If you want to invest in the world of cryptocurrencies, there are two terms you need to know: soft fork and hard fork. They appear frequently in this medium and comprise forks. But what does this mean in practice in the world of bitcoins (BTC’s)?
Basically, a fork is when there is a division in the block chain, the blockchain. This separation can be an update or a change. In either case, it is necessary to understand how transactions are carried out on the network and how they are interconnected. That is why we will explain this subject better. So, understand Bitcoin's hard fork and soft fork from now on. Come on?
What is the fork?
You should already know that the functioning and operation of this chain on the Bitcoin network depends on three agents:
1. Users: carry out cryptocurrency operations by miners;
2. Miners: are computers or agents that validate transactions and insert them in a block which will later be validated;
3. Nodes: comprise machines that scan and store new blocks in order to attach them to the chain which is decentralized and is constantly being updated.
In this process, the node only accepts a block if the operations are valid and there is no duplication. In addition, each of the nodes has specific information, which need not be constantly the same. These nodes that contain new blocks are in a kind of competition in favor of forming a new blockchain. The moment it finds a larger chain in another node, someone automatically downloaded it, adds a new grouping and can propagate the behavior among other nodes of the Bitcoin system network, for example.
This is where a soft fork or hard fork can arise. It shows that there are two different names that wish to add to the validations of the same chain. It can resolve the issue is derived from two specific situations: temporary inconsistencies between the versions of the block chain; function changes in the platform's development.
Convergence usually solves the problem, always with the addition of more blocks to one branch of the fork. The largest chain wins.
Soft fork vs. Hard fork: what do they mean?
We will explain to you what this can happen with Bitcoin (and other cryptocurrencies). The previous explanation focused on what happens in practice if the need for a fork arises. This bifurcation appears when there is a change to the consensus rules of the Blockchain network. However, what are the characteristics of each of these modalities? We list below. Check out!
Hard vs. Soft Fork
The soft fork refers to the modifications that restrict the guidelines applied by the nodes. Here, there is compatibility with older versions. An example is the modification of the block size, from 1Mb to 0.75Mb. This is a stricter rule. Thus, blocks mined by 0.75Mb nodes are accepted by those using the previous standard.
Miners need to update the platform, but users continue to work normally. The hard fork is a modification that reduces the restriction of the applied guidelines. The rules which make a block previously considered invalid to become active. Stay with us and understand once and for all what a soft and hard fork.
This is the case of a 1Mb block, which had its size changed to 2Mb. In this context, nodes that are still out of date do not accept blocks mined by us with 2Mb software. There is an incompatibility. Now, you may ask yourself: what does this influence on my investments? The answer is then.
What is the scenario for bitcoin hard fork in 2018?
Consensus can validate both the soft fork and the hard fork. When it is general, it remains a single currency. If the situation is unique, it created a different cryptocurrency with a separate blockchain.
Two examples are the hard fork Bitcoin Cash - or BCH hard fork - and Bitcoin Gold. The first is a fork in the current chain. It maintains previous records, but is incompatible with the UASF (User Activated Soft Fork) and SegWit2x proposals. BCH is the continuation of the bitcoin project in the peer-to-peer cryptocurrency model.
They announced the 2018 hard fork, with larger block transaction sizes allowed and other fixes. Bitcoin Gold is another cryptocurrency, whose expectation is to be a store of value better than BTC.
When will the Bitcoin Gold hard fork be?
Its launch in November 2017, but it has not yet shown its potential. It suffered a DDoS attack right at the launch and, therefore, presented a result below expectations. Thus, Bitcoin's hard fork could represent an excellent opportunity in the world of cryptocurrencies. But it is necessary to monitor the market and try to avoid problems.
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