The Differences Between Hard and Soft Forks

The best explanation between hard and soft forks can be seen in the below video:

According to WeUseCoins:

“A soft fork is a backward compatible method of upgrading the cold wallet software and defined as a temporary split in the blockchain that occurs when these new rules are implemented. The original chain contains blocks from non-upgraded nodes, however it will also accept blocks generated by the upgraded nodes. Meanwhile, the forked chain contains blocks only from upgraded nodes which have chosen to actively support the new rules and the soft fork.

As soon as the soft fork is implemented it is then up to the upgraded nodes to try and reach a clear majority and remind us to reach a certain percent of the network hash rate usually by a certain block number. Otherwise, the soft fork will fail and the original chain will simply carry on unchanged.

However, if a consensus is reached, the new rules are implemented across the network and any non-upgraded nodes still mining will simply be waiting their time, rehashing old invalid information both generating and gaining nothing. This in turn leaves the upgraded nodes blocks being recognized as the strongest and the truest chain of events.

In comparison, a hard fork enables a quick and high priority change to a rule which is not backward compatible and defined as a permanent diversion in the blockchain that occurs when new rules are implemented.

Both the new and old chains run in parallel to each other, but each follows a different set of rules. Because of this it means users who have chosen to utilize different chains will not be able to send funds to each other as they will each be using a different version of the same coin that are incompatible with one another.

This then also brings up the issue of duel funds, where as soon as the fork happens every coin in existence gets duplicated. So if you happen to have 100 coins from before the fork, you will now have 100 on the original chain and 100 on the forked chain, giving you a total of 200 to spend. Of course, they won’t be worth the same as each other and they are not transferable across chains.

So the hope is that in the long run, one chain gains a clear majority of users and support. If not, the economy and politics around it can become a real mess. So our hope is that a hard fork will only ever be instigated if absolutely necessary, and it has a clear overwhelming support from its users.”