Soft fork

A soft fork is a fairly common event on a blockchain, as it happens each time the core software part that dictates the block specifications is updated. As it changes the ‘rules’ to which a block must adhere, there will be ‘old’ and ‘new’ blocks during the update. This situation will cease to exist once everyone (all nodes and/or miners) are fully upgraded. It is called ‘soft’ as it will not split the blockchain; everyone is considered willing to update (i.e. there is consensus on the proposed changes).

A soft fork:

• is backwards compatible (old version nodes can still process new version blocks, e.g. the new rules don’t break the old ones);
  
• usually tightens rules (e.g. a smaller block size);
  
• will – most likely – not split the blockchain.
  

Hard fork

A hard fork is ‘hard’ because it will split the chain into two. It occurs when either:

• There’s a dichotomy (difference of opinion) among developers, miners and nodes, as they cannot agree on changes that have a great impact on the functioning of the blockchain. For example when miners want the block-size increased, and the developers refuse this.
  
• A large, fundamental change to the system is to be implemented (with broad support), which changes the technical characteristics of how the blockchain network operates in a way that new blocks will be refused by old nodes, as they violate their ‘ruleset’ (e.g. a larger block size).
  

A hard fork:

• is not backwards compatible (‘old version’ nodes will refuse the new version blocks);
  
• usually loosens the rules (e.g. a larger block size);
  
• will split the blockchain into two separate chains with a common history (up to the fork).
  

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