A soft fork is an update to a blockchain network protocol that is backward-compatible. This means that the new rules introduced by a soft fork do not invalidate blocks or transactions created under the old rules. Therefore, nodes (the computers running the blockchain software) that have not been updated to the new rules can continue to participate in the network and validate blocks, even if they do not fully understand all the new functionality.
How does a soft fork work?
To better understand, think of a soft fork as a tighter setting of existing rules without breaking the old ones. Here’s a simplified example:
Imagine an old rule on blockchain: “A block can be a maximum of 1 MB.” We can soft fork a new rule like this: “A block can have a maximum of 1 MB, but from now on, it will include the signatures of the transactions performed in a separate structure.” For all those passionate about innovation, we have prepared the essential guide: What is blockchain? Bitcoin and the blockchain technology revolution – a perfect article to get you started with this transformative technology.
- Updated (new) nodes: they understand and apply the new rules. They will create and validate blocks according to the new specifications, which are more efficient.
- Non-updated (old) nodes: They are not “aware” of the new rule. They see a block created by a new node and, as long as that block also complies with the old rules (i.e., does not exceed 1 MB of “core” data), they will consider it valid and add it to their blockchain. They are not forced to disconnect from the network.
In order for a soft fork to be successfully activated and deployed, it is necessary that the majority of miners or validators on the network adopt the new rules. When they start producing blocks according to the new rules, the soft fork compliant chain usually becomes the longest and is accepted by the entire network.
Key difference from a hard fork
- Soft Fork: Backward compatible. Does not create two separate chains and does not generally result in a new cryptocurrency. Old nodes can coexist with new ones.
- Hard Fork: NOT backwards compatible. Imposes new rules that are fundamental and conflict with old ones. Requires all nodes to update software; otherwise the network will split into two distinct blockchains with different currencies.
Advantages of a software fork
- Less disruptive: Allows updates without forcing everyone to update their software simultaneously.
- No chain split: Maintains network unity, avoiding the creation of two competing cryptocurrencies.
- Easier consensus: Requires a majority, not unanimous consensus, for implementation.
- Increased security: Soft forks often introduce stricter rules, improving security.
Disadvantages and risks
- Less flexibility: Being backwards compatible, a soft fork cannot introduce radical changes to the protocol.
- Risk of “51% attack”: Although more secure than a hard fork in some respects, there is a theoretical risk that outdated nodes could be “tricked” into accepting blocks that would be invalid under the new rules if a malicious majority of miners operate under the new rules.
- Implementation complexity: Developing a software fork that is truly backwards compatible can be technically difficult.
Example soft fork: Segregated Witness (SegWit), implemented on the Bitcoin blockchain. This soft fork allowed to increase block capacity by separating the signature data from the rest of the transaction, without changing the fundamental 1MB block limit.
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