Fork in digital currency What are hard forks and soft forks?

If you are one of the people who are active in the field of digital currency, it is very likely that you have heard the words fork and hard fork, so it is better to know that fork in digital currency is considered a term originally created for the purpose of updating digital currency. It is in the blockchain network. In the rest of this article, we would like to introduce the concept of fork for a better understanding, and also explain the difference between soft fork and hard fork to you, dear users.

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What is a fork?

People who have worked in the blockchain network are familiar with the concept of forks and know that it is impossible to change the recorded information. This blockchain technology follows the plans made by the programmers. To understand this issue, we start with an example; In the Bitcoin blockchain, in order to mine a block, it takes 10 minutes to break a block, which is 1 MB in total. Therefore, if a bug or a security problem occurs in the blockchain network, it may endanger users’ assets. In your opinion, what is the best way to solve this problem in the blockchain, that it is not possible to make changes to the information? A fork in a digital currency makes updates that cause changes in increasing the capabilities of a blockchain and its progress.

Fork in digital currency is marketed as a group of software codes and it is better to know that these codes are open source. The reason is that developers can release better versions to the market and tokens, like many of their similar software, need to be updated, which forks in digital currency improve their previous process. These codes make changes that aim to update and improve the performance of cryptocurrencies, which gives rise to the concept of a fork. In simple terms, forks are used when there are dissatisfactions with existing rules or when there are problems for the network.

Does the main price of digital currency change with the fork?

Assume that the trader has bought 3,000 units of Bitcoin and the price of each of them is $30,000; This person’s property will be worth more than 60 million dollars. For example, if a fork is issued for Bitcoin Cash, the trader will be given 2000 Bitcoin Cash as a gift. If this person is a professional trader and knows that a fork will happen in the near future for this currency; He comes to the insight that by increasing the number of digital currency units, he will get more money. In order to increase his bitcoin assets to 6000 before the fork occurs in the digital currency, he receives the same amount, i.e. 6000 bitcoin cash.

Therefore, before the fork occurs in the digital currency, the demand for its purchase increases, which causes the price of the currency to rise. As a result, until the fork, the demand for that currency increases and as a result the price of the currency rises. Also, when a fork happens for a digital currency, its value is spread in the forked network, and in the following, we intend to introduce the two in order to understand the difference between hard fork and soft fork.

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 What is a hard fork?

To explain the hard fork, know that the changes that are made in the network protocol are called hard forks, which make previous invalid transactions valid or do the opposite, and it is better to know that this type of fork works separately from The main chain itself is detached. In general, when a new version is created in the blockchain, it may cause problems and this version is not compatible with its previous version, which causes such a hard fork problem. There may also be a lot of differences between network users, which may be about network security, the amount of cryptocurrency distribution, their transfer speed, and similar things.

Due to the emergence of these differences, a hard fork is created, and to solve these problems, a hard fork must be done so that these differences do not harm the future of the currency. Accordingly, the hard fork, with the changes it makes in the software, makes the previous version incompatible with the new version, and if a trader does not perform this update, he will be disconnected from the network forever.

What is a soft fork?

A soft fork is a soft fork that is compatible with the previous version and its function is to cause a minor update in the software. It is better to know that in this method, if traders in the network do not perform this update, they can still be present in validating and performing network transactions. But on the other hand, if the block registration is done by a miner who has not done this update, it will cause a problem and it will be rejected. To understand the soft fork, we will give an example that in order to add the ability of multiple addresses on the Bitcoin network. To be signed, the SH2P soft fork has been issued. You can also refer to this page to view the next 3 months of Bitcoin.

Last article

Now that we have reached the end of this article, to conclude, it is better to know that a fork in digital currency is made to improve the performance of cryptocurrencies, which makes updates on them, generally when there is dissatisfaction with the existing rules, or for the network. If there are any problems, they use the fork. There are two types of forks, hard fork and soft fork, and the main difference between the two is that the hard fork makes changes on the network protocols, and also when the previous version is not compatible with the new version, the hard fork comes into action. But soft fork is not like that, in this method there is full compatibility with the previous version, which causes a partial update in the software, and if you do not update, you will be able to confirm transactions.