What are blockchain forks? Explaining hard forks vs soft forks

Blockchain technology has helped transform the way we perceive value and data management. But the history of a given blockchain is not always straightforward.

You may have heard of instances of debate like Bitcoin vs Bitcoin Cash or Ethereum vs Ethereum Classic. While they were contentious at the time (and continue to be in some circles) these are important examples of blockchain forks that serve as inflection points in each token's development.

Just like a fork in the road, its Web3 counterpart also represents a divergent path in the network's journey, leading to different future outcomes and possibilities.

But what exactly is a blockchain fork, how do they happen, and what’s the difference between a hard fork and a soft fork? Bring your knife and fork, and let's dig in.

What is a blockchain fork?

A blockchain fork is a divergence in a blockchain's transaction history, leading to the creation of two distinct paths. A fork occurs when consensus rules are altered, resulting in a split between nodes, miners, and users, often facilitating protocol upgrades or resolving disputes.

Forks play a pivotal role in shaping the trajectory of blockchain ecosystems, influencing the evolution and governance of blockchain networks worldwide. They enable upgrades, introduce new features, and address critical issues within the protocol.

Like their utensil namesake, Blockchain forks come in different sizes, each with its own set of characteristics and implications. From hard forks to soft forks, the variations in fork types dictate the direction and magnitude of changes within the network.

The origins of blockchain forks can be traced back to the early days of blockchain technology, where they emerged as a natural consequence of community-driven development and the decentralized nature of blockchain networks. Over time, forks have evolved as a mechanism for protocol upgrades, resolving disputes, and accommodating divergent visions within the cryptocurrency ecosystem.

How do blockchain forks work?

From the role of nodes and miners to the decision-making processes governing implementation, understanding how forks work is crucial for navigating the blockchain landscape.

Technical mechanisms behind forks

Blockchain forks occur due to changes in the underlying protocol, typically initiated through updates to the network's codebase. These changes can stem from various factors such as protocol upgrades, bug fixes, or the introduction of new features. When a portion of the network adopts these changes while others do not, a fork is created. This leads to a new version with divergent paths in the blockchain's transaction history.

Technically, forks can be initiated by altering consensus rules, modifying the block structure, or implementing new blockchain functionalities within the protocol. Nodes within the network must reach a consensus on which chain to follow, leading to the establishment of the dominant chain and the creation of an alternative chain(s) in the case of a split. But more on nodes in a bit.

Process of fork creation

The process of creating a fork generally involves several stages:

1) Identification: Changes or needs to a blockchain network are identified by the community. They could arise from user feedback, security vulnerabilities, scalability concerns, or ideological differences among members.

2) Proposal: Once the need is recognized, developers propose changes to the protocol through code modification or improvement proposals.

3) Review and testing: Following the proposal stage, the changes generally undergo review and testing by the development team and the broader community to ensure compatibility, security, and consensus.

4) Implementation: Upon reaching a consensus on the proposed changes, the fork is scheduled for activation at a predetermined block height or time. After the updated protocol goes live, the result is the divergence of the blockchain into multiple chains, and the creation of separate cryptocurrencies.

Role of nodes and miners

Nodes and miners play crucial roles in the execution and resolution of blockchain forks.

Nodes are responsible for validating transactions and maintaining a copy of the digital ledger, while miners contribute computational power to secure the network and add new blocks to the blockchain.

During a fork, nodes and miners are faced with the decision of which chain to support based on the consensus rules defined by the protocol. Nodes may choose to upgrade to the new version of the blockchain protocol, signaling their acceptance of the changes, while miners decide whether to mine blocks on the original blockchain, the forked chain, or both.

The collective actions of nodes and miners determine the outcome of the fork, with the longest chain typically being recognized as the valid chain by the majority of the network.

However, contentious forks may result in the emergence of competing chains, requiring additional consensus mechanisms or governance processes to resolve the dispute. More on those later.

Consensus and governance in fork decision-making

Consensus and governance mechanisms play a critical role as well. Consensus mechanisms such as Proof-of-Work and Proof-of-Stake determine how nodes and miners agree on the validity of transactions and the ordering of blocks within a blockchain.

Governance frameworks, on the other hand, provide a structured approach for managing protocol changes and resolving disputes within the blockchain community. These frameworks may involve voting mechanisms, governance tokens, or decentralized autonomous organizations (DAOs) to facilitate decision-making and ensure the alignment of stakeholders' interests.

Decisions regarding fork implementation are typically made through transparent and inclusive processes, involving input from developers, miners, node operators, investors, and other stakeholders. Governance mechanisms can help establish legitimacy, transparency, and accountability in the decision-making process, attempting to create trust and consensus within the community.

Hard forks vs soft forks: What's the difference?

From hard forks with irreversible changes to soft forks introducing backward-compatible updates, the two main types of blockchain forks offer unique advantages and challenges.

Differences between hard forks and soft forks

Selecting between a hard or soft fork often depends on whether backward compatibility is possible and the level of community consensus. The primary differences between hard forks and soft forks can be summarized using the following table:

Hard fork

A hard fork represents significant and irreversible changes to a blockchain protocol, resulting in the permanent divergence from the original blockchain.

They require all participants to upgrade their software to continue participating in the network, as nodes and miners enforcing the new rules will reject blocks that do not adhere to the updated protocol. Usually, a hard fork creates substantial changes, such as modifications to consensus algorithms, block size limits, or governance structures.

Notable examples of hard forks include Bitcoin Cash, which split from Bitcoin to increase block size, and Ethereum Classic, which diverged from Ethereum following the DAO hack to maintain the original blockchain's integrity.

How do hard forks work?

Hard forks involve fundamental changes to the blockchain’s underlying protocol:

Non-backward compatibility: Hard forks introduce changes that are not compatible with the previous version of the blockchain. This means that nodes running the old software cannot validate blocks created by nodes running the new software, leading to a split in the blockchain network.

• Permanent split: When a hard fork occurs, the blockchain is divided into two separate chains. One chain follows the old rules, and the other follows the new rules. This split is permanent, and each chain operates independently from the other.
• Consensus requirement: For a hard fork to be successful, it typically requires a broad consensus within the community. However, because it is a radical change, it often leads to disagreements and can result in a faction of the community choosing to stick with the old version, thereby creating two distinct blockchains.
• Upgrade necessity: All participants who wish to follow the new protocol must upgrade their software. This includes miners, nodes, and cryptocurrency wallets. Failure to upgrade will result in these participants remaining on the old chain, which can lead to confusion and fragmentation within the community.

Accidental hard forks

Accidental hard forks occur when different versions of the software produce blocks that are not recognized by other versions. These types of forks are unintended and often arise from inconsistencies or bugs in the codebase.

Resolution of accidental hard forks

It is best if accidental hard forks are identified and resolved quickly. When they occur, like with Ethereum in 2020, network participants work to identify the cause of the fork and coordinate to ensure all nodes operate on the same version of the protocol. This usually involves rolling back to a common point before the fork and revalidating subsequent blocks to ensure consistency.

Soft fork

Soft forks are backward-compatible changes to a blockchain protocol that do not require all participants to upgrade their software.

Instead, these forks tighten consensus rules, making previously valid transactions or blocks invalid according to the updated protocol. Soft forks are typically implemented through changes that restrict or redefine existing functionalities, allowing upgraded blockchain nodes to enforce the new rules while non-upgraded nodes remain compatible with the network.

They are generally less disruptive than hard forks and can be deployed more seamlessly, as they do not necessitate a unanimous upgrade by all network participants.

Examples of soft forks include the implementation of Segregated Witness (SegWit) in Bitcoin, which introduced transaction malleability fixes and increased block capacity without requiring a hard fork, and the introduction of BIP66 to enforce strict DER encoding rules for signatures.

How soft forks work

Soft forks function by introducing changes that do not break the existing rules, but rather strengthen them. Here are the key characteristics of how soft forks operate:

• Backward compatibility: One of the defining features of a soft fork is its backward compatibility. This means that even nodes that have not upgraded to the new protocol can still participate in the network and recognize new blocks as valid. The old rules continue to apply, ensuring that the network remains unified.
• Tightening rules: Soft forks typically involve changes that impose stricter rules on the blockchain. For example, they might reduce the block size limit or introduce new validation criteria for transactions. These stricter rules ensure that new blocks remain compatible with the old protocol.
• Majority consensus: For a soft blockchain fork to be successfully implemented, it requires majority consensus among the network participants. Usually, this means that a significant portion of miners must adopt the new rules. Once the majority of the network enforces the new rules, the rest of the network will naturally follow suit, as they recognize the majority chain as the valid one.
• No network split: Unlike hard forks, soft forks do not result in a split of the blockchain into two separate chains. Because the new rules are backward compatible, the blockchain remains a single entity, and all participants continue to work on the same chain.

Other types of blockchain forks

Planned vs. Contentious forks

Planned forks

These are deliberate and coordinated events initiated by developers or community consensus to implement scheduled upgrades or introduce new features to the blockchain protocol. As the name suggests, they are typically well-organized, with clear communication and broad support from stakeholders. Examples include protocol upgrades like Ethereum's Istanbul and Berlin hard forks, aimed at enhancing network scalability and functionality.

Contentious forks

This type of fork arises from disagreements within the blockchain community regarding proposed changes to the protocol, resulting in a split in the network. These forks often stem from ideological differences, governance disputes, or conflicting visions for the blockchain's future.

Contentious forks can lead to the creation of competing chains, each supported by factions advocating for divergent approaches. Notable examples include the Bitcoin Cash hard fork, which occurred due to differing opinions on block size limits and scalability solutions, resulting in the formation of separate Bitcoin Cash (BCH) and Bitcoin SV (BSV) chains.

Temporary vs. Permanent forks

Temporary forks

Sometimes called chain reorganizations, temporary forks occur when multiple valid blocks are mined simultaneously, causing a temporary divergence in the blockchain's history. However, these forks are typically short-lived, as the network eventually converges on the longest chain, which is considered the valid chain.

Temporary forks may result from network latency, mining competition, or propagation delays and do not typically require manual intervention to resolve. Blockchain networks employ consensus mechanisms like Proof-of-Work to mitigate the occurrence and impact of temporary forks.

Permanent forks

These represent enduring splits in the blockchain network, resulting from irreconcilable differences in consensus rules or protocol implementations. Unlike temporary forks, permanent forks lead to the establishment of separate and distinct chains, each with its own transaction history and community of users.

These can be intentional forks, such as a hard fork aimed at introducing fundamental protocol changes, or an unintentional permanent fork, arising from critical vulnerabilities or irreparable consensus failures. Examples of permanent forks include Ethereum Classic, which resulted from the Ethereum network's response to the DAO hack, and Bitcoin Cash, a contentious hard fork of Bitcoin aimed at increasing block size limits.

Advantages of blockchain forks

Despite their disruptive nature, blockchain forks offer several benefits that contribute to the growth and resilience of their networks.

Upgrades and enhancements

Forks can serve as catalysts for innovation, enabling the implementation of new features and functionalities that enhance the user experience and expand the capabilities of blockchain networks.

Security improvements

By addressing vulnerabilities and strengthening network defenses, forks can help bolster the security posture of blockchain ecosystems, mitigating risks associated with malicious attacks and exploitation.

Addressing disagreements

Forks provide a mechanism for resolving ideological differences and technical disputes within the blockchain community, in the name of collaboration and consensus-building among stakeholders.

Responding to hacks

In the event of security breaches or protocol vulnerabilities, forks might offer a means of remediation and recovery, allowing blockchain networks to adapt and evolve in response to emerging threats.

Risks associated with forks

While forks offer numerous benefits, they also introduce risks and challenges that can impact network stability, user confidence, and regulatory compliance. Understanding these potential drawbacks is essential for navigating the complexities of fork events.

Splits and fragmentation

One of the primary risks associated with forks is the potential for network splits, resulting in fragmented ecosystems and diminished network effects. A network split reduces combined developer talent and liquidity, sometimes causing both chains to compete for resources.

Security risks

Forks may inadvertently introduce security vulnerabilities or new bugs, weakening network defenses and potentially exposing users to financial losses, reputational damage, or network attacks.

Adoption issues

Complex fork events can potentially confuse users and stakeholders, leading to uncertainty and hesitation regarding network participation and inhibiting adoption.

Regulatory and legal implications

Regulatory scrutiny and legal uncertainty surrounding fork events can impede innovation and investment in blockchain technologies, hindering ecosystem growth and development. Forked assets can create confusion for tax authorities or regulators, and inconsistent guidance may make compliance challenging for projects and users.

Notable forks examples

Bitcoin vs Bitcoin Cash (Hard fork)

In 2017, the Bitcoin community experienced a significant split due to disagreements over scalability solutions. One group wanted to increase the block size limit, while the other preferred to implement SegWit. This disagreement led to a hard fork and the creation of Bitcoin Cash, a new cryptocurrency designed for daily transactions with a larger block size limit.

Today, there is now the original Bitcoin blockchain for BTC and the newer Bitcoin Cash blockchain for BCH.

Ethereum vs Ethereum Classic (Hard fork)

The Ethereum network underwent a hard fork in 2016 after a major hack exploited a vulnerability in The DAO, a decentralized autonomous organization. To reverse the effects of the hack, the Ethereum community decided to implement a hard fork, creating two separate chains: Ethereum (ETH) and Ethereum Classic (ETC).

SegWit (Soft fork)

Segregated Witness (SegWit) was a soft fork implemented in the Bitcoin network in 2017. SegWit aimed to solve transaction malleability and improve scalability by separating the transaction signature from the transaction data. This change was backward-compatible, allowing non-upgraded nodes to continue operating without causing a split.

BIP-66 (Soft fork)

Bitcoin Improvement Proposal 66 (BIP-66) introduced strict DER (Distinguished Encoding Rules) encoding for signatures. This soft fork tightened the rules for signature validation, ensuring greater consistency and security in the verification process.

Monero (Hard fork)

Monero has undergone several hard forks to enhance its privacy features and maintain ASIC resistance. These forks reflect the community’s commitment to improving the cryptocurrency’s security and privacy while ensuring it remains accessible to a wide range of miners.

P2SH (Pay-to-Script-Hash) (Soft fork)

The Pay-to-Script-Hash (P2SH) soft fork in Bitcoin allowed users to send transactions to a script hash rather than a direct public key hash. This added flexibility in creating complex transaction scripts without breaking compatibility with the existing protocol.

How to navigate an upcoming blockchain fork

Navigating an upcoming fork requires vigilance, preparation, and an understanding of best practices, to help mitigate risks and safeguard assets.

Best practices for users and developers

1. Stay informed: Users can follow reputable sources like cryptocurrency news sites, official project announcements, developer forums, and social media channels to monitor pre- and post-fork updates, including software patches, community initiatives, and regulatory developments.
2. Verify sources: Verify the legitimacy of fork-related information and instructions before taking any actions, such as claiming or trading forked assets. This may help to protect assets during and after a fork, as well as avoid falling victim to phishing attacks and other scams.
3. Conduct due diligence: Research the proposed changes and implications of the upcoming split to assess its potential impact on your operations or cryptocurrency stake.
4. Backup your assets: Ensure that you have secure backups of your private keys to prevent unauthorized access or loss of funds. Prior to the fork, confirm you have access to a trusted wallet/exchange that will support the forked assets.
5. Test before committing: If you're a developer, test the forked software in a controlled environment to identify any compatibility issues or unforeseen challenges.

Blockchain fork FAQs

1) What is the difference between a hard fork and a soft fork?

In a hard fork, the blockchain protocol undergoes a significant and irreversible change, resulting in a permanent divergence from the original chain. A soft fork, on the other hand, introduces backward-compatible changes to the protocol, allowing both upgraded and non-upgraded nodes to coexist on the same network.

2) What happens to my coins during a blockchain hard fork?

If you hold your coins in a wallet where you control the private keys at the time of the fork, you typically receive coins on both the original chain and the new chain created by the hard fork. Depending on the specific split, instructions for claiming the new cryptocurrency assets may vary. Users should research and follow the official guidelines provided by the project team to ensure a secure and successful asset claim process.

3) How do developers decide to implement a fork?

Developers may decide to implement a fork for various reasons, including software protocol upgrades, consensus rule changes, addressing security vulnerabilities, or resolving contentious issues within the community. Fork decisions typically involve consensus-building among stakeholders, with proposals undergoing rigorous evaluation and testing before implementation.

4) Can you refuse to upgrade after a hard fork?

If you disagree with a proposed fork, you can express your dissent through community forums, social media channels, or governance/voting mechanisms established by the project team. Engaging in constructive dialogue and presenting alternative viewpoints can help positively influence the decision-making process and shape the future direction of the project.

5) Are hard forks reversible?

Once completed and adopted by enough of the network, hard forks are generally irreversible. If a hard fork causes severe issues or controversy, community coordination is needed for any attempt to “roll back” or rejoin the chains.

6) Can forks cause security risks?

To better protect yourself from scams and phishing attempts during a fork, exercise caution and follow best security practices. Be wary of unsolicited messages or emails claiming to provide instructions, and only interact with trusted sources of information, such as official project websites and communication channels. Additionally, always use secure wallets—preferably a hardware wallet—and avoid sharing sensitive information, such as private keys or passwords.

Access forked cryptocurrency today

Want to compare forked cryptocurrencies in action? Track the price, usage, or developer activity of both the original and forked chains (like BTC vs BCH, ETH vs ETC) on block explorers or crypto analytics sites like MoonPay's Cryptocurrency Price pages.

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