2017 has been a fantastic year for Bitcoin and cryptoassets. Markets rallied, Bitcoin prices skyrocketed to $ 20,000, and cryptocurrencies have become a mainstream media priority.
It was also in 2017 that Bitcoin split into two separate coins: Original Bitcoin (BTC) and Bitcoin Cash (BCH), which left the media and many new users in awe of the reality.
Some BCH supporters even encouraged confusion and benefited from the original Bitcoin’s brand name and hype. Some websites and wallets have also referred to Bitcoin Cash as “Bitcoin” to express their opinion on BCH as the best version of Bitcoin.
Since then, we have seen the rise of other coins breaking away from the Bitcoin blockchain and keeping “Bitcoin” in their name, for example, Bitcoin Gold (BTG), Bitcoin Diamond (BCD) or Bitcoin Uranium (BUM). In 2018, Bitcoin Cash further split into Bitcoin Cash and Bitcoin Satoshi Vision (BSV).
This article will attempt to explain the difference between Bitcoin (BTC) and Bitcoin Cash (BCH) and a short history behind the hard fork that allowed BCH to exist today.
The scalability dilemma
Bitcoin can be described as a peer-to-peer payment system. It allows direct transfers of value (in the form of digital currency) between peers without banks or other third parties. Transactions are verified by a distributed, global network of private computers, and the automated nature of the process makes Bitcoin faster, cheaper, and borderless. However, it is not yet scalable.
Due to technological constraints, namely the size of Bitcoin’s blocks (1 MB) and the time required to issue each block (10 min), the Bitcoin network can only process between 3 and 27 transactions per second (TPS). To put it in perspective, VISA can handle 56,000 TPS and typically operates at an average capacity of two to four thousand TPS.
The growing popularity of crypto–currencies makes scalability Bitcoin increasingly urgent. Block size constraints mean that many financial documents simply do not fit into the block. As transactions compete to be processed faster, fees increase as well.
In 2017, there was a schism within the Bitcoin community of developers, miners, and node operators who run the global Bitcoin network. Part of the group believed that Bitcoin should stay as is, with a block size of 1MB. They proposed that future scaling be done through second-layer protocols, i.e. the network. Lightning , which allows off-chain transactions, with only certain data submitted to the blockchain itself.
Others have argued that second layer protocols are not yet functional and that Bitcoin should adapt and evolve on its own. This group campaigned to increase block size by changing the code of the blockchain.
One of the essential attributes of blockchain is that it is immutable, or rather, it is inherently difficult to change because any patch must be approved across the entire node network. This time, the community did not agree to change the original Bitcoin, and therefore the supporters of larger blocks decided to split up and create their own coin, Bitcoin Cash. It happened through a so-called hard-fork.
“Fork” is a technical term for developers who take open-source code and create new and distinct software. A blockchain hard fork occurs when a large number of nodes disagree, and the blockchain splits into two different chains, each propagated through their network.
On August 1, 2017, the Bitcoin hard fork took place which resulted in the creation of an entirely new currency, Bitcoin Cash, with a block size of 8MB, later increased to 32MB. Nodes that chose to Spreading Bitcoin Cash over the original Bitcoin have become part of the new BCH blockchain network.
Bitcoin versus Bitcoin Cash. Advantages and disadvantages
Bitcoin and Bitcoin Cash are two separate cryptocurrency coins, with different prices, market caps, and a different underlying blockchain. They come from the same blockchain, but once BCH broke up it took on slightly different attributes from BTC.
|Bitcoin (BTC)||Bitcoin Cash (BCH)|
|Parts prices (as of October 27, 2019)||$ 9500||$ 260|
|Market capitalization (as of Oct 27, 2019)||$ 172,114,098,964||$ 4,705,568,693|
|Block size||1 MB||32 MB|
|Total size of the blockchain (27-10-19)||172 GB||287 GB|
|Speed (TPS)||3.3 – 7 tps||20 tps|
|Maximum TPS||27 tps||14,300 tps|
|Average transaction fees||$ 1.46||$ 0.0033|
|Peak average tariff||US $ 55||$ 0.9|
|Transaction time||10min – hours / days||10 minutes|
|Blocking time||10 minutes||10 minutes|
|Consensus||Proof of work||Proof of work|
Blockchain scholars still disagree on BTC vs BCH scalability, as well as the future ramifications of the block size change.
Bitcoin Cash appears to perform well in stress tests, where the network manages to process around 2 million transactions in a day without a significant increase in processing fees. The system seems ready for the influx of new users. However, BCH has not yet used the 8MB block sizes; the maximum it reached was about 4.5MB .
There is an ongoing discussion of further increases in block size going forward, which in turn could make blockchain quite ‘heavy’. The total size of the BCH blockchain is currently smaller than the BTC blockchain, at 171 GB and 287 GB, respectively. Full nodes are forced to store full copies of the blockchain as a source of truth. But as both chains grow, it will become more and more expensive to store them on the nodes. This can limit who can become a full node operator and introduce some type of oligarchy into the network. This is the case for BTC and BCH blockchains, but could affect BCH more, once it uses its increased trading capacity.
The original Bitcoin continues to face the same scalability issues. Cryptocurrency is far from becoming the standard payment method, but the fees are already high and transactions can take a long time. You can pay the higher fees to be processed within 10 minutes, or pay less, but wait for hours or, in extreme cases, days. This puts a question mark on the future of Bitcoin in digital payments. At the same time, Bitcoin supporters are hoping that additional layers will address scalability issues, while Bitcoin remains a store of value and a long-term investment, like digital gold.
No solution seems perfect yet, and only time will tell how the market develops. One thing seems clear; the crypto community could benefit from working together to increase the adoption and positive perception of cryptocurrencies as a whole.