Bitcoin (BTC) vs. Bitcoin Cash (BCH): What’s the difference?

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 (similar to how any democracy functions) - 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 up 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, how they differ and whether one is better than the other.

The Bitcoin Scaling Debate

Long story short, the Bitcoin scaling debate is what ultimately led to the split between Bitcoin and Bitcoin Cash.

Back in 2017, when the cryptocurrency markets began to heat up again, the Bitcoin blockchain was unable to handle all of the increased demand. 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 many arguing that the design of Bitcoin was not favorable for micro-transactions. Advocates of this view said that Bitcoin was unfit for daily transactions as 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 the catch with increasing any network's block size is that the hardware requirements to run a node also increase, making it more difficult for the average person to run their own node.

Additionally, the increase in block size would also mean lower Bitcoin transaction fees. Although this is desirable for most Bitcoin users, it would drastically 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, all with lower transaction fees compared to the original Bitcoin blockchain. The goal was to create a cryptocurrency like Bitcoin, but one that could be used for daily transactions in the same way at 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). Bitcoin SV combines both Bitcoin and Bitcoin Cash with a vision to scale the Bitcoin network but in a way devs feel that Satoshi would approve.

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 get start mining and collect hundreds of 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. This has become a contentious issue because some argue that it is insufficient and that increasing the block size limit would allow for more transactions to be processed per block.

On the other hand, Bitcoin Cash increased the block size limit to 32 MB, allowing more transactions to be processed per block and, consequentially, 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.

This debate is ongoing, and it is not clear which approach will turn out to be the best. Larger block sizes could indeed encourage centralization, as only larger nodes would be able to store and process the larger blocks. At the same time, these changes could lead to a more efficient blockchain network.

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.

But this leads to a huge problem. A lack of smart contract capability meant that Bitcoin as it was created cannot be used in DeFi (decentralized finance) protocols. This limitation, along with Bitcoin's incapability to be used for global micro-transactions, is a double roadblock in the way of utility and demand for the world's most popular cryptocurrency.

To solve this problem, the Taproot upgrade was introduced. This upgrade allowed Bitcoin 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 Bitcoin 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 these tokens on the Bitcoin blockchain.

Creating custom digital assets on Bitcoin Cash is easier, as tokens 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: BTC and BCH 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

1. Lower transaction fees: Makes BCH more accessible for small transactions

2. Faster confirmation times: More suitable for point-of-sale transactions

3. Increased scalability: More transactions can be processed per block

4. Decentralized mining: Resistant to mining centralization and helps secure the network

5. More accessible to users: A simpler script language than Bitcoin

6. Better compatibility with existing infrastructure: Larger block size allows more compatibility with existing payment infrastructure

7. Stronger focus on peer-to-peer transactions: Designed to prioritize peer-to-peer transactions over other use cases

8. More opportunities for merchants: Faster confirmation times and lower fees make it more attractive for vendors

Disadvantages of Bitcoin Cash:

1. Lower adoption rate: It may be more difficult to find places to spend it

2. Less established: It could be riskier to invest in Bitcoin Cash vs Bitcoin

3. Less infrastructure: More difficult to use and store

4. Less liquidity: More challenging to buy and sell compared to Bitcoin

5. More susceptible to manipulation: Smaller market cap makes it more vulnerable to manipulation by larger holders

6. Less security: Has a smaller network and fewer nodes

7. More centralization: A small number of mining pools control a large percentage of the network's hash rate

8. Risk of hard forks: A history of hard forks can create FUD among users and investors

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 (just like how we use fiat cash).

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.

Still not sure how to buy Bitcoin? View our beginner's guide to buying Bitcoin.

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.