A fork is what happens when a blockchain splits into two separate blockchains. Forks occur whenever a change is made to the blockchain’s protocol, otherwise thought of as the blockchain’s set of rules. The original blockchain and the new blockchain created from the fork share the same history up until the point where they split.
Yes! There are two types of blockchain forks.
Before I explain the difference between these two blockchain forks, let me explain what backward-compatibility is. Backward-compatibility simply means that the new changes to a system are compatible with the old system prior to the changes. The difference between soft and hard forks sits on this concept - soft forks are backward-compatible, and hard-forks are not.
Soft forks can be thought of as software upgrades. This is when changes are made to the blockchain protocol to bring new functionality and new features to the blockchain network. The outcome of a soft fork is just one blockchain. May be unexpected, but to use the iPhone as an example, think of soft forks as updates to your iOS. The software is updated, but you would still have the same iPhone.
Hard forks are what happen when the changes made to the blockchain protocol are so large that the new version is no longer backward-compatible, meaning, the old version of the blockchain does not recognize the blocks added to the new, forked version of the blockchain. The “future” blocks added to each chain completely deviate. A great example of this is Bitcoin and Bitcoin Cash, or Luna and Luna Classic, which are respectively completely separate cryptocurrencies created by hard forks.
Forking has many benefits, including:
A great example of a blockchain that was forked to reverse malicious transactions from a hack is Ethereum.
In 2016, “The DAO,” which was one of the earliest decentralized autonomous organizations (DAOs) and a venture capital fund, raised more than $150M in Ether. After a few months, $60M worth of Ether was stolen through a hack of The DAO. There was much deliberation on whether to soft fork or to hard fork to recover the stolen funds. The difficult decision in hard forking Ethereum was made - it was the only way to rollback the transactions that stole these funds. The original investors were then able to withdraw their money!
In conclusion, forking is a crucial concept in the world of blockchain. Forking is what allows the community to address update blockchain networks and address issues presented in real-time: whether that means making the blockchain feature set more robust, increasing the security of the system, or reversing old transactions to keep the network alive and its participants happy.
Akhila Raju is a Product Manager at Dune based out of NYC. Previously, she was an engineer at Coinbase, ConsenSys, and Google, and graduated with a Computer Science degree from UC Berkeley.
This article and all the information in it does not constitute financial advice. If you don’t want to invest money or time in Web3, you don’t have to. As always: Do your own research.
