Soft Forks and Hard Forks

Bitcoin’s rules are encoded in software run by tens of thousands of independent nodes. Changing those rules requires convincing enough of those nodes to adopt new software. This is Bitcoin’s governance — and it’s deliberately difficult.

There are two types of rule changes: soft forks and hard forks.

A soft fork is a backwards-compatible change. New rules are stricter than old rules. Nodes running the old software can still participate — they just can’t produce or validate the new features. SegWit, Bitcoin’s 2017 upgrade, was a soft fork. It changed how transaction data is structured but didn’t invalidate old nodes. Adoption was gradual. No chain split occurred.

A hard fork is a backwards-incompatible change. New rules conflict with old rules. If not universally adopted, the chain splits — the old software continues on one chain, the new software on another. Bitcoin Cash was born from a hard fork in 2017, when one faction wanted larger blocks and decided to implement it unilaterally. The result was two separate chains: Bitcoin and Bitcoin Cash. Both still exist. Bitcoin Cash has a tiny fraction of Bitcoin’s value and security.

The difficulty of implementing hard forks is a feature, not a bug. It’s what makes Bitcoin’s rules credible. No CEO, no government, no group of miners can simply change Bitcoin’s supply cap or fundamental properties. Any attempt at a hard fork risks splitting the chain and losing the network effect that gives Bitcoin its value.

This is why Bitcoin changes slowly. It’s not developer laziness — it’s the cost of credibly fixed rules.

For the original document that started all of this — now fully understandable:

The Bitcoin Whitepaper for Humans — amzn.to/4spRFqo

Tomorrow: the block size wars — the governance fight that defined Bitcoin.

— The Daily Bit