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The aim of this article is to give a simple overview of why Bitcoin Cash exists. I’ll be talking about Bitcoin (BTC) and Bitcoin Cash (BCH) which are two distinct cryptocurrencies that often get confused and why they both exist.
Once upon a time there was Bitcoin. Bitcoin was originally invented to be a decentralized peer-to-peer electronic cash system. Whenever a Bitcoin transaction takes place the transaction is queued to be written to the blockchain, a decentralized ledger of all transactions. The transaction gets bundled up with other transactions into a block and added to the chain by miners, with the miners getting paid a set amount of new Bitcoins plus the fees paid for the transactions in the block.
Transaction blocks are added on average once every ten minutes and are 1MB in size. This means that every transaction to be written to the blockchain needs to fit within that block. In the early days this was no problem as there were few transactions, but as the popularity of Bitcoin grew, so did the number of transactions. When the number of transactions exceeds the block size miners are able to pick the transactions with the highest fees, leaving lower fee transactions behind. This results in higher transaction costs for the end users. This hinders the ability of Bitcoin to act as a low-fee cash system, and so a solution was needed.
Multiple solutions were proposed to fix this problem. As various solutions were discussed people gravitated towards one of two schools of thought and this is where the arguments that led to the creation of Bitcoin Cash began.
One view was that bitcoin should remain as it is and transactions themselves should be moved off of the blockchain into settlement layers which would then batch transactions together and add them to the blockchain in groups. This solves this issue but at the cost of removing the Bitcoin blockchain as the sole transaction ledger. Problems like preventing double spending become much more of a concern.
The other view was that the block size should simply be increased. The blockchain would continue to operate as it does but would be able to handle more transactions. One of the core arguments here was that internet connectivity had improved and that maintaining a 1MB block size was no longer required to ensure the smooth operation of mining operations.
The battle between these two ideas raged on, until it was realized that there was never going to be a consensus. Luckily there is still a solution when two distinct development directions for a cryptocurrency arise, a hard fork. This is where the existing blockchain is split into two (or potentially more) different chains, and on 1st August 2017 this is exactly what happened. The Bitcoin chain split in two, with Bitcoin continuing with 1MB block size and Bitcoin Cash being born with an 8MB block size. It should be noted that in 2018 this was again increased to 32MB.
As Bitcoin Cash was making a change it was decided that the original Bitcoin name would remain with the original fork. This is much debated as in reality Bitcoin Cash adheres much more to the original vision for Bitcoin, as a decentralized, accessible and low fee transaction platform allowing individuals to send a receive money without the need for banks. As it stands Bitcoin is unable to offer this as transaction fees are still far too high for most normal day to day transactions.
Hopefully this gives you an easy to follow summary of why Bitcoin Cash exists and how it differs from Bitcoin. If you feel I missed anything or could improve anywhere, please comment below or drop me a message on Reddit.