A soft fork in blockchain technology is a change to the software protocol that makes previously valid blocks invalid and vice versa. Soft forks can be thought of as a sort of backward-compatible upgrade to the network because old nodes will recognize the new blocks.
A soft fork requires only a majority of mining power on the network to enforce new rules so long as they are compatible with previous versions, while hard forks require all nodes (miners) on the network to update their software in order for new rules to go into effect.
Understanding Soft Fork
Examples of protocols that have implemented a softfork are the bitcoin and Ethereum protocols. Both have used softfork to implement new and upgraded functionalities that are backward compatible.
A soft fork can be imposed by miners, who have the power to choose which transactions they include in their blocks, or it can be done through a proposal from one or more developers and adopted by Bitcoin Core.
New transaction types can often be added as soft forks, requiring only that the participants (e.g., sender and receiver) and miners understand the new transaction type. This is done by having the new transaction appear to older clients as a “pay-to-anybody” transaction and getting the miners to agree to reject blocks including these transactions unless the transaction validates under the new rules. This is how the pay-to-script-hash (P2SH) was added to bitcoin
In order for a soft fork to work, a majority of the mining power needs to be running a client recognizing the fork. The more miners that accept the new rules, the more secure the network is post-fork. If you have 3/4 of miners recognizing the fork, 1/4 blocks created aren’t guaranteed to follow the new rules. These 1/4 blocks will be valid to old nodes that aren’t aware of the new rules, but they will be ignored by new nodes.
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