Bitcoin and Bitcoin Cash: What’s the difference?

Bitcoin (BTC) and Bitcoin Cash (BCH) are similar in meaning, but differ primarily in scalability and transaction costs.

In this article, we will explain more about Bitcoin and Bitcoin Cash.

Although BTC and BCH are both cryptocurrencies, they both (at least effectively) serve different roles in the crypto world. BCH was forked through BTC in 2017 to stay true to BTC’s original intent of serving as a quick mode of transferring cash electronically.

Let’s take a look at the background to understand why BCH was separated from Bitcoin and the Bitcoin vs. Bitcoin Cash conundrum.

What is Bitcoin?

BTC is a cryptocurrency launched in 2009. In the Bitcoin White Paper, Satoshi Nakamoto (the creator of BTC) stated that his vision for BTC is to provide the world with a P2P version of sending electronic money without financial intermediaries. BTC’s journey so far has been remarkable, but there have been bumps along the way.

Bitcoin is the pinnacle of cryptocurrencies, but it’s not easy to trade. In addition to the usual concerns about volatility, the Bitcoin blockchain is quite slow in processing transactions. This is why Bitcoin’s original purpose seems to have been sidelined. At the moment, most people are putting money into BTC in hopes of increasing its value, just like other capital assets such as gold.

A group of Bitcoin miners aimed to bring the purpose of BTC back to the blockchain by increasing the speed of transaction processing. This is where BCH comes into play.

What is Bitcoin Cash?

Bitcoin Cash emerged in 2017 as a hard fork from the Bitcoin blockchain. Bitcoin miners, who owned 85% of the computing power, came together on May 23, 2017 to reveal the path to the SegWit2x upgrade. This upgrade was intended to help Bitcoin scale by decoupling it. Data outside the BTC block size can be up to 8MB.

The proposal divided the BTC community into supporters of increasing block size to limit the increase in transaction fees, and opponents who expressed concerns about the difficulty of hosting and centralizing full nodes.

On August 1, 2017, proponents of larger block sizes forked the Bitcoin blockchain to create a new cryptocurrency, Bitcoin Cash. BCH’s maximum block size has since quadrupled to 32MB in 2018, but the actual block size is much smaller.

Bitcoin and Bitcoin Cash

Both BTC and BCH use a proof-of-stake mechanism that requires miners to mine blocks to confirm transactions on the blockchain in exchange for coins.

Both coins use DAA (Difficulty Adjustment Algorithm). BTC’s network difficulty is adjusted every 14 days (or every 2016 blocks), while for BCH it is adjusted every 10 minutes (or every block). Simply put, difficulty indicates how much computational power miners require for each block.

Although the two coins have some similarities, there are some notable differences.

#1.Transaction processing speed

As you know, Bitcoin transaction processing speed is relatively slow. Let’s talk about how slow it is .

For context, consider Visa Inc. The company processes approximately 150 million transactions every day, which equates to approximately 1,700 transactions per second. However, this is simply the capacity used. The company’s actual processing capacity is a whopping 65,000 transactions per second.

BTC transaction processing speed is close to 7 transactions per second. Scalability is certainly a big issue. Although BCH’s transaction speeds are significantly improved at around 200 transactions per second, they are still slower than Visa’s transaction speeds. However, BCH charges lower transaction fees.

#2.Transaction fee

BCH’s large block size makes the block space much less competitive, helping to significantly reduce transaction fees. Trading BTC can cost around $3 each time (as of this writing). In the past, BTC transaction fees rose to as high as $60 per transaction. By comparison, BCH’s highest transaction fee to date has not exceeded $1, hovering around 28 cents (also at the time of writing).

BCH also discontinues the RBF (replacement with fee) feature. RBF requires transactions that are stuck as unconfirmed on the blockchain to be replaced with another version of the same transaction, which also comes with higher fees.

Critics claim that RBF can be misused to use the same funds multiple times. For example, a person may use RBF to transfer funds to a vendor in exchange for a product or service for a small fee. If the vendor does not give enough time to complete the verification, that person can route the transaction to another wallet (of which he or she is the beneficiary) only by paying a higher fee.

However, most RBF versions require the output of both transactions to match. Additionally, if the recipient holds off until confirmation is complete, the original transaction will be executed, making RBF impossible.

#3.Block size usage rate

I’ve mentioned block size several times here, and it’s true that BCH has larger blocks (Bitcoin’s 1MB blocks vs. Bitcoin Cash’s 32MB blocks). However, the caveat here is that BCH is not able to utilize block space.

Despite the increased transaction processing speed, there were not enough transactions to fill the marginal block space. This is one reason why BCH’s growth has been limited.

Speaking of block size, another cryptocurrency was forked from the BCH blockchain in 2018. It is called BSV (also known as Bitcoin Satoshi Vision). BSV aims to increase the block size to 1TB, and has already surpassed the Bitcoin blockchain in terms of accumulated data size.

#4.Smart contract function

Although the Bitcoin blockchain does not inherently support smart contracts, Bitcoin DeFi services are under development. BCH is already working with smart contract languages ​​such as Cashscript . Cashscript allows you to create cash contracts in an easier way. This is essentially BCH’s ticket to take on BTC and ETH on the DeFi front.

Another way to create smart contracts (and issue tokens) with BCH is to use the wormhole protocol. The Omni-layer protocol also enables the issuance of BCH tokens and the creation of NFTs, as well as the ERC-721 and ERC-777 standards.

Bitcoin vs. Bitcoin Cash: Which coin should you invest in?

Before discussing these coins from an investment perspective, it is important to realize that demand and perceived value drive the price of these assets. You’re not buying something more fundamentally backed, like when you invest in stocks or gold.

Therefore, it is best to only invest money that you can afford to lose. For example, this year, the price of BTC exceeded $60,000 for the first time, and then quickly fell below $30,000.

If this gives you nightmares, cryptocurrencies are not for you. If you decide to invest, experts recommend sticking to BTC and ETH only. While BTC has been around for more than a decade, BCH has a much shorter history.

BTC has hit new highs several times in the past, which brings some comfort. However, BCH hit an all-time high of $3,785 shortly after its launch, but has since ranged between $500 and $1,500 .

last word

Both BTC and BCH are volatile, but BTC has a higher brand value. It is considered a safe haven for crypto investors and is in a much better position than BCH.