Bitcoin has many faces, which may seem confusing for many people. There exist forks, or alternative versions, of the original Bitcoin, such as Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond.
A fork has two types— soft and hard forks.
Soft forks are versions that perform well with original or alternate versions of the coin. Hence, you can choose which version you want without troubling yourself too much. On the other hand, there are hard forks, which don’t operate well with the original version.
This requires you to either update your software to run the alternate version or stick with the original one. To put it simply, if the alternative is not accepted 100%, a split will happen in the network, and a new coin will come out.
The new coin will be very similar to the original but not exactly identical. Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond— these forks— are actually the outcome of the proposed update to the protocol of Bitcoin that was not accepted by 100%. Therefore, a new or alternated version of the coin, springing from the original Bitcoin, was created.
In a nutshell, Bitcoin Cash was a hard fork of Bitcoin. But why was it created?
Block Size and Scalability
Bitcoin’s block size and scalability issue are some of the reasons why Bitcoin Cash rose to life. Transactions in Bitcoin don’t get confirmed immediately. It needs to pass to a part of the block transaction on Bitcoin Ledger, known as the blockchain. Every 10 minutes, new block transactions are added to the ledger.
Like any other type of digital data, adding a Bitcoin to a block demands a storage space. The maximum capacity for every block of a transaction is 1 megabyte, and the average transaction per block is 2700. If a block can hold 2700 transactions every 10 minutes, it can only make 4.6 transactions every second, which seems too low if you consider the number of users.
In comparison, Visa can confirm 1700 transactions every second. Hence, if people would want to send money through Bitcoin during price rallies, transactions get trapped in a queue, waiting for a block to be available and get confirmed.
Although you can jump off the queue by paying a higher transaction fee, it would be a big loss for you to spend so much. Given that a lot of people would want to cut the line with their transactions, the fees could reach insanely high levels. This is not a good feature to look at if Bitcoin plans to dominate the global payment method. So, as a result of this scalability problem, two various camps were developed.
The first camp was called Big Blocks, which Roger Vin and Bitmain led. Big blockers were frightened that Bitcoin would not accomplish its goal of being a peer-to-peer payment system. Having a long confirmation time and high transaction fees, Bitcoin is more likely to be treated like gold with a value store instead of a daily payment system. As a solution to this, big blockers come up with a new idea, and that is to increase the block size.
Big blockers come up with the idea of increasing Bitcoin’s block size to 8 megabytes in order to confirm eight times the number of transactions every second. This will lessen the overcrowding in the network. However, there’s opposition to their idea, coming from the small block camp.
Small block camps firmly believe that Bitcoin should keep its 1-megabyte block size while looking for solutions to optimize transaction size to enable authorized scaling. The solution they came up with was Segregated witness.
SegWit was a reformation to Bitcoin protocol that effectively reduces the transaction size by 75%. Thus, a 1-megabyte SegWit block can carry the same number of transactions as a 4-megabyte non-SegWit block. Moreover, small blockers are rooted in the development of Lightning Network, which permits a fast and feeless transaction.
Small blockers go against big blockers seeing that their proposal would hurt Bitcoin’s functionality and decentralization in the long run. They reckon that a bigger block would take more time to travel compared to a 1-megabyte block. Additionally, once the block gets to the computer network, the computer will be required to verify every transaction inside the very block. So, if the block is too large, the computer might not be able to verify all of the transactions on the block before the next block arrives.
Furthermore, not optimizing the transaction is brings an unoptimized transaction that already takes up a great number of gigabytes. Forcing computers to verify oversized transactions lessens the number of computers that can store the blockchain on their hard drive, shrinking the network’s decentralization.
For better understanding, try looking at it this way. There’s a street suffering from heavy traffic. The solution for this is making more lanes which works the same way as increasing the block size. This gives a good solution, but if you’ve come to think of it in the long run, there could be a big problem.
If the street becomes more popular, having more and more vehicles, would increasing the lanes still be the solution? You cannot continuously expand the lanes according to the vehicles, as well as you cannot just increase the block size to make room for more transactions.
On the flip side, you can lessen street overcrowding by implementing public transportation routes and carpooling. This solution is comparable to optimizing transaction size.
The argument between the two factions lasted for several years until the decision reached its peak in August 2017. By that time, Bitcoin was taking a step over the $1,200 mark, with its network getting congested because of an overflow in transactions.
As a result of the overflow, many transactions got delayed, and transaction fees soar immensely to $37 per transaction because of people trying to outbid others in the queue.
After the long debate, both big and small blockers ended up doing what they both wanted to do, giving the users the chance to choose which they will adopt as the true Bitcoin. On the 1st day of August back in 2017, small blockers implemented SegWit to the original Bitcoin protocol, and big blockers gave life to Bitcoin Cash.
Bitcoin Cash (BCH) vs. Bitcoin (BTC)
The fork initially cut Bitcoin’s hashing power almost into half, but after quite some time, the original Bitcoin stood tall amidst everything that happened. Since the fork, Bitcoin Cash has consistently kept its place as one of the reigning names in the cryptocurrency charts.
Bitcoin cash is not exactly the same as Bitcoin despite their big similarity. BCH has a bigger block size capped at 8-megabyte on its first release and later went through an update, increasing its limit to 32-megabytes block size.
Additionally, BCH has improved mining difficulty, enabling them to mine way quicker than the original Bitcoin. Bitcoin cash is also not supported by SegWit and Lightning Network.
Bitcoin Cash Fork
Back in November 2018, Bitcoin Cash went through its own hard fork. Roger Ver and Bitmain lead Bitcoin ABC, while Craig Wright and Calvin Ayre led Bitcoin SV. The two camps were Bitcoin SV — stands for Satoshi’s Vision, and Bitcoin ABC— the original Bitcoin Cash.
There were two primary dissimilarities between the two Bitcoin Cash Forks: Bitcoin ABC keeps the maximum block size of 32-megabyte, while Bitcoin SV expands theirs to 128-megabyte, still planning to increase the future. Moreover, Bitcoin ABC added a smart contract feature in their system Bitcoin SV doesn’t want to consider this change.
By far, Bitcoin ABC was regarded the most as “true” Bitcoin cash.
