August 1, 2017, is an important date for the entire cryptocurrency community because it was the day when the most anticipated bitcoin hardforward appeared. There were many opponents to its launch, but many cryptocurrency users spoke out in favor of the new project. Why did the new hard fork find support after all? It was assumed that BCH would be able to solve scalability problems.
Bitcoin Cash became the most successful fork of Bitcoin. Moreover, some services and user groups even abandoned the Bitcoin blockchain and switched to BCH. How deliberate was this move? So why is Bitcoin Cash so popular? What is the difference between these two cryptocurrencies? Our chief crypto researcher Alex will answer these questions and clarify all the misunderstandings.
The Creation of Bitcoin Cash
In 2016, cryptocurrency became much more widely used. Bitcoin was already very popular initially, but newcomers to the market knew almost nothing about other cryptocurrencies. So everyone entering the world of cryptocurrencies usually started with Bitcoin. This led to the first problems with transaction processing speed, making it necessary to improve the bitcoin protocol.
The development team created the SegWit soft fork, but almost no one saw any changes. That is why there was a suggestion to increase bitcoin’s block size, which could have solved the problem, but the developers rejected this idea: they said that such a change could lead to security problems.
Consequently, many miners, developers, and others in the Bitcoin community decided to abandon the original protocol and do a hard fork. Seeing that there were no other solutions, the bitcoin development team gave the grant to develop the hard fork.
Individual user groups, brands, and even exchanges recognized BCH even before its launch. The first exchange for making BCH a significant asset was CoinEx. In January 2018, the Block Explorer service removed Bitcoin from its base and began supporting BCH exclusively.
The hard fork practically divided the cryptocurrency community into two groups: some supported BCH and believed that this asset could replace BTC, while others refused to recognize BCH, claiming that it was “money out of thin air.
The Price Difference
The Bitcoin Cash project has been a great success from the very first days on the market. Already on the second day after its launch, the hard forward rose in price by 100%, and in the first three weeks, its value reached $1,000. It was the most expensive asset after Bitcoin (until Maker was launched) for a long time. Nevertheless, BCH didn’t get even 50% of the value of Bitcoin.
If you look at the retrospective data, you can see that Bitcoin was at least five times more expensive than Bitcoin Cash. At the time of the most substantial price “pump” in late 2017, BTC was worth about $20,000 per unit, and BCH was $4,000.
The only reason for this price difference is that Bitcoin is the “progenitor of all cryptocurrencies”: it was the first digital asset in the world, and therefore had more time to gain supporters. From teenagers to older people, everyone knows about Bitcoin, but not everyone knows about Bitcoin Cash. And that’s why BCH still hasn’t beaten BTC.
Block size was the main reason for the creation of BCH. As mentioned before, BTC transactions became slower and more expensive. The flow of transactions increased, and the Bitcoin blockchain could not handle them because the block size of 1 MB had low bandwidth.
The bitcoin development team did not want to increase the block size, even though it was the only option at the time. Consequently, a group of miners and developers launched BCH with a block size of 8 MB. Also, in the new protocol, the block could be increased if necessary.
Thus, the block size of BCH was increased to 16 MB at the end of 2017 and to 32 MB in 2018. If there are problems with transaction processing speeds again, the BCH development team will increase the block size to 64 MB.
The Scalability Problem
Bitcoin’s block size allows it to process no more than seven transactions per second. This is disastrously small today, considering that BTC is used all over the world. There have been many ideas on how to solve the scalability problem. First, SegWit soft fork, but as we already know, it turned out to be almost useless. The second step was the emergence of different hard forks.
Bitcoin Cash’s solution is much simpler: increasing the block size every time the need arises. Therefore, Bitcoin Cash will never have scalability problems, but there may be security issues in the future.
The algorithm and security protocol for both cryptocurrencies are the same, and therefore miners need to use more processing power to create new blocks and verify transactions. The reward for each block is also the same – 12.5 coin. But there is one significant difference: the mining complexity for BTC is recalculated every 2016 block and for BCH every six blocks.
Many miners liked this smooth change because it’s easier to rebuild the equipment for a new load. Therefore, BCH mining looks more attractive: the equipment can last longer.
To summarize all of the above points, we got a welcome dose of knowledge about the two significant cryptocurrencies, Bitcoin and Bitcoin Cash. Which is better to invest in? Bitcoin? Bitcoin Cash? Or both cryptocurrencies? It’s up to you to decide. But we hope this article has helped you understand the basics.
If you want to know more about cryptocurrencies beyond Bitcoin, Artex Global can help you with that. Our team publishes a lot of material about blockchain, including cryptocurrency exchanges in Australia and much more. Stay tuned and dive into this world with us.
I have been studying cryptocurrency for over 5 years. I have accounts in every exchange and I test everything on myself.
I want this market to be more understandable for everyone.