Hard Fork vs Soft Fork

Cryptocurrencies are becoming the leading trend of discussions during the latest time. More and more people look for the information about them to discover if it worth to invent in them and if mining is profitable. Virtual currency units are also pretending for bigger role – some people expect that Bitcoin are going to become an international common currency. There is also thought that it is a big deceive and ordinary person should avoid online coins not to lose money. Such variety of thought shows an uncertainty and misunderstanding the problems that Bitcoin, Ethereum and other types of cryptocurrency have in the principles of the work.

Before look for the decisions, it will be useful to discover cryptocurrency from the inside to have a clear view on it. The biggest problem of Bitcoin and other is distrust to it from the society side and authorities. People usually to do believe in providing innovations to their lives. Such situation was also actual with providing internet or electrified cars to the everyday life. The key point of this distrust is the speed of innovations comes to us. It is so high that can even not to analyse good the changes that have happened. Internet for more than ten years ago was a privilege for those, who had enough money to use. Today it is difficult to imagine our life without it. We can even say that our life is built on this invisible technology. Electrified cars was also associated with the dreams of engineers of big companies. No one believed that this technology would become available for the masses in near future. As you can see, today electric engines are spread a lot on the streets. During the latest five years, the technology became cheap for the producing and we achieve a result that we are observing. Bitcoin, Ethereum and other are also in the same situation because of speed of coming to usual life. First coins appeared on the market in 2009. In 2014, the number of transactions were over the million. Moreover, since that time have been appearing more coins and companies that working in this business. In addition, there are noprerequisites that the process are going to stop in following two years. Some people may think that cryptocurrency is the innovation that are going to change world a lot. However, there are problems that are interfering it.

Cryptocurrency is not a usual unit as a cash or money on your credit card. It is chain of blocks with special information. For mining, you requires to have equipment with enough power of electricity, than programmed it to create that information, which requires your coin. It is not special computers – you can use usual ones. However, the requires should be satisfied. Nevertheless, it is not the key problem for the fans of cryptocurrency. There is such fact as limits in virtual currency.

It is an obvious fact that Bitcoin and others are not legally exchanged on currency markets. It is because authorities are not satisfied with the fact that there is an emission of money beside the government. I addition, the price of coins are not guaranteed by anything. This provokes high risk of being hacked and lose money. To avoid an attacks on the owner the developers limits the size and maximum number of virtual units. The number differs from each currency. However, the size is usually the same. For example, in Bitcoin it is 1 megabyte. These limits are not good because they interferes cryptocurrency to develop and bring more money. First limit stop the rising of the price on the coins. The second one slow the speed of transactions.

Nevertheless, there is a decision of the problems. This decision is side forks of the blockchains. It is division of a continuous chain into two branches. This division in the bitcoin network is part of the algorithm and occurs regularly during the mining process. New blocks always contain a reference to the predecessor. If two blocks formed by different miners refer to the same block predecessor, this is division. The system does not give automatic preference. The new blocks can indicate any of them as a predecessor. As a result, the network separates for a while. At some point, one of the branches will become longer and the straggler will die, since the true system considers the longest chain. There are two types – hard and soft forks.

Hard Forkis a breakdown of the blockbuster into two separate chains as a result of the use of two different protocols. A new protocol can also divide the network if not all network members follow it. For example, Ethereum Classic arose as a result of Ethereum’shard forks due to a different understanding of the necessary actions in response to DAO breaking.

According to CoinDesk, unlike hard fork, soft fork is a protocol change, as a result of which the created blocks are recognized as valid and old software. According to Investopedia, softphone can also divide the network if the non-software will create blocks that will not be considered valid under the new protocol.

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