What are Bitcoin Hard and Soft Forks?
Bitcoin forks are essentially software updates to the underlying code that governs the Bitcoin network. These forks can be categorized into two main types: soft forks and hard forks, with the key difference lying in their compatibility with older versions of the software.
In this article, we elaborate on the differences between hard and soft forks, take a quick trip back into Bitcoin’s history of forks, and how these have changed the network forever.
What is a soft fork?
A soft fork is a minor upgrade in a blockchain. Nodes (computers that validate transactions) running older software versions can still understand and accept blocks and transactions created under the new rules. This allows for a smoother transition as users can gradually upgrade their software without causing disruption to the network.
Some notable soft forks include:
- Segregated Witness (SegWit): Implemented in 2017 to improve scalability by separating transaction signatures.
- Taproot: Implemented in November 2021, it enhances privacy and smart contract functionality
What is a hard fork?
A hard fork, on the other hand, is a major change, and creates a permanent divergence in the blockchain. Nodes using older software will no longer recognize blocks created under the new rules. This can lead to a split in the network, resulting in two separate blockchains and potentially two new cryptocurrencies.
A well-known example of a hard fork is the 2017 creation of Bitcoin Cash (BCH), which arose from disagreements about how to scale the Bitcoin network. BCH is by far the most successful hard fork, with a market cap of over $7 billion at time of writing.
How many times has Bitcoin forked?
It’s hard to arrive at a definitive number as to the number of times Bitcoin has forked, because some sources consider any deviation from the main blockchain protocol a fork, including minor tweaks. This definition could result in well over 100 forks throughout Bitcoin’s history.
Others focus on more substantial changes, particularly hard forks that create entirely new cryptocurrencies. By this definition, the number is significantly lower, likely around 4–6 major forks, which have resulted in cryptos such as Bitcoin Cash (BCH) as mentioned earlier and Bitcoin SV (BSV).
Will Bitcoin fork again?
The possibility of Bitcoin forking again is a topic of ongoing discussion within the cryptocurrency community (as is the topic of Bitcoin ossification, which is the process by which Bitcoin’s protocol becomes increasingly resistant to change as the network matures.) Here are some key points to consider:
- Probability of forks: According to a study by Decker and Wattenhofer, the probability of forks occurring in the Bitcoin blockchain can be estimated mathematically. They found that the probability of having a fork in Bitcoin is approximately 1.78% per block, with the likelihood of longer forks (e.g., six blocks) being extremely low.
- Network conditions: Forks can occur due to various network conditions, such as delays in block propagation or differing consensus among miners. For instance, the probability of a fork increases if some nodes are unaware of the latest block due to network delays.
- Future forks: There are discussions about the need for future forks to address ongoing issues within the Bitcoin network, such as scalability, transaction fees, and miner incentives. Factors like halving events, which reduce miners’ rewards, and Bitcoin’s inherent volatility are cited as potential reasons for initiating new forks to explore solutions to these problems.
In summary, while the probability of spontaneous forks in the Bitcoin blockchain is relatively low, the community may still initiate planned forks to address specific issues or introduce new features.
