Bitcoin and Bitcoin Cash are two separate cryptocurrencies that share some similarities but also have several key differences. In this article, I will provide a comprehensive overview of both cryptocurrencies, exploring the technology, adoption rates, and approaches. By the end, you will have a comprehensive understanding of the similarities and differences between Bitcoin and Bitcoin Cash.
- The main difference between Bitcoin Cash and Bitcoin is that the Bitcoin Cash Network has a larger block size.
- This means it can process transactions faster and at a lower cost.
- However, the market has voted in favor of Bitcoin which still dominates the market.
- Bitcoin is considered to be more decentralized and more secure.
First Understand Blockchain Technology Basics
Before delving into the specific details of Bitcoin and Bitcoin Cash, it’s crucial to have a solid understanding of cryptocurrency and how it operates.
Cryptocurrency is a digital or virtual form of currency that uses cryptography for security, making it highly secure and resistant to counterfeiting.
Cryptocurrencies typically operate on a technology known as blockchain.
A blockchain is a decentralized ledger that records every transaction ever made using a particular cryptocurrency.
These transactions are bundled together into blocks, which are then added to a chain of previous blocks in a linear and chronological order.
This way you end up with a transparent and verifiable system which eliminates the need for trust between parties. It also provides a high level of security.
Bitcoin, the first-ever cryptocurrency, was created in 2009 by an individual or group of individuals known by the pseudonym Satoshi Nakamoto. It revolutionized the financial world by introducing a decentralized digital currency that could be transferred directly between users without the need for a central authority such as a bank.
Bitcoin Cash, on the other hand, is a fork of Bitcoin that was created in 2017 as a result of a disagreement within the Bitcoin community regarding the scalability of the original cryptocurrency. This disagreement led to the split, with Bitcoin Cash being developed as an alternative version of Bitcoin with a larger block size, allowing for faster transaction speeds.
Why did Bitcoin Cash split from Bitcoin?
In 2017 a heated debate started taking place between miners in the Bitcoin community. Remember 2017 was still early days for crypto and Bitcoin. At the time there was a lot of discussion about what Bitcoin is and why it holds value.
The narrative we have today that Bitcoin is a store of value and equivalent to digital gold was not as strong back then.
Many in the community claimed that the original vision of Satoshi Nakamoto as outlined in his white paper was for Bitcoin to be used widely for transactions in place of cash.
This is something we haven’t seen happen. And the reason is that Bitcoin is slow.
Bitcoin can process about 4 transactions per second. Compare this Visa or Mastercard who can process thousands of transactions per second and you can see why it is hard for Bitcoin to become digital cash.
A meeting behind closed doors
So in 2017, a group of miners representing about 85% of the Bitcoin Networks hash rate met behind closed doors and agreed to vote on an upgrade to the Bitcoin source code called SegWit2x. (Segregated Witness 2.0)
We don’t need to go into the weeds to understand what this did precisely. Suffice it to say that its purpose was to optimize transaction verification by doubling the block size and removing signature data to an extended block. Signature data was sizeable making up 65% of the data in a block.
When word got out that big miners had been scheming to change Bitcoin behind everyone’s backs, two camps quickly formed.
On the one hand, you had those who thought that Bitcoin’s code should not be touched. Bitcoin was secure and very decentralized and there are alternatives to making it fast such as an add-on called the lightning network.
On the other hand, you had those who thought it was paramount to introduce a faster version of Bitcoin. They wanted to build a new blockchain.
As a result, the second group decided to create a fork of the Bitcoin blockchain. A fork is kind of like copy-pasting code but for blockchains.
By making some technical changes to the code they were able to increase the transaction speed and lower transaction fees considerably compared to Bitcoin but they are nowhere near the transaction speed of the commercial heavyweights such as Visa or Mastercard.
Let’s take a close look at how the two blockchains differ from a technical perspective.
Major differences between BTC and BCH
Difference #1: Block Size
One of the key differences between Bitcoin and Bitcoin Cash is their respective block sizes.
Bitcoin has a block size limit of 1 megabyte, which means that only a limited number of transactions can be included in each block. This has led to scalability issues, with transaction times and fees increasing during periods of high demand. Fees have been known to climb as high as $58 during periods of high congestion. That’s fine if you a transferring $1Mn in Bitcoin but not so cool if you want to pay someone 5 bucks.
On the flip side, this means Bitcoin is more secure. In theory, Bitcoin Cash’s larger block size makes it susceptible to being managed by a single node and therefore manipulated.
Bitcoin Cash, on the other hand, started off with a block size limit of 8 MB which it has since increased to 32MB, allowing for a larger amount of data and therefore a greater number of transactions to be processed in each block. This also reduced congestion on the network resulting in lower fees.
Difference #2: Protocol layers
A major drawback of Bitcoin is that it’s only a one-trick pony. When Vitalik Buterin realized the potential of blockchains he developed Ethereum, a more generalized blockchain that would allow you to issue tokens.
Bitcoin does have something called an Omni layer which is supposed to allow developers to build protocols on top of the Bitcoin Network but in practice, it’s super clunky and a headache to use which is why everyone has avoided it.
To differentiate itself Bitcoin Cash created its own protocol layer called the Simple Ledger Protocol. While it sounds cool it has hardly seen any adoption.
In the meantime, Bitcoin developers found a way to encode NFTs in the Bitcoin blockchain launching wildly popular tokens such as the much talked about $PEPE.
Difference #3: Smart Contracts
Bitcoin Cash supports a smart contract language called Cash Script. This would allow developers to build funky Decentralized Finance applications such as borrowing and lending apps or decentralized exchanges.
Difference #4: Difficulty adjustment
Because cryptocurrencies can be very volatile miners will often switch between mining different crypto coins. Since you can use the same miner to mine BTC and BCH the BCH community decided to adjust the difficulty of solving the cryptographic puzzles depending on demand. If there is an increase in miners joining the BCH network then the mining difficulty increases and vice versa.
Difference #5: Replace-by-fee
If a transaction is taking too long on the Bitcoin network you can ask to replace it with one where you offer a higher fee. This way miners will prioritize it as it is more rewarding for them to do so.
Because Bitcoin Cash is faster it does away with the Replay-by-fee feature
Which is better Bitcoin or Bitcoin Cash?
While the techies battled it out it turns out we have a clear winner. The market has a much stronger preference for the original Bitcoin. Bitcoin is still the most popular cryptocurrency with a market capitalization that is 125 times greater than that of Bitcoin Cash.
While Bitcoin Cash is faster and transactions on its network are cheaper it still has not reached peak capacity despite the increased block size. There is simply not enough demand for it.
Meanwhile, Bitcoin has built up the narrative of being a store of value or being equivale to Digital Gold. It has built a reputation for being more secure and decentralized.
Having said that Bitcoin Cash is still in the top 20 coins by market cap and is available to purchase on all cryptocurrency exchanges.
Let’s take a look at some of the similarities
Similarities between BTC and BCH
- Both BTC and BCH use the SHA-256 algorithm in their cryptography. This means that you can use the same mining machines for both BTC and BCH and that it’s relatively easy to switch between the two depending on which one is more profitable at the time. Check out how to mine Bitcoin Cash for more.
- Related to the first point is that both blockchains use a proof of work consensus mechanism. This means that both guzzle sizeable amounts of energy.
- Both networks have a maximum supply of 21 million coins with supply halving every 4 years.
- Also, both currencies have almost the same volume of circulating supply at around 19.5 million
- Both Bitcoin and Bitcoin Cash have vibrant communities of developers and miners. These communities play a vital role in supporting, promoting, and improving the respective cryptocurrencies.
- Both cryptocurrencies only do one thing currently. They are a form of money with very little development on top of that.
Other Bitcoin Cash and Bitcoin forks
Since its inception, Bitcoin Cash has further splintered into other forks with similar names. The most notable of these is Bitcoin SV (Satoshi Vision) which aims to be even faster than Bitcoin Cash with even large blocks of 128 MB. Today Bitcoin SV is the largest blockchain exceeding 2.5 terabytes.
Another popular hard fork of Bitcoin is Bitcoin Gold which attempted to make it easier to mine on a blockchain by using CPUs and GPUS rather than the more expensive ASIC machines that Bitcoin miners need to use. The aim was to make an even more decentralized blockchain.