Soft forks vs Hard forks

Not all changes in code require a fork, while changes in fundamental rules will inevitably lead to one.

There are two types of forks: soft forks and hard forks. 

What is a soft fork?

A Soft Fork is a code change that doesn’t break the rules of the old version – meaning both the older and newer versions of the software can still recognise and “talk” to each other, running together in the same network without a split.

One such example was the implementation of an improvement called Segwit on Bitcoin. This change optimised transactions without violating the rules that limited the maximum size of each block in the blockchain. 

What is a hard fork?

A hard fork, on the other hand, introduces changes that are incompatible with the previous version. It happens when agreement cannot be reached to implement a change or when a bug has been discovered that necessitates it – Ethereum is a good example..

Anyone running the old software will be unable to remain in the same network, as the new rules won’t be recognised by their version. This doesn’t mean the network will stop working; it just means that from that point onwards, there will be two parallel networks: one following the old rules, and one with the updated software.

This effectively splits one network into two, like a fork in the road. And then it’s up to that cryptocurrency’s ecosystem of participants (miners, holders, exchanges, stakers) to decide which path to follow.

What happens next depends on the community and on why the hard fork happened in the first place.