Bitcoin was designed by its unknown creator, Satoshi Nakamoto, to make online payments cheaper, easier and more private by cutting banks out of the loop. In this article, i shall be examining the difference between Bitcoin and Bitcoin Cash.
It says so right there in the first sentence of the Bitcoin white paper: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
There’s just one problem: it wasn’t up to the job.
Just compare it to one of the top Big Finance online payments systems, Visa. The credit card company processes about 150 million transactions per day around the world. That’s roughly 1,700 per second — and it has a theoretical capacity of about 24,000 TPS.
Bitcoin can handle just seven transactions per second. In November 2020, Amazon alone shipped out 18.5 orders per second.
Add in the fact that Bitcoin blocks are only added every 10 minutes, and you’ve got a long wait to complete a transaction. Then there’s the transaction fee, which averaged $2 to $3 in September of 2021.
That’s the problem Bitcoin Cash was created to fix.
Bitcoin vs. Bitcoin Cash: An overview
So what’s the difference between these two?
Both Bitcoin or Bitcoin Cash are cryptocurrencies originally designed to make online payments. But the Bitcoin blockchain is so slow, it can barely keep up with transactions from traders buying and selling it.
That’s what is known as Bitcoin’s scaling problem: it is incapable of handling the volume of transactions needed to be successful — and increasing capacity in line with demand.
That problem was coming to a head in 2017, and the developers and miners that have the power to vote on changes to the Bitcoin protocol broke into two distinct camps in finding a solution.
One wanted to move part of the transactions off-chain on to what’s called a Layer 2 or second-layer solution. This is like another blockchain sitting on top of the Bitcoin network, processing vast amounts of transactions. From here, comprehensive records of all the payments that have been made can be added to the proper Bitcoin blockchain once everything is finalized.
The other group wanted to expand the size of each block — beyond its original 1MB — allowing far more transactions to be included.
The basics of Bitcoin are that it uses a Proof-of-Work consensus mechanism to choose which miner gets to mine the next block to be added to the end of the immutable — unalterable — blockchain. This requires winning a race to solve a mathematical puzzle. Unfortunately, this now consumes so much power that it is considered a global warming threat, causing considerable political backlash.
The winner adds transactions to the block and gets as a reward a number of new Bitcoin — 6.25 BTC as of late 2021 — as well as earning transaction fees. While lucrative, these fees have become so high they can imperil Bitcoin’s usefulness as a currency.
What is Bitcoin Cash?
Well, to start with, Bitcoin Cash is a fork of the Bitcoin network. Both Bitcoin & Bitcoin Cash share the same blockchain up until August 1, 2017. Then Bitcoin Cash Supporters updated the protocol with the changes they wanted — primarily a larger block size — but also got rid of the Layer 2 changes, which were called segregated witness, or SegWit. That had been implemented in May after a closed-door meeting by large miners representing about 85% of Bitcoin’s hashrate — the term used to describe the total computing power on the network.
BCH supporters had three problems with SegWit. FIrst, they thought it did not go far enough in solving Bitcoin’s scalability problem. Second, they felt it broke from the original vision of Satoshi Nakamoto. Third, they felt rising transaction fees would undermine Bitcoin.
Later, Bitcoin Cash added Cashscript, a version of the smart contract capability pioneered by Ethereum that allows it to run DApps such as decentralised finance, gaming and NFTs. It also added Simple Ledger Protocol, another transplant from Ethereum that allows developers to issue their own tokens on the Bitcoin Cash blockchain.
The BCH crypto’s champion is Roger Ver, an early cryptocurrency investor called “Bitcoin Jesus” by crypto insiders. Its proponents say it is truest to Nakamoto’s vision of a peer-to-peer online payments platform.
How Bitcoin Cash differs from Bitcoin
The Bitcoin vs Bitcoin Cash debate ended — and the split began — when the Layer 2 camp won and the SegWit update was added to Bitcoin’s protocol. It also enabled other Layer 2 solutions, including a far more popular one called the Lightning Network. This collects a large number of small transactions into Bitcoin as a single transaction. A later version, Segwit2x, doubled the Bitcoin block size to 2MB.
The BCH camp split off, forking Bitcoin’s blockchain and creating a new cryptocurrency, Bitcoin Cash, known as BTC Cash, or more commonly by its exchange symbol BCH. Bitcoin Cash developers and miners first expanded the block size to 4MB, and then later to 32MB.
It is one of the three most popular “pure” cryptocurrencies — those actually used for payments — most notably being one of four cryptocurrencies gaining access to PayPal accounts in 2020. In 2021, PayPal opened the ability to pay with it at the company’s network of 29 million merchants.
Bitcoin Cash vs Bitcoin: Which is more valuable?
In terms of each cryptocurrency’s dollar value, the Bitcoin Cash vs. Bitcoin winner is very clear. BTC’s market cap — as of October 2021 — is above $1 trillion. BCH, on the other hand, had a market cap of $11 billion.
But is Bitcoin Cash better than Bitcoin… and will Bitcoin Cash replace Bitcoin as the main cryptocurrency that’s used for everyday payments?
The answer is maybe. As of late 2021, Bitcoin was generally accepted as a “store of value” like gold to hedge against inflation. The question of whether you should buy Bitcoin or Bitcoin Cash is even tougher.
During the height of the 2021 crypto boom, BCH’s value spiked to 2.5% of BTC’s. In 2017, it was about 25%.
But, if Bitcoin Cash manages to catch on as a popular digital currency, its usage — and price — has the potential to “moon.”
How to Buy Bitcoin or Bitcoin Cash
How to buy either BTC or BCH is far simpler. Start with a well-established, regulated cryptocurrency exchange.
Another good feature to look for in an exchange is that it has a fiat on-ramp, which means that you can send U.S. dollars, euros, or other currencies to your wallet on that exchange, and can trade your crypto for those national currencies if you need money.
At the end of the day, the BCH vs. BTC decision comes down to whether you believe this forked cryptocurrency will one day be commonly used to buy coffees. That would make usage soar, and its price climb.