The difference between Bitcoin and Bitcoin Cash is philosophical.
What is bitcoin cash?
As proposed by Bitcoin inventor Satoshi Nakamoto , Bitcoin was meant to be a peer-to-peer cryptocurrency that was used for daily transactions. Over the years, as it gained mainstream traction and its price surged, Bitcoin became an investment vehicle instead of a currency. Its blockchain witnessed scalability issues because it could not handle the increased number of transactions.
This was mainly due to the 1MB block size limitation for bitcoin. Transactions queued up, waiting for confirmation, because blocks could not handle the increase in size for transactions. Bitcoin Cash proposes to remedy the situation by increasing the size of blocks to between 8 MB and 32 MB, thereby enabling the processing of more transactions per block.
The average number of transactions per block on Bitcoin at the time Bitcoin Cash was proposed was between 1, and 1, Bitcoin Cash also differs from bitcoin in another respect as it does not incorporate Segregated Witness SegWit , another solution proposed to accommodate more transactions per block. SegWit retains only information or the metadata relating to a transaction in a block.
1. What is Bitcoin Cash (BCH)?
Typically, all details pertaining to a transaction are stored in a block. Ideological and block size differences apart, there are several similarities between Bitcoin and Bitcoin Cash. Both use the Proof of Work PoW consensus mechanism to mine new coins. The supply of Bitcoin Cash is capped at 21 million, the same figure as Bitcoin. Miners took advantage of this similarity by alternating their mining activity between Bitcoin and Bitcoin Cash.
While it was profitable for miners, the practice was detrimental to the increasing supply of Bitcoin Cash in the markets. Hence, Bitcoin Cash has revised its EDA algorithm to make it easier for miners to generate the cryptocurrency. In , the average size of a block on Bitcoin's blockchain was less than KB and the average fee for a transaction amounted to just a couple of cents.
2. Bitcoin Cash’s key features
This made its blockchain vulnerable to attacks, consisting entirely of cheap transactions, that could potentially cripple its system. But those safeguards proved to be a hindrance when bitcoin gained mainstream traction on the back of greater awareness of its potential and enhancements to its platform.
The average size of a block had increased to K by Jan. The average time to confirm a transaction also moved upwards.
Correspondingly, the fee for transaction confirmation also increased, weakening the argument for bitcoin as a competitor to expensive credit card processing systems. Miners typically push transactions with higher fees to the front of the queue in order to maximize profits.
Two solutions were proposed by developers to solve the problem: to increase the average block size or to exclude certain parts of a transaction to fit more data into the blockchain. The Bitcoin Core team, which is responsible for developing and maintaining the algorithm that powers bitcoin, blocked the proposal to increase the block size. Meanwhile, a new coin with a flexible block size was created. But the new coin, which was called Bitcoin Unlimited, was hacked and struggled to gain traction, leading to doubts about its viability as a currency for daily transactions.
The first proposal also drew sharp and diverse reactions from the bitcoin community.
Mining behemoth Bitmain was hesitant to support Segwit implementation in blocks because it would affect sales for its AsicBoost miner. Amidst a war of words and staking out of positions by miners and other stakeholders within the cryptocurrency community, Bitcoin Cash was launched in August Major cryptocurrency exchanges , such as Coinbase and itBit, boycotted Bitcoin Cash and did not list it on their exchanges.
Bitcoin Cash / BCC (BCH.CPT)
This ensured a supply of coins for trading at cryptocurrency exchanges when Bitcoin Cash was launched. Paradoxically enough, Bitcoin Cash itself underwent a fork slightly more than a year later due to the same reason it split from Bitcoin. In Nov. He rejected the use of smart contracts on a platform that was meant for payment transactions.
But the end has been a happy one as more funds have flowed into the cryptocurrency ecosystem due to the forking and the number of coins available to investors has multiplied. Since launching, both cryptocurrencies have garnered respectable valuations at crypto exchanges. Bitcoin Cash promised several improvements over its predecessor. The most important one is regarding block size. Transaction fees for bitcoin have also dropped significantly, making it a viable competitor to bitcoin cash for daily use.
They have staked out projects and partnerships with organizations and governments, at home and abroad. For example, Litecoin announced partnerships with event organizers and professional associations, and others, such as Dash, claim to have already gained traction in troubled economies like Venezuela, although such claims are disputed.
The Difference Between Bitcoin vs. Bitcoin Cash
While its split from Bitcoin was fairly high-profile, Bitcoin Cash is mostly unknown outside the crypto community and is yet to make major announcements about adoption. Based on transaction levels on the blockchain, Bitcoin still has a sizeable lead over its competition. That a sizeable section of the pool thought that Bitcoin cash was diluting its original vision is troubling because it opens the door to further splits in the future. Smart contracts are an essential feature of all cryptocurrencies.
However, it remains to be seen whether Bitcoin Cash pivots to become a platform for incorporating smart contracts for transactions or simply for payment systems. Bitcoin Cash also does not have a clearly-defined governance protocol.
While other cryptocurrencies, such as Dash and VeChain, have innovated and outlined detailed governance protocols that assign voting rights, the development, and design of Bitcoin Cash seem to be centralized with its development teams. Since then, miners have had a choice between BTC and BCH mining because they have compatible proof-of-work algorithms. Therefore, they can freely choose which coin to mine for higher profit, where the profitability depends on both the coin price and mining difficulty.
Some miners can immediately switch the coin to mine only when mining difficulty changes because the difficulty changes are more predictable than that for the coin price, and we call this behavior fickle mining. In this paper, we study the effects of fickle mining by modeling a game between two coins. To do this, we consider both fickle miners and some factions e. In this model, we show that fickle mining leads to a Nash equilibrium in which only a faction sticking to its coin mining remains as a loyal miner to the less valued coin e.
This situation would cause severe centralization, weakening the security of the coin system. To determine which equilibrium the competing coin systems e. We also demonstrate that the lack of BCH loyal miners may still be reached when a fraction of miners automatically and repeatedly switches to the most profitable coin to mine i. According to our analysis, as of Dec.