What is a fork?
In order to clarify the terminology, one must first understand what a “fork” is. The fork of a cryptocurrency describes the forking of a blockchain, a chain or a network. The term originally comes from software development and refers to the result after modifying a Blockcain project. Normally, the software is initially designed in such a way that it is freely accessible to everyone, so that every user can create their own copy and then adapt and change it according to their ideas. Since it is impossible to properly integrate the ideas of everyone involved when developing software in a large project, the network is often divided. The software was then “forked” and completely new, individually adapted functions can be added later. The result is then called a fork, from the moment when a different version of the protocol than the basic version is created and used.
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What are nodes?
In order to understand what soft forks and hard forks are and how they work, one must first know what “nodes” are. These are network nodes that store blockchains in order to be able to make them available to the user network. In the best case, the most recent transaction history is stored decentrally on all nodes. All existing nodes must therefore be operated with compatible software, otherwise they cannot be used on the same blockchain. Old and new nodes are therefore not compatible and two blockchains can result as a result.
What are hard forks?
Hard forks are a type of forks that are not backward compatible. In order for changes to the blockchain to be taken into account, existing nodes must update their software in order to establish communication between old and new nodes. Hard forks pose special challenges in order to generate consensus in the network, because the incompatibility of the different versions inevitably leads to the network being split. Bitcoin Cash (BCH) is an example of a hard fork. The cryptocurrency has a higher transaction speed and is less decentralized.
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What are soft forks?
Unlike hard forks, soft forks provide backwards compatibility through a code change. So older versions of the software will still work after a fork, and there may be nodes on the network that are compatible with the new software. In the old software with compatible nodes, the opinions of the users who decided to use the new software are accepted and compatibility problems can be avoided. So old and new nodes can continue to work together.
Isabell Tonnius / Editor finanzen.net
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