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Bitcoin vs Bitcoin Cash - What are the differences?
10 minutes
2 years ago
10 minutes
2 years ago
Cryptocurrency blew onto the scene and quickly became one of the most talked about and popular investment opportunities available. As the first form of blockchain-based cryptocurrency - Bitcoin is still the most trusted, making up 51.22% of cryptocurrency's market cap. BTC, recognized as the inaugural cryptocurrency, is commonly regarded as digital gold or "gold 2.0." It is primarily treated as a store of value and serves as a hedge against inflation. By contrast, Bitcoin Cash is designed as digital cash, with its proponents striving to make it a cost-effective and user-friendly cryptocurrency. BCH originated from a hard fork of BTC, resulting in both assets sharing a transaction history, a common code base, and other fundamental characteristics. In this article, we shall explore the intrinsic nature of these two tokens, with special consideration of their differences.
A hard fork refers to a radical change or upgrade to the protocol of a blockchain network that enables previously invalid blocks and transactions valid, or vice-versa. It happens when a permanent divergence from a blockchain’s latest version is created, and some of the computers running the network no longer meet consensus.
In essence, forks may be initiated by developers/ supporters of a crypto community who grow dissatisfied with functionalities offered by existing blockchain implementations, resulting in one side following the previous protocol and the second side following a new doctrine.
In July 2017, mining pools and businesses accounting for roughly 80% - 90% of Bitcoin computing power made a consensus to incorporate a technology called segregated witness (SegWit). This initiative helped reduce the amount of data needing verification in each block by eliminating signature data from the block that needs to be processed in each transaction and attaching it in an extended block. Signature data was evaluated to account for up to 65% of data processed in each block, so this move was a significant alteration.
Study unveiled by cryptocurrency exchange BitMEX in September 2017 showed that SegWit implementation had raised the block size amid a steady adoption rate for the technology.
Regarding the SegWit implementation, a group of developers and miners equally concerned about the future of Bitcoin and its ability to scale effectively had their reservations against the feature. They argued that SegWit did not address the fundamental issue of scalability meaningfully or follow the roadmap initially outlined by Satoshi Nakamoto.
Therefore, in August 2017, some miners and developers created a hard fork, effectively introducing a new blockchain and currency – the Bitcoin Cash (BCH). BCH has its own blockchain and specifications, including one key distinction from the original Bitcoin: it contains an increased block size of 8 MB to accelerate the verification procedure. Notably, this initiative has an adjustable size level to ensure transaction verification speeds regardless of the number of miners supporting it. In 2018, this limit grew to 32 MB.
Nowadays, as developers of each cryptocurrency target different goals, the gap between these two has become so big that they are now seen as two completely distinct assets in the community.
The difficulty adjustment algorithm added to BCH is one of the primary differences between Bitcoin and Bitcoin Cash. Due to the deployment of the same SHA-256 hashing scheme, Bitcoin miners may move to the Bitcoin Cash network when it becomes more profitable. This implies that the computing power behind the network can vary wildly. The difficulty adjustment algorithm guarantees that blocks are created at a steady rate every 10 minutes, either by halving difficulty if they are behind schedule or through doubling it if they are ahead of schedule.
Whilst Bitcoin maintains its 1 MB block size, Bitcoin Cash’s block size has grown to 32 MB. Thus, transactions on BCH now cost less than a penny, with each transaction taking at most 1/200 second.
Although developers are working to assist building DeFi services on top of Bitcoin, it does not support smart contracts. By contrast, Bitcoin Cash has started deploying smart contract languages such as Cashscript to allow more complicated abilities.
With Cashscript, BCH is now aiming to integrate DeFi into it to help compete with Bitcoin and Ethereum. Some already developed tools are CashSuffle and CashFusion, developed to improve the network’s privacy.
Issuing tokens on top of Bitcoin blockchain requires using the Omni layer, a platform “for creating and trading custom digital assets and currencies.”
On the other hand, Bitcoin Cash has created the Simple Ledger Protocol (SLP), allowing developers to issue tokens on top of BCH, just like how tokens are issued on top of the Ethereum blockchain.
The SLP protocol also supports non-fungible tokens (NFTs). However, their use on BCH has been limited, compared to that on Ethereum or other blockchains.
Replace-by-fee (RBF) is a feature offered on the Bitcoin network allowing users to get a transaction that is “stuck” without being processed, replacing that unconfirmed transaction with a different version with a higher transaction fee attached.
Bitcoin Cash has nevertheless abandoned this feature, making unconfirmed transactions irreversible on its network. With its higher transaction throughput, double spending with RBF would nonetheless become much harder as transactions are confirmed faster.
Bitcoin Cash was initially created with an 8 MB block size and has since quadrupled it. The network has an open policy to embrace new hard forks and takes steps to innovate as much as possible to increase its usability and be used as cash.
Bitcoin, however, is more careful in pushing out upgrades and is viewed as an inflation hedge and store of value. Its scaling plans have seen the implementation of SegWit and the initiation of Lightning Network (creating an extra layer on top of the cryptocurrency’s blockchain where transactions are fast, and fees are minuscule).
Bitcoin supporters value decentralisation and censorship-resistance more than a higher transaction throughput. Bitcoin’s role as a store of value is dependent on its ability to thwart attacks from any entity imaginable.
Bitcoin Cash’s vision as peer-to-peer electronic cash depends on its low transaction fees and faster speeds. Moreover, privacy on Bitcoin Cash is preserved through a different method – coin mixing. With coin mixing, numerous BCH users’ transactions get bundled together to obscure the origin of users’ coins.
Despite differentiators in visions, the monetary of both networks are identical. Sole 21 million coins will ever be created on each blockchain, and the issuance of new coins is halved every 210,000 blocks or roughly every four years. The last BTC and BCH are predicted to be mined in 2140. Furthermore, both tokens can protect against monetary confiscation, censorship, and devaluation through higher-than-expected inflation. They are also transparent and publicly accessible and cannot be altered by a single entity.
On November 1, 2023, Bitcoin Cash had a market capitalization of $4.7 billion (rank No. 18 among cryptocurrencies), while Bitcoin was the largest cryptocurrency by far, with its market cap of $673 billion.
The total supply of Bitcoin Cash and Bitcoin will never exceed 21 million coins. The rate at which new coins are added to the circulating supply gradually decreases along a defined schedule, with the issuance rate cut in half about every four years. As of November 1, 2023, the circulating supply of Bitcoin Cash was 19,547,438 BCH or about 93% of the total supply.
Bitcoin's circulating supply was 19,530,375 BTC or 93% of the total supply.
Bitcoin Cash enables peer-to-peer payments between individuals, like cash, but in digital form. Fees for sending Bitcoin Cash are typically less than a penny, while settlement occurs almost instantly regardless of the physical location of the participants in the transaction. These features make Bitcoin Cash useful for daily transactions as well as microtransactions.
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