Crypto Guide: Bitcoin (BTC) vs. Bitcoin Cash (BCH)
When the Blockchain was first introduced through the Bitcoin whitepaper in 2009 by Satoshi Nakamoto, there was no debate such as Bitcoin vs. Bitcoin Cash and whether or not one of them is better than the other cryptocurrency. This is due to the fact that Bitcoin cash arose out of a hard fork from Bitcoin, which took place in 2017. A hard fork is driven by the mining community and happens only if the miners can’t reconcile about an upcoming update addressing the future of the mined coin. This means, in essence, one coin follows the new, upgraded blockchain, and the other coin continues along the old route.
So you might wonder, which upgrade caused the dissent about Bitcoin’s prospective path and what is Bitcoin Cash?
The answer lies in the Blockchain Trilemma, a term fathered by Ethereum’s founder Vitalik Butterin, which describes the challenge in developing a blockchain technology that offers scalability, decentralization and security, without compromising anyone factor for the sake of the other.
E.g. Vitalik himself believes that at a fundamental level, blockchains can only achieve 2 out of 3 of these attributes at one time.
Bitcoin vs. Bitcoin Cash
Bitcoin, for example, was said to be decentralized and secure, but lacked significantly in scalability, as the Bitcoin network could only process one transaction every seven seconds. In comparison to Visa, which processes 1,700 transactions per second, Bitcoin’s transaction speed is way too slow in order to make it able to be widely used and mass adopted.
Thus, major mining pools representing nearly 90 percent of Bitcoin computing power voted to make use of a technology known as a segregated witness (SegWit) in July 2017. The update was intended to mitigate the blockchain size limitation problem to reduce the transaction speed. This is achieved by splitting the transaction into two fragments, removing the signature (“witness” data) from the block and adding it as a separate structure at the end. The original part would continue to include the sender and receiver data, and the new “witness” structure would contain scripts and signatures. The original data portion would be counted normally, but the “witness” segment would, in turn, be counted as a quarter of its real size.
Each record of a unit of Bitcoins is called a “block”, and all blocks are united together sequentially by using a cryptographic hash on the earlier block and storing its output in the next block. This forms the blockchain, which is in essence, just a chain of blocks.
Segwit should not be confused with Segwit2x, the hard fork which would have increased the block size to 2 megabyte, but was cancelled due to lack of consensus.
SegWit solves Transaction Malleability, thereby enabling the Lightning Network, an off-chain scaling solution, and resolving the scaling problem by enabling virtually unlimited numbers of instant, low-fee transactions. The Lightning Network is a payment protocol that operates on top of a blockchain-based cryptocurrency (like Bitcoin). It facilitates fast transactions between participating nodes and has been promoted as a solution to the Bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without authorizing custody of funds. Lightning Network implementation also simplifies atomic swaps, which enables the exchange of one cryptocurrency for another without using intermediaries, such as exchanges.
Ongoing disputes around Bitcoin’s technology have been concerned with this fundamental problem of scaling and increasing the speed of the transaction verification process. There are two major solutions to this problem: either making the amount of data that need to be verified in each block smaller, thus creating transactions that are faster and more cost-efficient, or making the blocks of data greater, so that more information can be processed at one time.
What is Bitcoin Cash?
Bitcoin Cash took the opposite route, upgrading the block size from 8MB to 32MB on May 15, 2018. Its miners were of the opinion that the scaling solution prevents Bitcoin from being a “peer to peer cash system” which contradicts the original terms stated in the whitepaper, which was released by Satoshi Nakamoto in 2009. In addition, the miners found that the process behind SegWit lacked transparency which could possibly undermine the decentralization and democratization of Bitcoin.
This caused a hard fork in August 2017, which created a new currency: Bitcoin Cash. Bitcoin Cash’s block size increase was designed to expedite the verification method, with an alterable level of difficulty to ensure the chain’s survival and transaction confirmation speed, regardless of the number of miners supporting it. This, of course, has caused a stir about whether the security of Bitcoin Cash remains assured.
Bitcoin Cash could ultimately process transactions in less than three minutes. However, the security of the Bitcoin Cash blockchain remains questionable.
The main proponent of Bitcoin Cash is Roger Ver, a very prominent and controversial figure in the blockchain world. He owns the domain bitcoin.com and refers to Bitcoin Cash as the real Bitcoin since he is of the opinion that the scaling solution contradicts the original ideas of Satoshi Nakamoto, as published in the whitepaper.
How do I convert Bitcoin Cash to Bitcoin?
The simplest way is to open up an account at Coinbase.com, a cryptocurrency exchange. After registering, you can directly sell your Bitcoin for Bitcoin Cash.
Should I buy Bitcoin or Bitcoin Cash?
It depends on what you believe in. It’s a matter of fact that the Blockchain Trilemma is yet to be solved and scaling proponents are either very optimistic or ignorant about the fact that scaling solutions for Bitcoin do`not harmonize necessarily with the original idea of a peer to peer cash system. It also depends on which reasons you buy Bitcoin for, whether to make monetary profits, to hedge against other asset classes, as a digital substitute to gold or to support an idealistic idea of sound money.
Currently, BCH is among the most popular cryptocurrencies by market capitalization.
Can I buy Bitcoin Cash in India?
Yes, by going to Coinmama.com.
What’s the simplest way to buy Bitcoin Cash?
At the time of writing, Coinbase remains the simplest way to buy Bitcoin Cash. But a very simple alternative is to visit Bitcoin.com. If you want to buy Bitcoin Cash, it makes sense to support its main proponent Roger Ver, by visiting his domain Bitcoin.com.
It’s noteworthy to mention that Roger Ver did a public bet in 2013 that Bitcoin is going to cross $1,000,000.