Differentiate between a ‘Soft Fork’ and a ‘Hard Fork’ in Cryptocurrency.
A soft fork is a backward-compatible change to the blockchain's protocol rules. Older nodes that do not upgrade will still see the new blocks as valid, though they cannot enforce the new rules.
A hard fork is a permanent, non-backward-compatible divergence from the previous version of the blockchain. Nodes that do not upgrade will see the new blocks as invalid, resulting in two separate, competing chains.
Hard forks often lead to the creation of a new cryptocurrency.
Glossar
Hard Fork
Disruption ⎊ A hard fork represents a radical divergence in a blockchain’s protocol, creating a permanent split and typically resulting in a new cryptocurrency.
Hard Forks
Disruption ⎊ Hard forks represent fundamental alterations to a blockchain’s protocol, necessitating all nodes to upgrade to maintain consensus; this divergence can introduce volatility into cryptocurrency markets, impacting derivative pricing models reliant on stable underlying asset behavior.
Soft Fork
Upgrade ⎊ This refers to a backward-compatible change to the protocol’s software, where non-upgraded nodes will still recognize blocks produced by upgraded nodes as valid, allowing for gradual adoption of new features or bug fixes.
Fork
Chain ⎊ A fork, within cryptocurrency contexts, represents a divergence in the blockchain's history, resulting from a change in the underlying protocol rules.