Bitcoin versus Bitcoin Cash — What Are Bitcoin Forks?
Bitcoin versus Bitcoin Cash relates to one of the most important debates in the crypto industry’s short but eventful history, namely, one about scalability.
In this article, we discuss these two cryptocurrency projects built around Satoshi’s vision, and why we have several versions of Bitcoin.
Bitcoin & altcoins
After the creation of Bitcoin, the first cryptocurrency, other digital currencies, also referred to as altcoins (alternative cryptocurrencies), were created.
Most of these cryptocurrencies were built separately from the Bitcoin blockchain by merely editing the original Bitcoin code or codes from other existing cryptocurrency projects.
Some Bitcoin alternatives were built directly on the Bitcoin blockchain in the form of another branch that comes with different features in a process called “forking.”
What are forks?
A fork, in cryptocurrency terms, is a drastic transformation of a network’s existing protocol that requires all users and nodes to upgrade to the newest version of the protocol. Or, alternatively, to make a choice between one or the other, as was the case when Ethereum split into Ethereum Classic (ETC) and Ethereum (ETH).
Several cryptocurrency projects have forked to ensure new vital features are added or certain limitations are overcome. However, sometimes part of a cryptocurrency’s community refuses to accept the newly suggested version of the blockchain.
This leads to a split where the former blockchain continues to exist and another, almost identical one, comes into existence alongside it.
Various developers have suggested new updates to the Bitcoin protocol through forks in the past. During every Bitcoin fork, miners have to agree with the latest update since miners are the ones who keep the blockchain running.
Forks that result in the creation of a totally different blockchain are referred to as hard forks, while forks that bring new upgrades on the same blockchain are known as soft forks.
At the end of a soft fork, only one blockchain is adopted and used by the community, while hard forks result in two split blockchains with different users.
There have been several Bitcoin hard forks in recent times, including Bitcoin Cash, Bitcoin Gold, Bitcoin SV, and Bitcoin Private.
In the case of Bitcoin and Bitcoin cash, the story revolves around scalability and transaction capacity.
The block size debate
At the peak of the Bitcoin block size and scalability debate was a period when there was serious network congestion. Increased popularity and usage of the Bitcoin blockchain overwhelmed the system. This meant that instead of all Bitcoin transactions being confirmed in up to 10 minutes, some transactions took hours or days in worst-case scenarios.
The time taken to verify transactions was a problem, and the Bitcoin community had to find solutions. Developers tabled two main ideas to speed up transactions on the blockchain.
One of the solutions included making the amount of data attached to transactions smaller, to enable faster verification times and cheaper transaction fees.
Another faction believed that the best way was to make the blocks of data bigger to process more transactions in one go.
Eventually, the broader Bitcoin community agreed with the first idea and voted to incorporate a technology known as a segregated witness (SegWit2x).
The new addition was agreed on by roughly 80 to 90 percent of Bitcoin miners who implemented the update in July 2017.
However, a smaller set of the Bitcoin community did not believe that SegWit would solve scalability issues. They felt SegWit was not in line with the initial vision of Bitcoin, as established in the Bitcoin Whitepaper by Satoshi Nakamoto.
This unit conducted a hard fork in August 2017 to create Bitcoin Cash (BCH). The new currency ditched the SegWit solution for an increase in the block size of the blockchain to 8 MB.
Bitcoin Cash has its own blockchain and community just like Bitcoin.
Differences: Bitcoin versus Bitcoin Cash
Despite being driven by similar goals, there are significant differences between the blockchains with respect to transaction speed, adoption, and value.
Block size: The Bitcoin blockchain has a block size of 1 MB with SegWit integration, while Bitcoin Cash has a block size of 8 MB.
Transaction speed: Bitcoin Cash transactions are faster and cheaper than Bitcoin transactions. However, there are more transactions recorded on the Bitcoin network compared to Bitcoin Cash due to Bitcoin’s overwhelming popularity.
Adoption: Bitcoin has a wider user base than Bitcoin Cash. This can be seen in the number of transactions on both platforms, merchants who accept Bitcoin as payment, and even trading pairs on cryptocurrency exchanges.
Value: Both currencies have performed well. Of course, at present, Bitcoin dominates the market with a market cap of $178 billion, where 1 BTC is valued at $9,700. Bitcoin Cash, currently priced at $440, is the 4th largest currency, with a market cap of $8,1 billion.
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Originally published at https://academy.aax.com on February 7, 2020.