Launched in 2009, Bitcoin became the first successful blockchain and cryptocurrency ever created. However, over time, some serious shortcomings of Bitcoin were revealed. They included scalability problems and low transaction speed.
In 2017, the above-mentioned issues worsened. That sparked a heated debate among Bitcoin developers about the possible solutions. Because Bitcoin is decentralized, any changes to the protocol require a consensus, which was not achieved at that time.
Eventually, one of the Bitcoin pioneers, former Facebook employee Amaury Sechet, suggested taking a different path. In 2017, together with like-minded individuals, he carried out the network's hard fork on the 478558th block of Bitcoin. Among the supporter’s of the hard fork were such prominent members of the Bitcoin community such as Roger Wehr and Jihan Wu.
The result was the creation of a parallel chain called Bitcoin Cash. The main difference from Bitcoin was the increase in the block to 32 megabytes (vs. 1 MB for BTC). Thus, payments became faster, while fees — significantly lower.
In this article, we will explore the similarities and differences between Bitcoin and its fork Bitcoin Cash (BCH). Weaknesses and strengths will also be discussed, as well as the outlooks for both networks.
- Bitcoin Cash is the hard fork of Bitcoin, created in 2017
- The BCH fork aimed to increase the speed of transactions and to lower fees
- Both BTC and BCH have a hard cap of 21 million coins and the new tokens are issued through mining
- While Bitcoin is more of a digital gold, Bitcoin cash proves to be an effective medium of exchange
What Are the Key Differences Between Bitcoin and Its Hard Fork Bitcoin Cash?
First, Bitcoin and Bitcoin Cash have different philosophies. While Bitcoin is seen more as a means of saving (digital gold), Bitcoin Cash is promoted as a means of exchange. This is the reason the word “cash” was added to the name of the new currency.
Bitcoin supporters have not abandoned the idea of scaling the network. They rely on second-layer protocols, such as the Lightning Network, which provide increased scalability. The Bitcoin Cash team, on the other hand, bet on increasing the size of the blockchain block. They consider this approach more convenient for performing multiple transactions.
The different approaches also determined the technical distinctions of the two projects. And the main one is the size of the block. While Bitcoin's block size is limited to 1 MB, Bitcoin Cash's block is much larger at 32 MB. Thus, the Bitcoin Cash allows processing up to 200 transactions per second.
Another important feature of Bitcoin Cash is that its Simple Ledger Protocol (SLP) allows to issue tokens on top of the network. The process is similar to issuing ERC-20 or ERC-721 (NFT) tokens on top of the Ethereum network. This feature allows users to create, issue and transfer digital tokens that use the same security and network model as Bitcoin Cash.
Another major dissimilarity is the high-level programming language CashScript for Bitcoin Cash smart tokens. This syntax is based on the Ethereum Solidity smart contract language. CashScript aims to integrate DeFi into Bitcoin Cash to help it compete not only with Bitcoin, but also Ethereum.
Other differences between Bitcoin and Bitcoin Cash include the following:
- BCH's system allows the PoW (proof-of-work) difficulty metrics to be adjusted after each block via a Difficulty Adjustment Algorithm (DAA);
- Bitcoin Cash developers do not plan to activate SegWit, as is in Bitcoin;
- Bitcoin has a “replace by fee” function. It allows users to replace a stuck transaction with another one with a higher gas fee. This function is not available in BCH network;
- Bitcoin Cash supports protection against “replay” attacks;
Bitcoin ranks first in terms of capitalization, and its domination index stands at about 40%. Considering the fact that it is the oldest and best-known cryptocurrency, Bitcoin still looks like the best option for a long-term investment.
Other advantage of Bitcoin is its hard cap of 21 million to prevent inflation. That is why BTC is more often positioned as digital gold. However, it is not deprived of high volatility inherent to all cryptocurrencies.
Bitcoin Cash, on the other hand, took another direction. It bet on the increased transaction throughput, which made BCH more suitable for everyday mass use. Bitcoin Cash was designed to be a simple and convenient coin for fast transactions with low commissions, and gathered its own community of enthusiasts.
Despite the obvious technical superiority of Bitcoin Cash, at the moment it attracts less attention and investments comparing to original BTC. Bitcoin Cash has a market capitalization of just over $2.2 billion, which is nearly 180 times less than that of Bitcoin.
The Bitcoin Scaling Debate
As Bitcoin became more popular and attracted more users, its network faced a scaling problem. One of the main reasons for it was the limited number of transactions that could be written to a 1 MB block of Bitcoin blockchain. And given that 1 block is created once every 10 minutes, transaction processing time significantly increased. During periods of high user activity, the network was overloaded and the size of commissions began to spike. That is why Bitcoin proved to be impractical for everyday payments.
However, there are different ways to increase transaction speed, each with its set of advantages and disadvantages. At first, it seemed like a simple solution would be to increase the size of the block. However, the discussions did not lead to any specific decision. Some developers argued for 2, others — for 8 megabytes. There were even those who suggested 32 megabytes.
The discussion escalated into the “scaling debate” that divided the Bitcoin community. Part of the development team argued that any increase in block size would weaken the decentralization of the protocol by concentrating processing power. After all, larger block sizes would also increase the requirements for mining equipment. There was a fear that the race for more powerful machines would eventually make Bitcoin mining unprofitable. And there was also the risk the number of nodes able to store the increased blockchain size would reduce, further centralizing the network.
Some developers questioned whether anything needs to be changed in the Bitcoin blockchain at all. After all, it is always possible to simply create a fork, modify the open source code, and run your own coin. And that is exactly what happened — Bitcoin Cash was launched.
What Is the Total Supply of Bitcoin Cash?
The total supply of BCH is limited to 21 million Coins. Initially, 15 000 000 BCH were created at the time of the fork.
As the BCH blockchain completely copies the original Bitcoin blockchain, the coins are also created through mining. The reward per block is 6.25 BCH, decreasing (halving) every 4 years. The entire supply of coins will be mined by about 2035.
What Are the Features That Make Bitcoin Cash an Effective Medium of Exchange?
As a somewhat improved version of Bitcoin, Bitcoin Cash provides a permanent and efficient payment system. In February 2020, it was estimated that more than 4,300 stores worldwide accepted BCH. As of today, that number is probably even higher. This success has been achieved through a number of improvements of the original blockchain.
To ensure that one block is created approximately every 10 minutes, Bitcoin Cash uses a special algorithm that adjusts its mining difficulty parameters. The algorithm is called the Difficulty Adjustment Algorithm or DAA. It allows the difficulty to be adjusted after each block created.
In June 2019, a group of researchers demonstrated that Bitcoin Cash's DAA is stable regardless of cryptocurrency price volatility, and the supply of hash power remains very elastic.
Block Size Differences
As mentioned above, each block in the Bitcoin Cash blockchain is 32 MB in size, which provides a significant increase in transaction speed compared to Bitcoin. The larger block size also results in lower transaction fees.
And while the increased block size has led to increased hardware requirements for nodes, Bitcoin Cash developers believe that full nodes should only be operated by large specialized mining companies and other stakeholders, including cryptocurrency exchanges.
Smart Contracts and Decentralized Finance
Bitcoin Cash allows the use of smart contract languages, such as Cashscript, which allow for more complex features than just simple payments. It sets the stage for building “decentralized financial” applications on this blockchain.
At the moment, there is an active development of a Bitcoin Cash side chain called Smart Bitcoin Cash. It aims to implement multifunctional smart contracts. Smart Bitcoin Cash is compatible with Ethereum's EVM and Web3 API and should provide high throughput for dApps in a fast, secure and decentralized way.
Similar to the way ERC-20 tokens are issued on the Ethereum network, Bitcoin Cash uses the Simple Ledger protocol to activate the creation of new tokens on the blockchain.
Developers gave up the Replace-by-fee (RBF) feature in Bitcoin Cash, thus making unconfirmed transactions irreversible on the network. In BCH blockchain, it is not possible to send a new transaction with more gas in place of a “hung” transaction. This makes the BCH protocol a more secure and more efficient payment solution, especially when transactions must be processed quickly.
Bitcoin and Bitcoin Cash have a number of important differences that have placed these projects in different niches so that there is virtually no fierce competition between them. In practical terms, Bitcoin Cash is a slightly faster version of Bitcoin with lower fees.
Bitcoin Cash has the potential to become a popular tool for transactions and money movement. Whereas Bincoin is more likely to remain a store of value, a kind of digital equivalent of gold.
Which Is Better Bitcoin Or Bitcoin Cash?
There is no definitive answer to this question. Being the first and time-tested cryptocurrency, Bitcoin is considered to be a great store of value. Bitcoin Cash is identical to Bitcoin, but is more scalable and enables faster transactions, which makes it an efficient medium of exchange.
What Is A Hard Fork?
A hard fork is a change in the cryptocurrency's programming code that creates new rules for the system that are incompatible with the old algorithms. Since the old and new rules cannot work within the same chain, a network fork occurs. The “original” chain continues to work according to the established algorithms, while the new blockchain will follow the new rules.
Are There Any Other Forks Of Bitcoin?
Yes, there are many forks of Bitcoin. More or less well-known forks include Bitcoin Gold, Bitcoin Private, and Bitcoin Diamond.
How Many BCH Are There?
According to CoinMarketCap, the current circulating supply is 19,293,694 BCH at the end of January 2023.
Is Bitcoin Cash a Good Investment?
Unlike many other coins, Bitcoin Cash today has a clear use case and real-world applications. This asset is accepted as payment for goods and services in thousands of stores around the world. This means that BCH is a fundamentally strong asset. Analysts at Priceprediction expect that the price of BCH can reach $463.58 by 2025. However, to decide whether it is worth to invest in this asset or not, you should do your own research.
Bitcoin Cash Vs Bitcoin Price
As of the beginning of March 2023, Bitcoin price is $22,387.47, while BCH price is $123.61.
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