Blockchain soft forks are interdependent updates that take place in parallel to the original blockchain network.
In other words, a blockchain project needs to be updated and implement improvements and patches, like almost any software. The only difference in the blockchain ecosystem is that being run by communities and not by a central body, there may be disparity of opinions.
In the case that concerns us, blockchain soft forks are update processes in which the original blockchain gives rise to another parallel project. These types of projects are compatible with each other, existing, depending on the case, a greater range of compatibility or another.
This stems from disagreements in the community when trying to implement updates that may be due to wanting to include improvements, change certain rules, or fix inconsistencies and bugs in the code.
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Characteristics of blockchain soft forks
Initially, before making any type of change in a blockchain network, it should be discussed in the community itself. Developers and miners will have to argue if the new update responds to a need or not.
In the event that the community does not agree, and there is a certain tie or indecision, we are then facing a blockchain soft fork. From that precise moment, there will be two different projects, one will be the original, and the other the updated one. In this type of division, both networks are usually fully compatible. Otherwise, one could speak of a blockchain hard fork, which would lead to a null understanding between both networks, being incompatible.
It is important to know if the projects are compatible or not, because if they are not compatible they must use one of the well-known ‘exchange’, such as Binance or PancakeSwap.
Then, in short, what characterizes a blockchain soft fork process is its frequent interoperability between projects, the maintenance of a united community to a certain extent, and the different functionalities that the projects have among themselves.
Cases of soft and hard fork in the business world
To better understand the concept, two examples will be detailed below:
- In the first place, we are going to focus on the companies Santander and Openbank. Santander is a bank that operates internationally, one of its hallmarks being face-to-face action in branches, thus allowing a certain closeness with the customer. On the other hand, Openbank arose from the need to update the bank in a more digital way, attending to the digital call, and the needs of the younger population. Later, this split was given thanks to the fact that in the business group an agreement was not reached on whether Santander should declare a more digital policy or not, so it was decided to attend to that need by creating a bank within the group that would function entirely on its own. that way
- Second, we would have the eBay company. This company’s main business is the sale of products via the Internet. However, for the business to have a certain differentiating component, Paypal was promoted, a payment alternative for those customers who did not wish to provide their payment details directly. The fact is that it went so well, and Paypal grew so much, that the split with eBay became a reality. This is an example of a hard fork case, in which both projects are totally different and offer different services and solutions.
Therefore, in the case of eBay and Paypal, it is clear that both projects are different and respond to needs that are not mutual. Meanwhile, on the Santander and Openbank side, it can be clearly seen that both businesses consist of practically the same thing, except in certain aspects, which in this case would be the dichotomy between face-to-face attendance and the digitization of financial entities.
Blockchain soft fork example
At this point, the existence of Bitcoin (BTC) is at least familiar to us. In this aspect, an example of a blockchain soft fork that directly affects BTC will be presented.
To begin with, considering that BTC is from a blockchain network that is original in itself and that does not come from any kind of spin-off or fork, we cannot say the same for Litecoin (LTC).
LTC is a project that, due to the need to improve the BTC ecosystem, is based on the same network design as BTC, adding those improvements and updates that the BTC community initially rejected.
In other words, the promoters of LTC copied the rules and code of BTC (it is important to know that BTC is open source) and then added other features that, in theory, improved the functionalities of the aforementioned BTC.
Finally, it should be noted that LTC is not the only spin-off of BTC, there are many of them, whether they are soft forks in the case of LTC, or hard forks in the case of Bitcoin Cash (BCH).