Blockchain split (soft vs hard fork)

The blockchain is a software based technology, and in the need to implement things, changes need to be made in the software. Some of these changes may be more radical than others, in the sense that they may change previous established rules and cause divergence in the consensus of the network. When a change in a centralized system need to be made, the decision is imposed from upward and there is no problem of consensus, since those below must abide by the decision. In contrast, in a decentralized system, where the project is supported by the network, it's not just a matter of code change, but it is something that needs to be accepted by the community. The changes need to be discussed and understood by all users, who keep the network running according to pre-established rules, the miners and full nodes users. In the Bitcoin network when someone wants to suggest a change that may affect the compatibility among users, it is necessary to submit a standardized document called BIP (Bitcoin's Improvement Proposal), explaining its effects.

When a soft fork happens a new client is released and the workers can download the new version. The changes included does not break compatibility with the original rules, and the updates are backwards compatible with previous versions. It does not require a mandatory upgrade to maintain the consensus among the users, since all blocks in the soft forked chain obey the old rules. The new rules are usually a restriction, a grasp of the old rules that fit inside them, therefore recognized by the old clients.

This kind of fork may cause a temporary split, but it tends to be eliminated with time and the two chains tend to be reunified in a single chain. What will happen depends on the hashing power on each of the chains, that is, the computational power made available by the miners. As part of the participants starts to work with the new rules and part remains working with original rules, the original chain continues to be extended, till come a time when the new chain has more power of work, become more extended and the old one is abandoned. A similar situation could happen if two miners find the result for the proof of work at the same time, causing a split of the main chain. At this case they both propagate the solution, considered valid, that are transmitted to the network. Part of the network will receive one block and work to extend it in one chain, while the rest will work in another chain, until one is more extended than the other and becomes the continuation of the main chain.

Hard fork

A hard fork happens when the new proposed rules are not a subset of the old rules, but are a extension not recognizable by the original project. If this happens and part of the community starts to work with this change, it means that they will start to mining another blockchain and will happen a hard fork because the original chain will not recognize the new rules. It is a permanent fork, bacause the original chain will never recognize the other as valid, so in practic this results in two coins, the original one and the other, with the implemented changes.

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