To many, Bitcoin and Bitcoin Cash might seem like one and the same thing. If anything, the latter might seem like another extended name for Bitcoin. However, these are two different cryptocurrencies trying to achieve distinct goals, it’s just that they have many things in common.
They both use the same white paper, codebase, and block rewards system. However, Bitcoin Cash is actually an evolution of Bitcoin. It shares many characteristics with its predecessor and boasts several new features too.
Bitcoin Cash was created through a hard fork in the Bitcoin Blockchain. A hard fork refers to a significant change in a blockchain network. It is a radical update that splits a cryptocurrency into two. After the split, one cryptocurrency follows the protocols of the old blockchain, and the other follows a new set of protocols. This is what happened with Bitcoin in 2017, leading to the formation of Bitcoin Cash.
Bitcoin Cash has become a prominent cryptocurrency thanks to the new and improved features it brings to the table. Let’s understand what Bitcoin Cash is and how it came to being.
The problem with Bitcoin
Scaling has always been an issue for Bitcoin, and several other blockchains too. The growth of a network leads to more transactions. The blockchain then needs more nodes to verify these transactions. This increased traffic clogs the network, resulting in slower transaction processing and higher transaction fees.
While other new blockchains can finalize a transaction in seconds, it takes networks like Bitcoin and Ethereum minutes to do the same. As a result, people have to wait longer for their transactions to be processed, which is not good for a network trying to onboard new users. And even if it did onboard new customers, they would only amplify the problem.
Global payment provider Visa can process an average of 17,000 transactions per second. In contrast, the average transaction per second rate for Bitcoin is 5.
Another factor that slows down the transaction rate is the block size. Blocks are where the transaction data is stored after verification. Each block on the Bitcoin network is 1 MB. When there is more traffic in the network, the limited block size creates a backlog of transactions waiting to be finalized.
The solution to the scaling problem
Scaling has become an important factor for developers and users use to gauge the proficiency of a blockchain network. Newer blockchains that have inbuilt scaling solutions have emerged and offer TPS rates in the thousands. To combat this, blockchains with scaling inefficiencies have developed two interesting solutions:
-Creating layer two solutions: Here, a secondary network is built on top of the primary blockchain. This secondary layer takes some of the transaction load from the main network and processes it before sending it back for storage.
-Increasing the block size: This allows more transactions to be stored on a single block.
However, both solutions have trade-offs. And this is what the bitcoin community struggled with — choosing one over the other. The debate about what solution to apply to the Bitcoin network ultimately led to a split in the network and gave us Bitcoin Cash.
The Bitcoin hard fork
In 2017, prominent figures in the Bitcoin community met behind closed doors to decide what solution would be adapted to address the scaling problem. The topic of contention was the SegWit2x upgrade that called for the block size to be increased to 2MB.
This led to a debate between the opposers and those in favour of the increase. The opposers lamented that the upgrade would not align with Satoshi Nakamoto’s roadmap for Bitcoin. Increasing the block size would increase the overall size of the blockchain, making it harder to host a full node.
People in favour of the size increase argued that it would lead to higher transaction rates and lower transaction fees. They also argued that if Bitcoin did not implement the measure, it would cause harm in the longer run.
Even after much debate, a consensus could not be reached. Eventually, those in favour of the increased block size forked the Bitcoin blockchain on August 1, 2017, leading to the creation of Bitcoin Cash.
The differences between Bitcoin and Bitcoin Cash
Value of the asset
The most significant difference for the average crypto trader would be the price of the two assets. Bitcoin is much costlier than Bitcoin Cash and has a significantly larger global market cap. At the time of writing, bitcoin was selling at around $45,000, while bitcoin cash was priced at around $350.
Block size
This is the main factor that led to the split of the network. Bitcoin still has a block size of 1 MB, while Bitcoin Cash’s block size has grown to become 32 MB. The increase in block size has decreased Bitcoin Cash’s transaction fee and increased the transaction per second rate to 200 TPS.
Implementation of smart contracts
Smart contracts have become an important facet of the blockchain and decentralised finance industry. They are self-executing pieces of code that are triggered when certain conditions have been met. Thus, they remove the need for mediators and intermediaries.
Bitcoin Cash supports smart contracts on its network, while Bitcoin does not. Although, there is some speculation that Bitcoin will also soon adopt smart contracts in its network.
Token issuance
Tokens on the Bitcoin network are issued by projects using the Omni layer, a platform that creates and trades custom digital assets.
Meanwhile, Bitcoin Cash uses a protocol known as the simple ledger protocol (SLP). SLP allows tokens to be issued in a similar way to how the Ethereum network does it. In addition, SLP also helps to issue NFTs or non-fungible tokens.
The ’replace by fee’ feature
The Bitcoin network has a feature that allows transactions that have not been confirmed to be cancelled and replaced with another transaction, they just need to be accompanied with a higher transaction fee.
Bitcoin Cash got rid of this feature in the split. Unconfirmed transactions cannot be cancelled on the network, but this does not present itself as a huge problem because the transaction throughput of Bitcoin Cash is higher than Bitcoin’s.
