Tech
Bitcoin vs Bitcoin Cash: What’s the Difference?
Bitcoin vs. Bitcoin Cash: An Overview
Bitcoin was the first cryptocurrency to reach public awareness. It started as a payment method outside the control of government bodies or other third parties. Bitcoin Cash is a cryptocurrency created by a fork of the Bitcoin blockchain, which occurs when users resist change or reprogram a blockchain to work the way they want. Bitcoin liquidity was bifurcated in 2017 after developers and users disagreed over the direction Bitcoin was going.
Key points
- Bitcoin is limited by transaction processing time, an issue that has caused factional rifts within the Bitcoin mining and development communities.
- Bitcoin Cash was started by Bitcoin miners and developers concerned about the future of Bitcoin and its ability to grow effectively.
- While Bitcoin blocks are limited to 1 MB, BCH blocks can go up to 32 MB.
Bitcoin
In July 2017, mining pools and companies representing about 80%-90% of Bitcoin’s computing power have voted to incorporate a technology known as segregated witness (SegWit). This fix reduced the amount of data to verify in each block by removing the signature data from the block that needs to be processed in each transaction and appending it in an extended block. It is estimated that signature data represents up to 65% of the data processed in each block, so this was not an insignificant technological change.
In September 2017, research published by the cryptocurrency exchange BitMEX demonstrated that the implementation of SegWit helped increase the block size in the context of a constant rate of adoption of the technology.
Bitcoin Cash
Bitcoin Cash is a different story. Bitcoin Cash was started by Bitcoin miners and developers equally concerned about the future of the cryptocurrency and its ability to grow effectively. However, these people had their reservations about the function of segregated witnesses. They felt that SegWit did not address the fundamental problem of scalability in a meaningful way, nor did it follow the roadmap initially outlined by Satoshi Nakamotothe anonymous subject who first proposed the blockchain technology underlying cryptocurrency.
In August 2017, some miners and developers started an initiative hard fork, effectively creating a new blockchain and currency: Bitcoin Cash (BCH). BCH has its own blockchain and specifications, including a crucial distinction from Bitcoin: it has a larger block size of 8MB to speed up the verification process. This block size has an adjustable size level, which guarantees transaction verification speed, regardless of the number of miners supporting it. This limit was increased to 32 MB in 2018.
Bitcoin Cash is therefore, in theory, capable of processing transactions faster than the Bitcoin network, meaning wait times should be shorter and transaction processing fees could be lower. The Bitcoin Cash network is also believed to be able to handle many more transactions per second than the Bitcoin network. However, this claim has yet to be tested, as the blockchain only records more than 115,000 transactions daily on average.
special considerations
The scalability debate transaction in progress, and the blocks continued beyond the fork in the road that led to Bitcoin Cash. In November 2018, for example, the Bitcoin Cash network experienced its own hard fork, which led to the creation of another offshoot of Bitcoin called Bitcoin SV. Bitcoin SV was created in an attempt to stay true to the original vision of Bitcoin described by Satoshi Nakamoto in the Bitcoin white paper, while making changes to facilitate scalability and faster transaction speeds.
Bitcoin remains the most popular cryptocurrency in the world, as well as the largest market capitalizationso BCH users may find that real-world liquidity and usability are lower than with Bitcoin.
Even with a larger block size implemented to reduce transaction times and improve usability, BCH does not come close to the popularity and volume of Bitcoin. BCH block sizes as of November 1, 2023 ranged from a few hundred bytes to around 7 MB, while BTC blocks consistently ranged from 1.1 MB to around 1.8 MB.
How does the market capitalization of Bitcoin Cash compare to that of Bitcoin?
On November 1, 2023, Bitcoin Cash had a market capitalization of $4.7 billion, ranking 18th among cryptocurrencies by this metric, while Bitcoin was by far the largest cryptocurrency overall, with a capitalization of market of 673 billion dollars.
What is the total supply of Bitcoin Cash?
Like Bitcoin, the total supply of Bitcoin Cash will never exceed 21 million coins. The rate at which new coins are added to the circulating supply gradually declines according to a defined schedule, with the issuance rate halved approximately every four years. As of November 1, 2023, the circulating supply of Bitcoin Cash was 19,547,438 BCH, or approximately 93% of the total supply. The circulating supply of Bitcoin was 19,530,375 BTC, or 93% of the total supply.
What are the characteristics that make Bitcoin Cash an effective means of exchange?
Bitcoin Cash allows peer-to-peer payments between individuals, like cash, but in digital form. Fees for sending Bitcoin Cash are typically a fraction of a cent, while settlement occurs almost instantly regardless of the physical location of the participants in the transaction. These features make Bitcoin Cash useful for everyday transactions and microtransactions.
The bottom line
Bitcoin and Bitcoin Cash are two cryptocurrencies that have evolved from the original version of Bitcoin. Bitcoin Cash split from Bitcoin in 2017 after the community disagreed on how to resolve scalability and speed issues. Bitcoin remains the leading cryptocurrency by price and market capitalization, but Bitcoin Cash also has a significant user base.
The comments, opinions and analyzes expressed on Investopedia are for informational purposes only. Read ours warranty and exclusion of liability for more information. As of the date this article was written, the author does not own cryptocurrency.