Bitcoin (BTC) vs. Bitcoin Cash (BCH): What’s the difference?
Bitcoin (BTC) and Bitcoin Cash (BCH) may sound similar but they’re anything but. Read our introductory explainer on the differences between them.
By Sankrit K
In today’s era of rapid innovation, the developers behind cryptocurrency projects often find themselves strongly opinionated about its direction. Often, these debates are resolved by a voting mechanism where the option receiving the most votes wins.
But there are times when a large number of people are so passionate about their own beliefs that a consensus can't be reached, and the project splits into two - this split is what is known as a "hard fork."
That is exactly what happened with Bitcoin (BTC) and Bitcoin Cash (BCH).
In this article, we explore Bitcoin and Bitcoin Cash and how they differ.
The Bitcoin Scaling Debate
Long story short, the Bitcoin scaling debate is what ultimately led to the split (fork) between Bitcoin and Bitcoin Cash.
Back in 2017, the Bitcoin blockchain was unable to handle the increased demand arising from that bull market. This caused long delays for Bitcoin transactions, as well as high fees that peaked at almost $40 for a single transaction!
The long transaction confirmation times and transaction fees led to arguments that the design of Bitcoin was not favorable for micro-transactions. Advocates of this view argued Bitcoin was unfit for daily transactions as creator Satoshi Nakamoto intended in Bitcoin's white paper, and that it needed an upgrade.
The proposed solution was to increase the block size from 1MB to 8MB, which would result in a higher number of transactions being confirmed per second. Sounds quite straightforward, doesn't it?
Well, it wasn't that easy.
The change was met with some resistance from those who argued that larger block sizes would centralize the Bitcoin network, going against its very ethos. This is because increasing any network's block size increases the hardware requirements to run a node, making it more difficult for the average person to run their own node.
The increase in block size would also mean lower Bitcoin transaction fees. Although this may be desirable for most Bitcoin users, it would affect the livelihood of Bitcoin miners, who earn block rewards in the form of transaction fees.
The Bitcoin Cash Hard Fork
As previously stated, this scaling debate resulted in the splitting of Bitcoin into two separate chains - Bitcoin (BTC) and Bitcoin Cash (BCH).
The Bitcoin Cash network was created on August 1st, 2017 as a hard fork of the Bitcoin blockchain, with an increased block size limit of 8MB (later increased to 32MB).
The result was a new BCH network that could confirm transactions at a greater rate per second, with lower transaction fees than the original Bitcoin blockchain. The goal was to create a cryptocurrency like Bitcoin that could be used for daily transactions in the same way as someone would pay with cash.
What is a hard fork?
A hard fork is essentially a divergence in the consensus rules of two networks with the same codebase. In this case, Bitcoin and Bitcoin Cash both share the same codebase, but have different consensus rules.
To put it another way, Bitcoin Cash can be thought of as Bitcoin's clone but with different settings.
The Bitcoin Cash network also implemented a few other minor changes, such as easier difficulty adjustments and retargeting.
Difficulty adjustments and retargeting dictate how often or easily blocks are mined. An easier difficulty adjustment allows miners to adjust more quickly to changes in network hash rate, while retargeting allows miners to adjust the difficulty of mining a block more quickly in response to sudden changes in hash rate.
And as if one fork wasn't enough, Bitcoin Cash actually underwent a second one in November 2018, over the same block scaling debate, leading to the creation of Bitcoin SV (BSV), which is somewhat of a hybrid, combining elements of BTC and BCH.
Bitcoin vs. Bitcoin Cash: Key differences
The main difference between Bitcoin and Bitcoin Cash can be summed up in one word - scalability. But there's more to it than that.
Difficulty adjustment algorithms
In the early days of Bitcoin, it was so easy to mine the cryptocurrency that anybody with a desktop could start mining and collect Bitcoin tokens! Since Bitcoin is a Proof of Work (POW) cryptocurrency, Bitcoin miners with the most processing power (hash power) tend to have the upper hand in the fierce competition to produce the next block.
An obvious question that arises is, "What if someone brings a device with a lot of processing power and mines all the BTC at once?" Satoshi Nakamoto actually predicted this, and introduced what is known as the "difficulty adjustment."
The difficulty adjustment ensures that the supply of a cryptocurrency is controlled and dictated by the tokenomics (built into the source code) and cannot be sabotaged by any entity. When the hash power increases, the difficulty level of mining blocks increases. Conversely, when the hash power is lowered, so too is the difficulty level.
Both Bitcoin and Bitcoin Cash are designed to have a block time of about 10 minutes, with the difficulty adjusted periodically based on the time it took to mine the previous blocks.
Bitcoin uses the difficulty-adjustment algorithm (DAA), where the difficulty is adjusted every 2016 blocks. It is increased if the previous 2016 blocks were mined at a pace faster than 10 minutes per block, and decreased if they were mined slower than 10 minutes per block.
Bitcoin Cash uses the Emergency Difficulty Adjustment (EDA) algorithm. This algorithm dictates that the difficulty will be reduced by 20% if the time difference between the previous 6 blocks is more than 12 hours.
Block size differences
In Bitcoin, the block size is limited to 1 MB. Bitcoin Cash increased the block size limit to 32 MB, allowing more transactions to be processed per block and, consequently, a higher network throughput.
But larger block sizes also mean that the data stored in the blockchain will be greater. This can cause issues with storage, especially for the nodes that validate transactions and blocks.
It is important to note that increasing the block limit is a complex issue that involves trade-offs between various factors such as security, decentralization, and scalability.
Smart contract capability
Smart contracts are an innovation created by Ethereum developers several years after Bitcoin first came into existence. Hence, Bitcoin's architecture does not natively support smart contracts.
This led to a problem: A lack of smart contract capability meant that Bitcoin cannot be used in DeFi (decentralized finance) protocols. To solve this problem, the Taproot upgrade was introduced.
This upgrade allowed for Bitcoin, the most popular cryptocurrency, to start supporting smart contracts by masking smart contract transactions as regular Bitcoin transactions. This eventually helped pave the way for Bitcoin Ordinals, or NFTs on the Bitcoin blockchain.
Additionally, another proposed solution to properly scale the Bitcoin blockchain is called the Bitcoin Lightning Network. The Lightning Network is a Layer-2 solution built on top of the Bitcoin network that enables faster and cheaper transactions by using smart contract functionality.
Bitcoin Cash, on the other hand, supports smart contracts natively, allowing developers to implement more complex DeFi protocols using CashScript (BCH's smart contract programming language).
Token issuance
Both the Bitcoin and Bitcoin Cash networks support token issuance (including custom utility tokens, stablecoins, NFTs, and more) but differ in how they do so.
To issue tokens on the Bitcoin blockchain, you need to use another platform called the "Omni Layer." The Omni Layer is designed to be a decentralized and trustless platform, allowing anyone to create and issue their own custom tokens. The protocol uses a series of special transaction types called "smart properties" to represent tokens on the Bitcoin blockchain.
Custom digital assets on Bitcoin Cash are implemented natively using the Simple Ledger Protocol (SLP), a token issuance and management standard built on top of the Bitcoin Cash (BCH) network.
One of the key features of SLP is that it is designed to be simple to use and understand, making it accessible to a wider range of users.
At a glance: Bitcoin vs Bitcoin Cash key differences
As we've covered, Bitcoin and Bitcoin Cash differ in several areas:
At a glance: BTC and BCH similarities
Although they are distinct networks and tokens, both Bitcoin and Bitcoin Cash share much in common:
Advantages of Bitcoin Cash
- Lower transaction fees: Makes BCH more accessible for small transactions
- Faster confirmation times: More suitable for point-of-sale transactions
- Increased scalability: More transactions can be processed per block
- Decentralized mining: Resistant to mining centralization
- More accessible: A simpler script language than Bitcoin
- Better compatibility with existing infrastructure: Larger block size allows greater compatibility with existing payment infrastructure
- Stronger focus on peer-to-peer transactions: Designed to prioritize peer-to-peer transactions over other use cases
- More opportunities for merchants: Faster confirmation times and lower fees make it more attractive for merchants
Disadvantages of Bitcoin Cash:
- Lower adoption rate: It may be more difficult to find places to spend it
- Less infrastructure: More difficult to use and fewer storage options
- Less liquidity: Fewer places to buy and sell compared to Bitcoin
- More susceptible to manipulation: Smaller market cap makes it more vulnerable to manipulation by larger holders
- Less security: Has a smaller network and fewer nodes
- More centralization: A small number of mining pools control a large percentage of the network's hash rate
- Risk of hard forks: A history of hard forks can create FUD among users and investors
- Risk of losing investment: As with any cryptocurrency investment, there is always the risk that coin's price significantly decreases
The Verdict: Bitcoin or Bitcoin Cash?
At a fundamental level, both Bitcoin and Bitcoin Cash are digital currencies that can be used to pay for goods and services, just like fiat money. However, they differ in many ways including their goals, philosophy of development, block sizes, transaction fees, scalability, and more.
As far as goals are concerned, Bitcoin is focused on becoming a global digital asset and currency, while Bitcoin Cash is focused on becoming a peer-to-peer payment system.
There is no simple answer to which is better when it comes to Bitcoin vs Bitcoin Cash. Of course, Bitcoin Cash has introduced several improvements that Bitcoin lacks, but it has made some significant trade-offs in the process that many Bitcoin maximalists frown upon.
Like any cryptocurrency investment, it all comes down to personal preference.
Did you know? You can pay with Bitcoin and Bitcoin Cash
How to buy Bitcoin and Bitcoin Cash
Now that you have a bird's eye view of BTC vs BCH, you may be looking to acquire and explore them both yourself.
You can buy Bitcoin (BTC) and Bitcoin Cash (BTC) via MoonPay or through any of our partner wallet applications with a credit card, bank transfer, Apple Pay, Google Pay, and many other payment methods.
Just enter the amount of BTC or BCH you wish to purchase and follow the steps to complete your order.
How to sell Bitcoin and Bitcoin Cash
MoonPay makes it easy to sell Bitcoin and Bitcoin Cash when you decide it's time to cash out your crypto.
Simply enter the amount of BTC or BCH you'd like to sell in the MoonPay widget and enter the details where you want to receive your funds.
