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Crypto Mining Protocols: Understanding the Importance of Hard Forks and Soft Forks in Crypto | Benefits & Risks

Crypto Mining Protocols: Understanding the Importance of Hard Forks and Soft Forks in Crypto | Benefits & Risks image

If you are interested in knowing Blockchain and Cryptocurrencies, you should also be familiar with the terms related to it for you to have a better understanding. There are a lot of familiar and unfamiliar terms that are related to cryptocurrency such as algorithm, dumping, Ethereum and more. But in this article, we will talk about a term that is important for you to know: “fork” or “forking”.

 

Forking or fork is a programming term that refers to a software upgrade or update. It is just a little complicated to understand because it is different from the usual “upgrade”. It implies a permanent or temporary divergence in the blockchain. A fork may be used to test a certain process. In the Blockchain technology, a fork is used in implementing a change.

 

Types of Forks

Hard Fork

In blockchain technology, a hard fork is a change in software protocol which makes invalid blocks to be valid and vice-versa. Since there would be a change in protocol, it will show the older versions as invalid. That means that any transactions made on the new chain will not be valid on the old one. Because of its permanent divergence, all nodes (or the replicas of ledgers which people rely on to keep track of cryptocurrency transactions that have occurred on the blockchain) of the protocol software should be upgraded to the latest version available.

 

One good example of a hard fork is what happened to Bitcoin. When Bitcoin started to become more of a store of value than an actual usable currency, it leads into a division in the Bitcoin community. Other portion of the community wanted Bitcoin to remain as it is while the other half feels the need for Bitcoin to evolve to make it better than any other decentralized currency.


Soft Fork

On the other hand, soft fork, unlike hard fork, can still work with the older version. It is the change in software protocol wherein only the previously valid blocks are the ones made invalid. The existing nodes need not be upgraded or need not accept a new protocol to see new blocks as valid. This means that the new forked chain will follow the new rules and will also honor the old rules. The old rules will then be followed by the original ones.

 

It is also notable that soft forks do not carry the double-spend risk that plagues hard forks since merchants and users running old nodes will read both new and old version blocks.

 

Final Thought

Knowing all these facts about the soft fork and hard fork, it would be easier for the cryptocurrency and blockchain investors or even the developers to understand how forking works. Just knowing the basics is very important in knowing which fork will give as advantages.  As it is always stated, the world of cryptocurrency has no other way but to evolve and forking as a fundamental issue will surely evolve with it. And that is why it is better to know how it works, ahead of time.

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