What is the difference between a hard fork and a soft fork?

Hard forks and soft forks are two different types of updates or changes to a blockchain protocol, such as Bitcoin's, that result in changes to the network's rules. The primary difference between them lies in their compatibility with older versions of the protocol:

1. **Hard Fork**:
   - A hard fork is a significant and non-backward-compatible change to the protocol rules.
   - It results in a permanent divergence in the blockchain, creating two separate and incompatible chains.
   - Nodes running older versions of the software will not recognize blocks produced by nodes running the updated software, leading to a split in the network.
   - Examples of hard forks in Bitcoin include the creation of Bitcoin Cash (BCH) and Bitcoin SV (BSV) from the original Bitcoin (BTC) blockchain.
   - Users and miners must actively upgrade their software to the new protocol rules to remain on the same chain.

2. **Soft Fork**:
   - A soft fork is a backward-compatible change to the protocol rules.
   - It results in a temporary fork in the blockchain, where nodes running the updated software will recognize blocks produced by nodes running older versions of the software, but not vice versa.
   - The majority of the network must adopt the new rules for the soft fork to be successful, but nodes that have not upgraded can still follow the consensus rules without any disruption.
   - Examples of soft forks in Bitcoin include the introduction of Segregated Witness (SegWit) and the implementation of BIP 66 (strict DER encoding).
   - Soft forks are generally considered less disruptive than hard forks because they do not require a mandatory upgrade for all participants and do not result in a permanent split in the blockchain.

In summary, the main difference between a hard fork and a soft fork lies in their compatibility with older versions of the protocol. Hard forks are non-backward-compatible changes that create permanent splits in the blockchain, while soft forks are backward-compatible changes that result in temporary forks and do not create permanent divisions in the network.