Bitcoin was introduced to the world in 2009. It was a reaction to the global financial crisis of 2008, which saw many people lose faith in the current centralized economic systems.
Financially and technologically astute individuals quickly adopted this new exchange system, as it provided numerous benefits from the centralized system controlled by banks and regulatory bodies.
Initially, most people were apprehensive of Bitcoin, as the world of cryptocurrency was new to them, and the underlying blockchain technology was also not understood by most.
During this period, Bitcoin saw steady growth as it was mainly being used by savvy developers that believed in a decentralized philosophy to financial transactions.
In 2017, the world of cryptocurrency was undergoing rapid changes. Bitcoin was reaching values of astronomical levels, and the consensus was to enjoy the peak while it lasted.
In 2020, the value of Bitcoin has slowly recovered after its 2017 high point. This year was not only significant for its all-time high Bitcoin valuation, however. In 2017, a fork of Bitcoin was introduced into the cryptocurrency market, and it proved to be the most successful fork of any cryptocurrency.
Bitcoin Cash is a modified version of Bitcoin, but there are some fundamental differences in the two coins’ philosophies. To find out more about Bitcoin Cash and the differences between the two currencies, read on!
What is Bitcoin Cash?
You probably know about Bitcoin, the world’s first decentralized cryptocurrency powered by blockchain technology. As Bitcoin started growing in popularity in the mid-2010s, users began to run into issues with scaling and high transaction fees.
Some developers sought to resolve these issues by introducing a fork of Bitcoin. In this context, a fork refers to a divergence between users regarding accepting a new update to an existing cryptocurrency.
In Bitcoin’s case, developers decided to create a fork to implement specific changes that would not be feasible in the main currency. Nodes that accepted this update were then transferred to a new blockchain called Bitcoin Cash.
What is the difference between Bitcoin and Bitcoin Cash?
Bitcoin Cash differs from the original Bitcoin in many ways. One of the main reasons for the new currency’s introduction was that Bitcoin became too popular, and transaction fees reached unsustainable levels.
Bitcoin Cash was a hard fork introduced as a reaction to Bitcoin’s proposed changes in the SegWit or Segregated Witness update. This update aimed to resolve the prevailing issues of high transaction fees and limited space in the blockchain network.
To combat this issue, Bitcoin Cash increased its blocks’ size, making it eight times as big as its predecessor. In simple terms, you can say that Bitcoin Cash has eight times the space for transactions.
The advantages of this extra space give Bitcoin Cash reduced transaction costs, faster transaction speeds, and more transactions.
This is convenient for users who had to wait ten minutes to complete a single transaction with Bitcoin. This quality of life improvement has played a large role in the acceptance and popularity of Bitcoin Cash as a viable alternative.
A Detailed Comparison
From the initial period of Bitcoin’s creation, it soon became clear that the network could not process enough transactions per second to make it a genuine rival to centralized payment networks like Visa.
This problem came to the forefront in 2017, when the number of transactions rose significantly, allowing Bitcoin’s average transaction fee to spike to as much as $55 by the year’s end.
A range of off-chain scaling solutions has been developed to overcome this scaling problem, such as the Lightning Network and numerous side-chain scaling options.
But Bitcoin ABC, headed by blockchain developer Amaury Séchet, tried to keep scaling on the chain without depending on offline processing or side-chains and launched the Bitcoin protocol in August 2017.
The fork happened only after the Segregated Witness (SegWit) update was released, which marginally enhanced Bitcoin’s scalability by decreasing the size of transactions, enabling them to be accommodated into a single block.
This fork initiated a unique cryptocurrency labeled as Bitcoin Cash, which retains the initial Bitcoin codebase, albeit without the SegWit update, and raises the limit block size to 8 MB.
The critical technological divergence between Bitcoin and Bitcoin Cash is potentially the highest possible block size permitted by each network. For Bitcoin, the block size is constrained to approximately 1 MB, although there have been reports of correctly mined blocks bigger than this due to the efficiency of the SegWit update.
In contrast, Bitcoin Cash has an overall block size of 32 MB, expanded from 8 MB in May 2018. This move significantly improved the number of transactions that could be used in each block and the Bitcoin Cash platform’s average speed.
Bitcoin Cash retains the average block discovery duration of Bitcoin, which was 10 minutes. This ensures that transactions are validated at almost the same rate between the two chains. Still, since additional transactions can be packed into each bitcoin cash block, the bitcoin cash network’s overall throughput is about 100 tps, compared to only seven tps for bitcoin.
Because Bitcoin Cash has larger chains but much less individual transactions than Bitcoin does, it also profits from lower fees. Today, the typical Bitcoin Cash exchange fee is about 0.5 cents, equivalent to $2.07 for Bitcoin.
Besides the enhanced overall block size and absence of SegWit assistance, Bitcoin Cash varies from Bitcoin in several other respects. For one, multiple extra added queries and functions are allowed, known as opcodes.
Back in 2018, some opcodes disabled in Bitcoin have been re-enabled in the Bitcoin Cash chain, although some new ones have also been added. This distinction gives Bitcoin Cash increased smart contract capabilities over Bitcoin.
Bitcoin Cash can also be deemed more centralized than Bitcoin. A single pool regulates more than 25 percent of the bitcoin cash hash rate, while the highest-ranked pools collectively account for more than 55 percent of the hash rate. In comparison, the leading bitcoin pool manages about 17.7 percent of the hash rate, while the other three add less than 47 percent.
Overall, Bitcoin and Bitcoin Cash are close in both ambition and intent, but Bitcoin has become much more effective in securing adoption — despite the technological advancements provided by Bitcoin Cash.