Bitcoin vs Bitcoin Cash: What’s the Difference?
One of the big questions that has come up time and again since the beginning of Bitcoin is whether it’s able to scale effectively. The reason this question pops us is because like other digital currencies, Bitcoin uses blockchain technology.
A blockchain is a digital ledger that enables Bitcoin transactions to be verified, processed, and stored. This ledger-recording technology is truly revolutionary and has had a massive impact on the digital currency world.
The blockchain makes ledgers more difficult to manipulate or duplicate, and prevents hacking and fraud of currency. Furthermore, like with BTC, the blockchain network is decentralized and therefore, can exist on every computer in the world.
While all of this may sound great (and it is), the downside is that technology is slow. When it’s compared to the technology banks use to process credit card transactions, for example, you can really see the difference.
Banks vs Bitcoin
Let’s take a look at the credit card company Visa, Inc. Every day, this company processes just shy of 150 million transactions. This works out to around 1,700 transactions every second of every day. However, the company is capable of processing 65,000 transactions per second if it needed to.
On the other hand, the network for Bitcoin processes 7 transactions per second. Most transactions take several minutes to go through and the more people on the network the longer they take. The technology has remained the same since 2009 but the number of users has not.
This has created slow transaction times that can only get even slower, therefore, not being able to scale effectively.
Of course, there have been ongoing talks about the problems of Bitcoin’s technology. Developers and miners understand that scaling has to be more effective and the transaction verification process has to be faster.
So far, there have been two main solutions to these ongoing problems.
1. Reducing Data
The first solution put forward has been to reduce the amount of data needed to verify every block. If there’s less data, then the blocks can be smaller. Smaller blocks in turn mean faster and cheaper transactions.
2. Increasing Data
Surprisingly, the second solution is the exact opposite of the first. While smaller blocks can make transactions faster, larger blocks, with more data, can process more information.
These persistent problems lead to the creation of Bitcoin Cash (BCH). Let’s take a look below at what Bitcoin Cash is and how it differs from Bitcoin.
Important Points to Takeaway
- The Bitcoin network speed is limited, therefore, causes slow transactions and processing times
- Both developers and miners came up with two main solutions to fix the slow network issue, one to reduce data and the other to increase data
- Bitcoin Cash was created to ensure that Bitcoin would be able to scale effectively since the network is lagging so far behind especially as more and more users are joining
- Blocks for Bitcoin are limited to 1MB, blocks for Bitcoin Cash reach up to 32MB
Back in July 2017, companies and mining pools representing around 80 to 90 percent of all bitcoin computing power had a vote. The vote was to incorporate a piece of technology called a segregated witness (SegWit).
This technology would reduce the amount of data needed in order to verify each block. The way this would work would be by removing signature data from the data block that’s required to be processed in every transaction and having it attached in an extended block.
Since the signature data is estimated to account for as much as 65 percent of the data processed in every block, this change in technology would have a vast impact on the network.
Throughout 2017 and 2018, discussions continued to take place to double the size of the blocks from 1MB to 2MB. By February 2019, the Bitcoin block size had reached 1.305MB which has beaten all other previous records.
However, come January 2020 and the block size had been reduced back down to an average of only 1MB. Since studies had shown previously that SegWit was successful, the community proposed that doubling the block size and SegWit was needed. This combination became known as SegWit2x.
As we previously touched upon, Bitcoin Cash came about due to the concern from developers and miners that Bitcoin would never be able to scale effectively. The future of this cryptocurrency would encounter problems if scalability became an even bigger issue.
Of course, segregated witness technology was already known at this point. But not every developer and miner was convinced that was the best route to take. Users who opposed SegWit/SegWit2x did so because they felt this technology did not solve the fundamental problem of scalability in any kind of meaningful way.
Nor did it follow what was considered to be Satoshi Nakamoto’s roadmap outline for how the blockchain technology in crypto would work.
What if this technology ended up undermining the decentralization aspect of crypto? Or even the democratization side? There were too many unanswered questions for certain individuals to feel SegWit2x was the right path to take.
As a result, in August 2017, certain developers and miners initiated a hard fork, thereby effectively creating a whole new currency - Bitcoin Cash (BCH).
Bitcoin Cash had its own specifications and blockchain, as well as one essential and major difference from Bitcoin. The block size. With BCH, the block size had increased to 8MB. This increase meant the verification process was faster. It also had an adjustable level of difficulty which ensured the chain’s transaction verification speed no matter how many miners were on it.
With Bitcoin Cash, it seemed like all the issues had been solved. The larger block size and faster verification speed made transaction wait times lower and in turn, processing fees were cheaper.
The Downsides of Bitcoin Cash
However, with so many positives, there had to be a downside as well, and there was. The negative of using a larger block size is the increased security risk. Security on the Bitcoin network could be compromised, something that no investor wants to hear.
Additionally, since BTC’s popularity far exceeds that of BCH, owners of Cash could find it more difficult to trade and sell as there would be fewer persons interested. While this is a more secondary concern, it is still a concern, nonetheless.
With its own downsides, not enough people were convinced that BCH was the right way to go either. In another attempt to solve all the issues and please everyone, BCH experienced its own fork in the shape of Bitcoin SV in November 2018.
Bitcoin SV was created by, again, miners and developers in an attempt to fix the problems while staying true to Nakamoto’s original vision.
Ultimately, while Bitcoin Cash and Bitcoin SV still exist, neither had the kind of success some individuals hoped for. Neither fork completely solved the original issues and as of right now, investors are still working on the answer.
This may be a problem that will never be resolved, however, that won’t stop those who care the most from trying their best to make Bitcoin as good as it could be.
Act Now with Mining Syndicate
Bitcoin is and always has been the future. However, with so many users on the network and time running out in regards to BTC left to be mined, now is the time to act if you want to become an investor in the world’s most popular digital currency. Bitcoin mining is the answer for anyone looking to invest as a group rather than a solo miner.
If you would like any more information about starting or expanding your Bitcoin horizon; reach out to us at Mining Syndicate. Our mission is simple: Strengthen the Bitcoin network by enabling small-scale miners to affordably purchase and reliably host miners.
As a small miner, Chris became frustrated by the lack of hosting options available for miners with under 100 units. As luck would have it, he found a 2.5MW mining facility for sale right down the road, and thus, Mining Syndicate was born. Facilities #2 and #3 are already in the works.
Why is Mining Syndicate so successful? Because we have a team of people who are just like you, eager to be a part of the future of mining.
You can also contact us to resolve any doubts, ask any questions, or even learn more about Bitcoin itself. Remember, you should never invest what you can’t afford to lose!
We look forward to hearing from you, together we are stronger!