The development of blockchain technology is not a linear path, but a process of continuous evolution through branching events, or "forks". In Tan Phat Digital's latest report, we found that the branching concept is not simply a software update, but also a complex governance mechanism, a conflict resolution tool and a means to make technological leaps. At its core, an Ethereum Fork is an upgrade or change in the rules of the network, resulting in a split of the blockchain into different versions. One version continues to follow the new rules, while the other version may stay the same or go in a completely different direction. This process is often aimed at solving urgent technical problems, patching serious security vulnerabilities or improving the overall performance of the network to meet the growing needs of global users.
Classification and Technical Nature of Forks
To deeply understand how a blockchain operates and renews itself, it is necessary to clearly distinguish between two main types of forks: hard forks and soft forks fork). The difference lies in compatibility and how the network achieves consensus between participating nodes.
Hard Forks and Backward Incompatibility
A hard fork is a radical blockchain protocol change that is non-backward-compatible. In a hard fork, new rules are introduced that cause previous blocks or transactions to be considered invalid according to the new rules, and conversely, nodes running the old version will not accept blocks created according to the new rules. This forces all network participants, from miners to validators to node operators, to upgrade their software to the latest version if they want to continue operating on the main chain.
If a segment of the community refuses to upgrade due to technical or philosophical disagreements, the network will be permanently split into two independent blockchains. Each chain will own its own ledger and often create a new cryptocurrency from the roots of the old chain. Prominent historical examples include Bitcoin Cash (BCH) forking from Bitcoin in 2017 due to a block size controversy, or The DAO event leading to the fork between Ethereum (ETH) and Ethereum Classic (ETC) in 2016.
Soft Forks and Backwards Compatibility
In contrast, soft forks are a type of protocol update that is backward-compatible. New rules in soft forks are often stricter than old rules, allowing unupgraded nodes to still join the network and recognize new blocks as valid, although they cannot enforce new rules or exploit new features.
Soft fork is considered a "softer" upgrade method because it does not create a permanent split of the blockchain, as long as the majority of the network's computing power or staking rate accepts and executes new rules. The most typical example is the implementation of Segregated Witness (SegWit) in Bitcoin in 2017.
Detailed Comparison of Forking Features
Below is a summary of the core differences analyzed by Tan Phat Digital:
Hard Fork:
Compatibility: Not backward compatible, requires all mandatory upgrade of nodes.
Structural consequence: Creates two permanently separate chains if there is disagreement in the community.
Monetary impact: Often leads to the creation of a new cryptocurrency (coin).
Purpose: Used for major upgrades, changes to the consensus mechanism, or serious system bug fixes.
Risks risk: High, can split the community and disperse market liquidity.
Soft Fork:
Compatibility: Backwards compatible, old nodes can still operate without being forced to upgrade immediately.
Structural consequences: Maintain a single unified chain for the entire network.
Impact currency: Does not create new currencies.
Purpose: Typically used to patch minor bugs, optimize performance, or add new restriction rules.
Risk: Low, transition is seamless and less disruptive.
Decentralized Governance and Innovation Proposal Process (EIP)
Ethereum is not owned by any individual or entity; instead, it operates as a digital democratic entity. Any changes to the protocol must go through a transparent process called the Ethereum Improvement Proposal (EIP). These are design documents that provide information to the community or describe new features and new processes for the Ethereum environment.
The Life Cycle of an EIP and the Role of AllCoreDevs
An EIP starts from an idea that is widely discussed on forums. The consensus building process is the most important step, where the core developers (Core Devs) consider the technical implications and the community evaluates the practical value.
For changes affecting the consensus layer, a concept called "Rough Consensus" is applied. The decision is not based on a simple majority vote but on reaching a general agreement that the proposal is technically safe and not so controversial that it could collapse the network.
Classification of EIP Tracks in Governance
Core EIP: Focuses on changing the consensus rules (consensus). This is the most important type of EIP, requiring a hard fork and affecting the entire network.
Networking EIP: Aims to improve the peer-to-peer (p2p) communication protocol, changing the way nodes communicate with each other.
Interface EIP: Standardizes client APIs and contract ABIs, mainly affecting wallet and decentralized application developers (dApp).
ERC (Ethereum Request for Comments): Standardization of application layer such as Token (ERC-20) or NFT (ERC-721) types. This type does not require a hard fork and is a technical recommendation.
Meta EIP:Changes to governance processes or development tools that directly affect the way Ethereum's development engine operates.
Historical Milestones and Landmark Forks
Ethereum's history is a series of strategic upgrades, sometimes accompanied by political earthquakes in the community.
The DAO Event (2016) and the "Code Is Law" Philosophy
The DAO was exploited in June 2016, leading to the withdrawal of more than 3.6 million Ether. To save the situation, the community performed a hard fork at block 1,920,000 to refund the funds. However, a minority group that believes in the "code is law" philosophy refused to upgrade, leading to the split:
Ethereum (ETH): The new chain has refund intervention, which is now the mainstream version.
Ethereum Classic (ETC): The original chain retains its hacked history, adhering to the principle of absolute decentralization.
The Merge (2022) and the Transition to Proof of Stake
The Merge marks the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) on September 15, 2022. This upgrade cuts the network's energy consumption by 99.95%. The event also created a fork called EthereumPoW (ETHW) from a group of miners who wanted to maintain the GPU mining chain, but the chain quickly lost traction due to lack of infrastructure support.
Current Roadmap: Dencun Upgrade and the Importance of Blobs
The Dencun upgrade due in March 2024 is a major step forward in "The Roadmap" Surge", focusing on scalability through EIP-4844 (Proto-Danksharding).
Effective Fee Reduction After Dencun Upgrade
Tan Phat Digital recorded a significant reduction in transaction fees on Layer-2 networks:
Optimism: Fees decreased from about $0.10 - $0.30 to less than $0.01 (Reduced by more than 95%).
- 85-90%).
Ethereum Mainnet:Transaction fees remain unchanged at $2.00 - $7.00 depending on time (0% reduction).
Next Stages: Pectra and Fusaka
Roadmap for 2025 and 2026 includes two major upgrades:
- (Fulu-Osaka):Aims for processing hundreds of thousands of transactions per second via PeerDAS (data sampling) and expected to increase Gas limit to about 60 million.
Technical Security: Replay Attack Protection Mechanism (EIP-155)
A major risk of hard fork is "Replay Attack". To prevent bad actors from taking transactions from one chain and replaying them on another chain, Ethereum implemented EIP-155, which adds a unique CHAIN_ID value to the transaction signing process.
Formula to calculate v value in ECDSA signature:
Economic Impact and Policy of the Exchange
A fork always creates economic variables large economic events, directly affecting prices and market psychology.
Exchanges' Reaction to Major Forks
According to observations of Tan Phat Digital, exchanges act as "judges" of liquidity:
Bitcoin Cash Event (2017):
Binance and Kraken: Support and list transactions immediately news.
Coinbase: Initially refused, but supported after 5 months due to pressure from users.
Ethereum Classic Event (2016):
Both Binance, Coinbase and Kraken: All quickly supported and listed this native chain.
EthereumPoW Event (2022):
private key) at snapshot time, you usually receive new tokens at a 1:1 ratio. If left on an exchange, receiving tokens depends entirely on the support announcement of that exchange.Who decides to implement the Fork? The decision is based on community consensus. Developers write the code, but node operators and users are the ones who decide to "lock" which versions will exist.
Fork Safety: Tan Phat Digital recommends users avoid trading during sensitive times of forks and always keep assets in cold wallets to ensure airdrop benefits.
In-Depth Analysis: Modular Blockchain Vision by Tan Phat Digital
System Ethereum's forking system has evolved from an emergency rescue tool into a sophisticated governance mechanism. Recent upgrades are pushing Ethereum to transition to a Modular Blockchain model. In this model, Ethereum serves as the payment and data storage layer, while Layer-2s perform transaction processing. The blobs mechanism is the technical "key" that helps this model operate effectively.
The biggest challenge today is no longer technical, but social consensus when Ethereum becomes a global financial infrastructure. However, Tan Phat Digital believes that the "right to fork" is the ultimate protection mechanism for decentralization, ensuring the network always serves the best interests of the community instead of being manipulated by any monopoly entity.
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