Bitcoin Cash (BCH): There’s More Than One Bitcoin?
Inspired by frustration with the scalability challenges of Bitcoin, Bitcoin Cash (BCH) is designed to be a more convenient cryptocurrency for daily blockchain transactions. In this article, we explore BCH’s founding purpose and what sets it apart.
Bitcoin (BTC) is a relatively new technological development. Although it was only launched in 2009, it has already spawned many alternative coins (“altcoins”). Somewhat controversial, one of the first altcoins incorporated Bitcoin into its name – but what is Bitcoin Cash (BCH)? Based on the original Bitcoin code, Bitcoin Cash is implementing several technical changes that have far-reaching implications. Inspired by frustration with Bitcoin’s scalability challenges, Bitcoin Cash is designed to be a more convenient cryptocurrency for day-to-day blockchain transactions. Its increased block size encourages its use as a payment system rather than as a store of value.
Bitcoin Hard Fork: What is Bitcoin Cash?
The Bitcoin protocol was designed in 2008, and the network itself came online in January 2009 with the mining of what is known as the “ genesis block ” – the first block in the Bitcoin blockchain. Over the years, the Bitcoin community has grown from a small community of computer scientists and cryptographers to more and more mainstream. As Bitcoin’s adoption grew, different opinions and strategies on how to accommodate this growth emerged within its core developer group.
In the early days of Bitcoin, the network was more than capable of handling the transaction load of a community of niche developers. But as its popularity grew, the network got bogged down in more and more transactions, ultimately slowing their processing time.
The concern was that ultimately Bitcoin transactions could take days or weeks to clear if left unchecked, which could also force users to pay higher fees to speed up the process. Neither scenario was ideal, and that became Bitcoin’s scalability issue.
Several solutions have been proposed which can be grouped into two camps: those who sought to increase the size of the blocks and those who sought to reduce the size of the blocks. Bitcoin’s maximum block size is 1MB. This is the amount of data that can be contained in each block of the blockchain. By most tech standards, that’s not a lot of data. There were of course pros and cons on both sides of the debate, but neither was compelling enough to unite the developer community.
With the main developers unable to come to a consensus on the appropriate way forward, a hard fork took place. In soft and hardware forks, an update to the original blockchain is performed, but not all nodes accept the update. In the case of a hard fork, the nodes that accept the update are migrated to a new blockchain and the coins of the new blockchain are separate and unique from the original ones. Bitcoin Cash (BCH) was created in a hard fork of the original Bitcoin protocol in August 2017, with a unique Bitcoin Cash blockchain and BCH cryptocurrency.
Why create a second Bitcoin?
The desire to increase the number of transactions that can take place per second has been the primary driver of the Bitcoin Cash fork. This concern is reflected in the structure of BCH, with its increased block size. More data in each block means transactions can be processed faster. Steps have also been taken to reduce the total amount of data to be verified in each transaction, further speeding up the process.
These technical differences are important. Transaction speed is crucial for the scalability, functionality, widespread adoption, and ultimate success of a cryptocurrency. For comparison, Bitcoin is capable of processing seven transactions per second, while Bitcoin Cash processes 116 transactions per second on average. It should also be noted that Visa processes 24,000 transactions per second. In the eyes of Bitcoin Cash supporters, seven transactions per second was not going to cut it in the long run.
The Controversy: Bitcoin vs. Bitcoin Cash
The Bitcoin Cash fork has been a hotbed of controversy. The core group of developers initially working on Bitcoin were the first to adopt cryptocurrency and blockchain technology – meaning they were passionate about the project and believed in its long-term potential. Supporters of Bitcoin and Bitcoin Cash felt their way forward was the right one, so the hard fork was the only way for the two equally passionate groups to proceed.
BTC supporters have argued that increasing BCH’s block size means that it would be more power hungry and expensive to run a node. More processing power requirements could theoretically become an obstacle for individuals to operate nodes and preserve the decentralized nature of the network. This in turn could open the door for centralized institutions to take control of the network.
In addition to the deep ideological differences between the two camps, the controversy between Bitcoin and Bitcoin Cash also stems from the latter’s appropriation of the name Bitcoin. Although BCH is technically very similar to BTC, many believe its adoption of the name Bitcoin is to some extent disrespectful.
Additionally, following the disappearance of Bitcoin creator Satoshi Nakamoto from the Bitcoin community, many have speculated on Satoshi’s original vision for Bitcoin. Different accounts of ‘Satoshi’s vision’ suggest that his original intention was either more aligned with BTC or BCH. The controversy is especially heated when prominent figures in the cryptocurrency community make claims about it.
For example, Craig Wright (who claimed to be Satoshi himself) stated that “Bitcoin Cash is Bitcoin”. As a controversial figure (with a history of suspected fraud), his support for BCH has fueled flames on both sides of the BTC vs. BCH debate, with many BCH supporters still distancing themselves from Wright.
Despite all the controversy that exists between the two cryptocurrencies, they fulfill largely distinct roles and share only one name. They have different use cases. BTC works like “digital gold” and functions as a store of value, while BCH serves as “digital currency” and aims to be a means of payment. Many users understand this and support the further development of BTC and BCH.
This article originally appeared on Gemini and is republished here with permission.
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