Bitcoin+: Hard and Soft Forks


There are three components that define a decentralized blockchain: Open-Source, Permissionless, and Public. Open source allows anyone to contribute to a protocol. Permissionless allows anyone to evaluate a ledger and change the state of a blockchain. Public allows anyone to be a user of the blockchain and view the entire history of transactions. 

These features lead to protocol forks. A fork is when blockchain developers copy the open-source code of an existing blockchain and change it, creating a derivative. There are two types of forks, hard and soft. A hard fork makes for two blockchains: the original blockchain and a new one. This new blockchain will not be backward compatible with the original, which requires blockchain miners to update their software to adhere to the specifications of the new blockchain, assuming they want to join this new fork. In this context, backward compatibility means that nodes running the software for the original blockchain could write to the new blockchain. Conversely, a soft fork creates two blockchains that are backward compatible, meaning that the blockchain has merely received new features and functionality, but does not require a change to the rules miners must follow in the original protocol. 

Types of Forks

Early forks of Bitcoin include ZCash, which is a payment protocol implementing more robust security features like encryption to preserve the privacy of its users. While forks of BTC are more oriented toward payment transfer, the open nature of its code inspired more alternatives. Take Arweave, from which this post is hosted. It is a decentralized storage network that stores data permanently in what is called the permawe. Arweave’s tools include capacity for UI hosting, database queries, and smart contract programming. This protocol provides a decentralized alternative to Amazon Web Services and other database-type centralized providers. 

Forks are what have brought Web3 to its state today. One notable example was the introduction of Ethereum, as introduced in Vitalik Buterin’s seminal whitepaper. What made Ethereum such a pivotal shift in Web3 was the introduction of smart contracts. Before Ethereum, a developer would need to create their own, special purpose blockchain to perform a set of actions. Smart contracts allowed developers to build on top of Ethereum, increasing the rate of innovation and speed to launch (we’ll cover the complexities of smart contracts in a future post). 

The key statement is that with public blockchains, forks are a necessary feature that propel the industry forward. It allows developers to build from a more resource-driven starting point, and in conjunction with stellar computer engineering skills, to create new blockchains that optimize for different use cases, as in the case of Solana, Avalanche, Algorand, and NEAR (among many others). 

While the core components of a decentralized blockchain are oriented around openness and access, the technology itself has inspired other alternatives. One such example is Estonia’s government placing both identification and health records on a permissioned (private access) blockchain, accessible with the proper key pair. Similarly, banks had come together through the R3 to provide cross-border payments, only accessible to permissioned members. In these types of forks, decentralization of data is the key optimization. It reduces the fault-tolerant features of centralized providers, but does not match the three key features of open-source, permissionless, and public. 


Without the open and transparent nature of the Bitcoin protocol, innovation within the blockchain space would be much more difficult to achieve and even more knowledge-siloed than it is now. Since the code to Bitcoin is available to anyone to look through, anyone can copy the code, replace parts, and develop their own protocol optimizing for features left out by the original. Forking breeds purposeful creation. Communities are built, innovation flourishes and hypotheses are tested. Take this in comparison with the protective stances taken by pharmaceutical companies: how much more could we accomplish if we all could look under the hood?

Special thanks to Zoe Enright and Samuel Wheeler for their suggestions.

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