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Bitcoin vs. Bitcoin Cash: An Overview
Bitcoin was the first cryptocurrency to achieve public awareness. It began as a payment method outside the control of governing bodies or other third parties. Bitcoin Cash is a cryptocurrency created from a Bitcoin blockchain fork which occurs when users resist change or reprogram a blockchain to operate the way they want it to.
Bitcoin Cash forked in 2017 after developers disagreed about the direction Bitcoin was taking.
Key Takeaways
- Bitcoin is limited by transaction processing time.
- This issue historically created factions within the Bitcoin mining and developing communities.
- Bitcoin Cash was started by Bitcoin miners and developers who were concerned about the future of Bitcoin and its ability to scale effectively.
- Bitcoin blocks are limited to 4MB.
- BCH blocks can be up to 32MB.
Bitcoin
Mining pools and companies representing roughly 80% to 90% of Bitcoin computing power voted to incorporate a technology known as segregated witness (SegWit) in July 2017. This fix made the amount of data that needed verification in each block smaller. It removed signature data from the block that must be processed in each transaction and placed it in the coinbase transaction field.
Signature data was estimated to account for a large amount of data processed in each block so this was not an insignificant technological shift.
The Bitcoin code was altered to account for this development and it was changed so that Bitcoin blocks were no longer limited to 1MB. Blocks gained a change called block weight which could scale up to 4MB.
Bitcoin Cash
Bitcoin Cash was started by Bitcoin miners and developers who were equally concerned with the future of the cryptocurrency and its ability to scale effectively.
These individuals had their reservations about the segregated witness feature, however. They felt that SegWit did not address the fundamental problem of scalability meaningfully nor did it follow the roadmap initially outlined by Satoshi Nakamoto, the anonymous party who first proposed the blockchain technology behind cryptocurrency.
Some miners and developers initiated a hard fork in August 2017, effectively creating a new blockchain and currency: Bitcoin Cash (BCH). BCH has its own blockchain and specifications, including one crucial distinction from Bitcoin: it has an increased block size of 8 MB to accelerate the verification process.
This block size has an adjustable size level which ensures transaction verification speeds regardless of the number of miners supporting it. This limit was increased to 32 MB in 2018.
Important
Bitcoin Cash also has a halving event that occurs about every four years. Its block reward is reduced by 50% during this event. The last halving occurred on April 3, 2024 and reduced the reward to 3.125 BCH.
Bitcoin Cash is therefore theoretically able to process transactions more quickly than the Bitcoin network. 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.
These claims have yet to be tested, however. The blockchain rarely averages more than 250,000 daily transactions, compared to Bitcoin, which consistently has much more than that.
Special Considerations
The debate about scalability, transaction processing, and blocks has continued beyond the fork that led to Bitcoin Cash. The Bitcoin Cash network experienced its own hard fork in November 2018, creating yet another derivation of Bitcoin called Bitcoin SV. Bitcoin SV was created to stay true to the original vision for Bitcoin that Satoshi Nakamoto described in the Bitcoin white paper while making modifications to facilitate scalability and faster transaction speeds.
BCH doesn’t experience nearly the popularity and volume of Bitcoin even with an increased block size implemented to decrease transaction times and improve usability. BCH block sizes throughout its existence have an average of about 29.6KB. BTC blocks have an average of about 1.6MB.
Use This in Real Life
Bitcoin remains the most popular cryptocurrency in the world and the largest by market capitalization so you may find that liquidity and real-world usability are lower with BCH than they are for Bitcoin. The best choice for you will ultimately depend on your priorities.
Do transaction times matter to you? How are you planning to use your investment? Will the risk of low trading volume be more than your nerves can bear? You’ll probably have to review your goals-and-needs checklist periodically because these options can shift unexpectedly and with some frequency. You might be best off consulting with someone well-versed in the field as you make a decision.
Is Bitcoin Cash the Same as Bitcoin?
Bitcoin Cash was hard forked from Bitcoin in 2017. Both have undergone programming changes since then so they are fairly different.
What Is the Downside to Bitcoin Cash?
The only downside to Bitcoin Cash is that it failed to gather the attention and involvement it needed from the cryptocurrency community and investors after it was created. This is likely because Bitcoin has the first-mover advantage which established its dominance.
Is Bitcoin Cash Safe?
Bitcoin Cash has a smaller network, a lower market cap, and a significantly lower daily trading volume. A smaller network is less secure and less trading brings liquidity risk. You might not be able to get in and out of positions quickly. Bitcoin Cash had about 23,000 active addresses compared to Bitcoin’s more than 521,000 on May 12, 2024.
The Bottom Line
Bitcoin Cash evolved from the original Bitcoin release in 2017 after the community disagreed on how to fix scalability and speed issues. Bitcoin remains the top cryptocurrency by price and market capitalization but Bitcoin Cash has a dedicated user base as well.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author owns BTC and LTC.
