Bitcoin was the very first cryptocurrency to gain widespread attention. It was designed as a form of money that operates outside the control of governments or banks, allowing people to send payments directly to one another.
Bitcoin Cash, on the other hand, is a newer cryptocurrency that emerged from a split—or “fork”—in the Bitcoin blockchain. A fork happens when some users disagree with changes in a blockchain and decide to create their own version to follow a different set of rules.
Bitcoin Cash was created in 2017 after developers and miners disagreed about how Bitcoin should evolve and handle growth.
Key Points to Know
- Bitcoin has limitations in how quickly it can process transactions.
- This limitation has caused divisions within the Bitcoin community over time, particularly among developers and miners.
- Bitcoin Cash was created by a group of miners and developers who were worried that Bitcoin might struggle to grow efficiently.
- Bitcoin blocks are originally capped at 4MB in size.
- Bitcoin Cash blocks can be much larger—up to 32MB—allowing for faster processing of transactions.
Bitcoin
In July 2017, major Bitcoin mining pools and companies, representing around 80% to 90% of Bitcoin’s computing power, decided to implement a technology called Segregated Witness (SegWit).
This change reduced the amount of data that needed to be verified in each block. SegWit works by moving signature data—the information used to confirm a transaction—from each transaction into a separate part of the block called the coinbase transaction.
This was a significant technological change because signature data makes up a large portion of the information in each block. With SegWit, Bitcoin blocks were no longer strictly limited to 1MB.
Instead, a new measurement called block weight was introduced, allowing blocks to scale up to 4MB. This change helped Bitcoin handle more transactions per block without completely overhauling its original system.
Bitcoin Cash
Bitcoin Cash emerged because some Bitcoin miners and developers were concerned about Bitcoin’s ability to scale efficiently. These individuals felt that SegWit did not fully solve the core scalability issue and did not follow the vision originally outlined by Bitcoin’s mysterious creator, Satoshi Nakamoto.
In August 2017, these developers and miners created a hard fork, forming a new cryptocurrency: Bitcoin Cash (BCH). Bitcoin Cash has its own blockchain and technical rules.
The main difference from Bitcoin is its much larger block size. Originally set at 8MB, this block size allows for faster transaction verification. In 2018, the block size was further increased to 32MB, giving the network more flexibility to process transactions quickly, even as more users join.
Bitcoin Cash also follows a halving schedule, similar to Bitcoin. This means that roughly every four years, the reward miners receive for processing blocks is cut in half. The most recent halving occurred on April 3, 2024, reducing the reward to 3.125 BCH.
Because of its larger blocks, Bitcoin Cash is designed to process transactions faster than Bitcoin. This can result in shorter wait times and potentially lower fees for users. The BCH network is theoretically capable of handling more transactions per second than Bitcoin.
However, in practice, it rarely sees more than 250,000 daily transactions, whereas Bitcoin consistently handles much higher volumes.
Special Considerations
The debate over scalability, block sizes, and transaction speed continues even after the creation of Bitcoin Cash. In November 2018, Bitcoin Cash itself underwent a hard fork, resulting in another new cryptocurrency called Bitcoin SV (Satoshi Vision).
Bitcoin SV was created to stick more closely to Satoshi Nakamoto’s original vision while making adjustments to improve scalability and transaction speed.
Despite the larger block sizes, Bitcoin Cash has never reached the same popularity or transaction volume as Bitcoin. On average, BCH blocks have been about 29.6KB, compared to Bitcoin blocks, which average around 1.6MB.
Practical Use
Bitcoin remains the most widely used cryptocurrency and has the largest market value, which means it is easier to trade and use in real-world applications. Bitcoin Cash, while faster in theory, has lower trading volume and less liquidity.
Choosing between Bitcoin and Bitcoin Cash depends on your priorities. Do transaction speed and low fees matter more to you than market popularity? Are you concerned about the risk of lower liquidity with BCH? It is important to periodically review your investment goals and consider consulting an expert in cryptocurrency before making decisions.
Frequently Asked Questions
Is Bitcoin Cash the same as Bitcoin?
No. Bitcoin Cash was created from a Bitcoin fork in 2017. Since then, both cryptocurrencies have been developed separately and now differ in important ways, including block size and transaction speed.
What are the downsides of Bitcoin Cash?
The biggest downside is that BCH never gained the same level of attention or adoption as Bitcoin. Bitcoin’s first-mover advantage and established reputation make it the dominant cryptocurrency.
Is Bitcoin Cash safe?
Bitcoin Cash has a smaller network, lower market capitalization, and significantly fewer daily transactions. This smaller network can be less secure, and lower trading volumes create liquidity risks, making it harder to buy or sell large amounts quickly. As of May 12, 2024, BCH had around 23,000 active addresses, compared to over 521,000 for Bitcoin.
Conclusion
Bitcoin Cash was born from a disagreement in the Bitcoin community over how to solve speed and scalability problems.
While Bitcoin remains the largest and most popular cryptocurrency, Bitcoin Cash offers faster transaction processing and lower fees, appealing to users who prioritize efficiency.
Both have dedicated user bases, but each serves slightly different purposes and audiences within the crypto world.
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