Bitcoin Cash, the cryptocurrency that was launched as an upgraded version of Bitcoin, has gone through so many changes that it’s now considered a completely different cryptocurrency in the community.
Most people don’t know that Bitcoin cash was launched to fix the scalability issues of Bitcoin.
Bitcoin’s Scalability Issue
Bitcoin is the most popular cryptocurrency that is often seen as digital gold. But there are some flaws in its network that are now affecting its growth.
Bitcoin’s network has drastically grown over the past years due to which the transaction speed has significantly decreased. According to an estimate, Bitcoin’s blockchain can process around 4-7 transactions per second.
On the contrary, visa (the most popular centralized payment provider) is processing around 1,700 transactions per second.
The company even claims that its payment processing system is capable of processing 24,000 transactions every second. So, it’s a serious challenge for the entire crypto industry because Bitcoin is the leading face of this market.
Why Bitcoin Cash Was Launched?
Bitcoin’s developers and miners had identified this problem in 2017 and they started looking for a solution that may support the continuous growth of the Bitcoin Network. Bitcoin’s blockchain stores 1MB of data in each block and it uses gas fee as a key factor when processing transactions which means the transactions with higher fees are processed on priority bases.
The developers and miners found a backlog of unconfirmed transactions being formed when the demand on the network increased. The transactions are only included in the blocks once they’re verified and confirmed by a participant.
The historical data shows that more than 100,000 unconfirmed transactions were held in the network’s backlog at a time. As a result, transaction fees surged drastically driving users away from Bitcoin.
SegWit2x Upgrade
Bitcoin miners and business owners then held a meeting on May 23, 2017, to solve this problem. They had two solutions under consideration.
- Processing more information at a time by increasing the data storage capacity of each block.
- Reducing the amount of verifiable data in each block.
After a detailed discussion behind closed doors, the community decided to introduce the SegWit2x Upgrade. This protocol was designed to increase the block sizes to 2MB while segregating some data outside the limited block space.
Some community members opposed this solution considering it as a centralizing force because the main codebase of BTC wasn’t represented.
Those, who were in the favor of small blocks, raised arguments saying that increasing the block size will ultimately increase the size of blockchain which will potentially undermine the decentralization and democratization of the currency.
And those, who were in the favor of bigger blocks, backed their argument saying that the crypto industry’s growth will be affected if we didn’t take steps to reduce the transaction fees of Bitcoin. The debate ultimately led to a hard fork that was introduced as Bitcoin Cash.
Bitcoin vs Bitcoin Cash
As mentioned above, Bitcoin Cash was an upgraded version of Bitcoin. But it went through a number of changes over the years because both the networks are managed by developers who are focused on achieving different goals. Bitcoin cash went through so many changes that it’s now recognized as a completely different asset in the crypto community.
Transaction speed is the most important factor that differentiates between these networks. But there are several other factors to look out for.
- Block Size
Bitcoin Cash (BCH) accelerated the verification process by increasing the block size to 8MB. After successful trials, the block size was upgraded to 32MB in October 2021. Thus, Bitcoin Cash managed to offer faster transaction speed while significantly reducing the transaction fee.
On the other hand, Bitcoin’s transaction speed is still very low because it has a block size of 1.39MB only. But it’s worth noting that Bitcoin’s network is more secure than Bitcoin cash
- Market Capitalization
The circulating supply of Bitcoin Cash is almost equal to Bitcoin. Still, it’s ranking at 28 in terms of market cap. Bitcoin has successfully maintained its position as the leading cryptocurrency with a market cap of $789 billion while Bitcoin cash only has a market cap of $6 billion.
- Smart Contracts and Decentralized Finance (Defi)
Although developers are working on building Decentralized Finance Services on Bitcoin’s network, Bitcoin doesn’t support any such services so far. On the contrary, Bitcoin cash has already started using smart contract languages to compete with other cryptocurrencies.
The developers have already built a few tools including CashFusion and CashSuffle on BCH’s network.
- Replace-By-Fee
It’s a feature Bitcoin users can use to replace a transaction with a higher transaction fee if their previous transaction is stuck without being processed. Bitcoin cash hasn’t introduced this feature due to which the unverified transactions can’t be reversed on its network.
- Total Supply
The total supply of Bitcoin Cash is equal to Bitcoin. Thus, it has a limited supply of 21 million coins that will be released over time. Like Bitcoin, the token issuance rate of Bitcoin cash is cut by half after every four years. Currently, the circulating supply of Bitcoin and Bitcoin cash is almost 90-91% of the total supply.
- Different Visions
Bitcoin Cash swiftly adopts innovative changes to provide a better experience to its users. Bitcoin, on the other hand, follows a careful approach to maintain the integrity of the currency. Bitcoin is slowly implementing the Lightning Network to increase its capacity to process 15 million transactions per second.
Bitcoin Cash is focused on offering faster speed and low transaction fees while Bitcoin supporters want to maintain the standards of decentralization and censorship resistance.
Conclusion
Bitcoin cash was introduced as an upgrade of the Bitcoin network because Bitcoin’s transaction processing speed is very low as compared to the competitors. But Bitcoin’s supporters didn’t accept Bitcoin Cash because of its vulnerabilities. And there are now so many differences in these networks that they’re now recognized as completely different assets.