Difference Between Bitcoin and Bitcoin Cash

A not so long time ago, in a galaxy not so far away, some smart people invented Bitcoin. In the beginning, there were only a few enthusiasts excited about the new currency, but very soon people started to realize the potential. So, the number of miners and people who hold bitcoins and pay with it became to grow exponentially.

It is a great thing, overall, except for one glaring issue: Bitcoin’s transaction speeds are very slow at around 7 transactions per second. As a comparison, Visa performs around 24,000 transactions per second. In 2017 it was clear that there are already too many transactions to handle and some reform is required in order to allow Bitcoin to scale further.

So, why can’t the volume of transactions just be increased?

That’s a great question. Initially, Bitcoin’s Block size limit was 1MB (today it’s 2MB). So, why they can’t make it a larger number, for example 820,100MB?

The answer to this can be explained using a heavy traffic metaphor. For example, say we have a heavy traffic issue, so we decide to change the speed limit to 200 miles per hour. What will happen? First of all, there will be a safety issue because at this speed the chances of crashing and injuries increase. However a potentially bigger problem is that now old and small vehicles will not be eligible for highways, because they can’t move fast enough. So the highway will be full of big people with big strong cars and a regular driver will stay at home or take slower roads to get to where they want to be.

This is exactly what will happen with increasing the limit. More blocks = more data to process for each transaction. So small nodes will not be able to process this increased data and decentralization becomes inevitable.

But there is still a need for more transactions - what is the solution?

The transaction issue has divided the Bitcoin community into two groups. One group claims that Bitcoin was never designed to be a “cup of coffee” payment solution, the other says that it has to scale. As neither group was ready to give up, in August 2017 Bitcoin was basically split using a process called “Hard Fork”, which created a new version of Bitcoin called Bitcoin Cash. Bitcoin Cash uses the same codebase, but with a Blocksize limit of 8Mb. This increased limit makes possible a performance of around two million transactions processed per day.

Bitcoin and Bitcoin Cash in your wallet

Ok, the couple is divorced, but who keeps the children?

What happened to people who had Bitcoins before the fork? The easiest way to solve the issue was to clone the wallets. The last mined block, before the fork, was 478558. So, if you had any Bitcoins before that block, after the fork you’ve will end up having the same amount in Bitcoin Cash. Easy, isn’t it? I wish we could do the same with children. (just kidding, it’s creepy!). Just imagine that you suddenly have 4 kids instead of 2. You are not really sure who is your original son. What about the school, friends, family? Sounds like a nightmare. In the Bitcoin world this nightmare came true in what is known as a “Replay Attack”.

You see, each person after the split has the same bitcoin with the same Private key in two wallets. This means that once you make a transaction, people can use the private key for a transaction in another currency. Instead of paying only from one wallet, the same amount will be deducted from the second too.

Like if you have two apartments and somebody enters and takes a laptop in one of them, he also is able to take the same laptop from another apartment. This doesn’t sound so great, right?

So, all the people now have twice more? Sounds great!

Not really, once the amount has increases, it automatically decreases the overall value of the currency, so nobody has actually become richer from the fork itself.

Another popular question: are the two interchangeable? The answer is: no. They are completely separate now and are able to operate independently of each other - I definitely wish the best of luck to both.

Differences

So, you can say it wasn’t confusing enough before, when we needed to choose from Bitcoin, Ripple, Ethereum and others – now we need to choose from two Bitcoins. Which one is better, you ask? In fact, they are just different, with each currency having its pros and cons. Let’s explore some of these below.

1. New Name

Of course the name itself. The word cash in it is not accidental - the creators are intending that the future of the currency is to become a new form of cash.

2. Advantage/Disadvantage

+  Larger Blocksize limit (8MB). As a result - more transactions are able to be processed for a cheaper fee.

-   Bitcoin has lots of mining pools, so no one is strong enough and a situation where a single miner has a majority of 51% to rule them all is quite impossible.

Bitcoin Cash, on contrary, is highly centralised. Right now we already have 3 mining pools that make more than 51% together. This can be a dangerous situation because the future of the currency becomes too reliant on these three.

3. Technical difference

Bitcoin Cash is aware of its weaknesses and added protection adjustments to close these gaps and make the new currency safer for all to use.  

Replay and Wipeout Protection: Bitcoin Cash uses a different hash algorithm to the one Bitcoin uses. So, the replay between the two chains is no longer possible.

On-chain scalability: Bitcoin Cash’s technology allows for an increase in the number of blocks. Right now it is 8MB and further increases are possible.
New transaction signatures: Bitcoin Cash has a different transaction signature to verify its distinction from Bitcoin.

Emergency Difficulty Adjustment (EDA): A new algorithm which ensures normal chain work in case of dramatic changes of the number of miners This provides additional stability to the currency as a whole.

What factors affect BCH price and why did it spike in November?

Bitcoin Cash was announced on August, 2017. But the rocketjump happened on November of the same year. On November 12, the price rose twice in one day and Bitcoin Cash officially took second place, behind Bitcoin.