What are Blockchain Forks?

For a technology which is as sophisticated as blockchains, it won’t be wrong to say that the technology is adhered to numerous limitations. With issues such as propagation delays, which refer to lag time between nodes sending and receiving data, transactions getting lost while being transmitted to receivers, and nodes going bad and transmitting false information, stakeholders were in pursuit of apt technological renovations that would improve the performance of blockchains altogether.

Enter Blockchain Forks
A fork is a change to the blockchain protocol. It is essentially a divergence from the previous version of the blockchain.
The decentralized nature of public blockchains means that participants on the network must be able to come to an agreement as to the shared state of the blockchain. Unanimous consensus among the network nodes results in a single blockchain that contains verified data that the network asserts to be correct.
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However, many times, nodes in the network can’t come in unanimous consensus regarding the future state of the blockchain. This event leads to forks, meaning that it leads to a point in which the ideal ‘single’ chain of blocks is split into two or more chains which are all valid.

Reasons for the occurrence of a blockchain fork

  • Adding new functionality
  • Fixing security issues
  • Reversing transactions

There are 2 types of forks

  • Hard forks
  • Soft forks

Hard Forks:

When there is a change in the software that runs on full nodes to function as a network participant, new blocks mined based on new rules in the blockchain protocol are not considered valid by the old version of the software. When hard forks occur, new currency comes to existence. Equivalent quantity of currency is distributed to the full nodes who choose to upgrade their software so that no material loss occurs. The final decision to join with which chain rests with the full nodes. If full nodes choose to join with the new chain, the software is upgraded to make newer transactions valid while the nodes who do not choose to upgrade their software continue to work the way they used to work.
Example:
Suppose, there is a new update in the Ethereum blockchain in which the consensus protocol will change from a type of Proof of Work to a type of Proof of Stake. The full nodes which install the update will use the new consensus protocol, and the ones who do not choose to install the update will become incompatible in the blockchain.

Soft Forks:

When there is a change in the software that runs on full nodes to function as a network participant, new blocks are mined based on new rules in the blockchain protocol and are also considered valid by the old version of the software. This feature is also called as backwards compatibility.
Example:
Suppose, there is a new update in the Ethereum blockchain in which the consensus protocol will change from a type of Proof of Work to a type of Proof of Stake. The full nodes which install the update will use the new consensus protocol, and the ones who do not choose to install the update will still stay compatible with other nodes in the blockchain.
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