Bitcoin Cash was launched in August 2017, created by a group of Bitcoin miners, that were opposing to the implementation of SegWit. They believed that SegWit was not the answer to Bitcoin’s scalability issues and bigger blocks should be used instead, in addition to the fact that it was tampering the original concept of Satoshi Nakamoto. Bitcoin Cash is seen as “How Bitcoin should have been” by its creators, and their core differences are outlined below.
The differences & similarities between Bitcoin and Bitcoin Cash
Both cryptocurrencies are open source, using the same Proof-of-Work algorithm (SHA-256) and have the same scarcity (21 million coins will ever be created). Bitcoin Cash endeavors to be used as a means of micropayments currency, while its predecessor Bitcoin, is treated more as a value storage.
The core difference between the two cryptocurrencies is scalability. Bitcoin consists of 1Mb size blocks, that can fit up to seven transactions and its growth, made the transactions in the Blockchain slow, turning Bitcoin into an inconvenient payment method. While SegWit virtually increased the block capacity to 4Mb, transaction fees are still relatively high. Bitcoin Cash, on the other hand, has eight times bigger block capacity (8Mb), meaning that transactions are processed faster than on Bitcoin’s network. The increased block size enables Bitcoin Cash to process 2,000,000 transactions per day, as opposed to Bitcoin’s 250,000.
Consequently, as Bitcoin Cash can fit more transactions on each block, the network will be relieved from congestion periods and transaction fees will be lowered. Fees are dependent to the transaction size and the network traffic, so as the anticipated Lightning Network is still in test mode, there are instances where the fees were higher than the amount of the transaction itself. However, it would be worth to mention that the Bitcoin Cash community is still very small, and is yet unknown if similar issues could be faced in the future as the infant cryptocurrency gains acceptance.
In both Blockchains, transactions need an average 10 minutes to validate, providing the network nodes with adequate time, until they reach consensus. Bitcoin Cash, though, accepts zero-confirmation transactions, dropping the required time to 2.5 minutes, however, this raises a major security issue. Bitcoin has over 10,000 full nodes spread around that world, so it is sensible that a broadcasted transaction will take more time for the majority’s “agreement.” Bitcoin Cash only has about 1200 nodes at the moment. Additionally, if we take under consideration the fact that BCH mining is highly centralized in pools, we will see that Bitcoin’s is more secure than Bitcoin Cash, which could be more vulnerable to a 51% attack.
When it comes to network upgrades, Bitcoin is more democratic. The community participates in the changes through a transparent voting system and BIP proposals, whereas Bitcoin Cash was hard forked in November 2017, a decision taken independently by its creators.