The Bitcoin blockchain is a decentralised ledger that records all Bitcoin transactions in chronological order. The Bitcoin network consists of miners, nodes, apps, and clients which are distributed across the world. Each participant of this network has access to the full Bitcoin blockchain which contains every transaction ever executed in Bitcoin’s history. The Bitcoin Era platform is considered as one of the most authentic bitcoin trading platforms.
The Bitcoin users make sure that each block is valid by solving difficult mathematical problems through hashing. This process assures the legitimacy of transactions by preventing them from being modified after being recorded in blocks, with one caveat: if more than half of the participants agree, they can add new blocks to the chain and override existing transactions in previously-mined blocks. This mechanism is called a “soft fork”, or sometimes just a “fork” for short.
A soft fork is initiated by miners or Bitcoin businesses who want to make Bitcoin more useful in their own professional capacity. Bitcoin companies like Coinbase, BitPay, and Bitfinex can initiate forks because they own Bitcoin nodes that forward information to the Bitcoin network. This allows Bitcoin companies to operate independently of other participants on the Bitcoin network while still using the same blockchain data that ordinary users share. If these Bitcoin companies install new blocks that conflict with already-mined blocks, the soft fork turns into a hard fork.
A hard fork occurs when an existing set of rules are changed in such a way that all previous transactions are made invalid under the new rules, which means everyone has to upgrade their software if they want to use Bitcoin afterward. Anyone can initiate a hard fork if they own Bitcoin. Bitcoin miners, Bitcoin users, Bitcoin companies, Bitcoin developers, Bitcoin exchanges – all of these groups can initiate a hard fork if they want to make Bitcoin more useful in their own professional capacity. For example, the Bitcoin XT project was an effort to increase Bitcoin’s block size limit from 1MB to 8MB by initiating a hard fork.
Another recent example is the Bitcoin Gold fork which occurred on October 24th, 2017. It changed Bitcoin’s proof-of-work algorithm from SHA256 to Equihash rendering specialised mining equipment obsolete overnight. This created another cryptocurrency that runs on the original Bitcoin chain called “Bitcoin Gold“. Soft forks are just upgrades of existing blocks whereas hard forks re-write the Bitcoin transaction history. Bitcoin Cash and Bitcoin Gold are Bitcoin hard forks because they use the Bitcoin name and chain as a basis for their own cryptocurrency.
Bitcoin Cash was originally Bitcoin, but it split into Bitcoin and Bitcoin Cash after the Bitcoin network initiated a hard fork to fix Bitcoin’s slow confirmation times and high transaction fees which were touted as Bitcoin’s fatal flaws by some community members at the time. However, many people disagreed with this assessment of Bitcoin’s problems, resulting in an extremely contentious argument within the community about how best to scale Bitcoin for future growth.
The point is that both types of forks require everyone on the network to upgrade their software if they want to use “the new” Bitcoin afterward, even though soft forks are technically more acceptable since they don’t break Bitcoin’s existing rules.
However, Bitcoin Cash is a hard fork of Bitcoin with a different development team and no association with the Bitcoin developers who have been working on Bitcoin since 2010. Although most Bitcoin companies and miners were against Bitcoin Cash at first, its price skyrocketed after launch because it was a new cryptocurrency that could be mined using the same hardware as Bitcoin. Companies like ViaBTC initially backed Bitcoin Cash because they saw it as an opportunity to generate more profits through mining by introducing another cryptocurrency that runs on the original Bitcoin network but requires special equipment for faster processing speeds.
A soft fork can easily turn into a hard fork if people disagree with the changes involved in the upgrade. Some people don’t think it should be possible to have Bitcoin hard forks at all due to the fact that Bitcoin exists in a social contract, not just a technical one. Although Bitcoin was initially designed with the social contract in mind, there’s no reason why Bitcoin’s design can’t be changed by an agreement between most of Bitcoin’s participants after enough time has passed.
A soft fork is used when everyone agrees on everything all at once, but sometimes it isn’t possible for everyone to agree on everything immediately because Bitcoin companies are often businesses that rely upon making money in order to continue existing. This makes perfect consensus impossible since Bitcoin companies need financial security guarantees in order to do business without fear of being attacked by other Bitcoin users.