ViaBTC | Differences Between the Soft Fork and the Hard Fork of Bitcoin
It has been 14 years since Bitcoin was created in a paper in 2008. Though this process may seem easy, Bitcoin has gone through plenty of challenges. The original design of Bitcoin by Satoshi Nakamoto, the founder of this cryptocurrency, is only suited for a minority of people. Yet, as the number of Bitcoin users continues to grow, many problems have been revealed, including insufficient block capacity and the overconcentrated hashing power. These problems triggered the appearance of two solutions: soft fork and hard fork.
How do they work? What are their differences?
To begin with, a soft fork, which is a gentle approach, performs optimization in the original Bitcoin network to expand its block capacity to 2M, 4M, 8M, or even greater. Mainstream soft-fork solutions include SegWit and the Lightning Network. Simply put, a soft fork is like building a side road to ease the traffic jam on the main road.
Such mild forks (e.g. the Taproot upgrade last November) allow the original Bitcoin network to be compatible with the network created by the fork, and the transactions after the fork are still recorded on the original main chain.
In comparison, a hard fork, which is much more “violent”, develops a new chain based on the original network while completely changing the block height through coding. To put it bluntly, a hard fork is like building an overpass on top of a congested main road. Moreover, new vehicles are demanded to use the overpass while the old ones will follow the original course.
The blockchain created from a hard fork will no longer be compatible with the original network, which requires the support of all users in the Bitcoin network. If some of them do not support the decision, then there will be two versions of the blockchain, which will generate “two bitcoins”.
For example, during the first major BTC fork that took place in August 2017, BCH miners started to implement the hard fork at the block height of 478558. Six hours later, ViaBTC Pool mined the first BCH block ever, which signaled the official inception of Bitcoin Cash.
At first, the division between BCH and BTC also stems from the insufficient block size of the latter. Along with the continued growth of the number of Bitcoin users and the transaction volume, the Bitcoin network, where the maximum block size was set at 1MB, started to face network congestion. Back in 2015, Gavin Andresen, one of the Bitcoin Core developers, proposed that the block limit should be expanded. However, his proposal was not supported by other Bitcoin Core members, who felt that the solution was not consistent with Bitcoin’s positioning.
Since then, the Bitcoin community became divided. On the one side of the argument were advocates for big blocks like Bitcoin ABC who championed the scaling of the network; on the other side were proponents of small blocks led by Bitcoin Core. As their disagreement heated up, the two met in Hong Kong in 2016 to state their views and address the disagreement between developers. It was finally agreed that the Segwit proposal will be implemented first before expanding the block capacity to 2MB through a hard fork.
However, as the BTC price reached new highs, the crypto market became more popular than ever, which further congested Bitcoin transactions. Faced with Bitcoin Core’s reluctance to go with the 2MB expansion under the Hong Kong consensus, Bitcoin ABC eventually decided to develop its own client system that will scale BTC to 8MB and start running on August 1, 2017. This led to the first major hard fork in the history of Bitcoin and the birth of a new cryptocurrency called BCH, which now ranks 28th among all cryptos in terms of total market cap.
Both soft forks and hard forks face defects. A soft fork only cures the symptoms but not the root causes — the approach merely alleviates network congestion for a limited period, while continued scaling & upgrading is still required in the future. On the other hand, a hard fork constitutes the permanent separation from the previous version of the blockchain. The new chain will compete with the old chain, which will lead to drastic price fluctuations. For example, though there used to be dozens of cryptos born from BTC forks, only BCH is noted for its high consensus, and most of the others leveled out at $0 a long time ago.
