain. Bitcoin Cash and Ethereum Classic are two examples of cryptocurrencies (example)

Forks: how do they work?

Through forks, blockchain protocols are changed. The process of creating new tokens is often associated with them. Creating cryptocurrencies from scratch is the most common way to create new cryptocurrencies. Alternatively, a cryptocurrency blockchain could be forked.

The most common way to create tokens is from scratch. To accomplish this, existing code is copied and pasted into a new token, which is then modified. Creating a blockchain network from scratch requires convincing people to use the new cryptocurrency. The litecoin currency is an example of this method since it started as a bitcoin clone. People were convinced by the changes made to the code, so it has now become a popular cryptocurrency.

Alternatively, blockchains can be forked. Using this method, existing blockchains are modified instead of starting from scratch. A split in the network creates two blockchains. An example of this is Bitcoin Cash. From the original cryptocurrency (bitcoin), new cryptocurrencies (bitcoin cash) were created because of differences of opinion about its future.

Hard Fork vs. Soft Fork

When the existing code on a cryptocurrency platform is changed, both hard forks and soft forks remain in place while a new version is created.

When a soft fork occurs, only one blockchain remains valid until users adopt the update. Hard forks create two separate blockchains that exist side by side, which means that the software must be updated to comply with the new rules. Regardless of the type of fork, a hard fork leads to two separate blockchains, and a soft fork results in one. 

Due to the difference in security between hard and soft forks, most users and developers advocate a hard fork, even if a soft one might be more appropriate. Blockchains require a lot of computing power to update their blocks, but with a hard fork, the public ledger will be more private.

What is the purpose of a hard fork?

Developers may implement a hard fork for a variety of reasons, including the correction of important security vulnerabilities, the addition of new functionality, or the reversal of transactions, such as when the Ethereum blockchain reversed a hack on the Decentralized Autonomous Organization (DAO).

 In response to the hack, Ethereum community members voted almost unanimously to roll back transactions from an anonymous hacker who was siphoning off digital currency worth tens of millions of dollars. The hard fork also enabled holders of DAO tokens to receive their funds back in ether (ETH).

Hard forks did not unravel all of the network’s historical transactions. A smart contract was created solely to transfer all funds associated with the DAO into original owners’ accounts. 

The rate of withdrawal of ETH from DAO holders is approximately 1 ETH to 100 DAO. By providing “failsafe protection” for the DAO, extra tokens and any remaining ether from the hard fork were removed and distributed by DAO curators.