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On 1 August 2017, a new cryptocurrency, Bitcoin Cash/Bcash (BCH), split off from the Bitcoin network (BTC). When part of a large company becomes an independent entity, the individual asset's value is usually expected to be higher. We find out if this is the case with Bitcoin Cash, how it differs from its predecessor and what the future holds for it.
The main reason for the bitcoin network's hardforward (switching to a new protocol that is incompatible with the previous version) was that groups of developers proposed competing plans to improve the network's protocol. They could not come to a consensus, and so the network split in two.
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In other words, one group of nodes (which controls the blockchain to distinguish legitimate transactions from illegitimate ones) continued to use the old software and the other switched to the new software. With the switch to the new version, the amount in bitcoin wallets was converted into Bitcoin Cash.
Reasons for the split
Philosophical differences. Part of the developers (bitcoin) saw the currency more as a means of saving, while the other (Bcash) wanted to promote it as a transactional medium of exchange. For that reason, the word cash was added to the name of the new currency.
Proponents of Bitcoin Cash were also concerned about the limitations of the network's scalability, as the currency continued to gain in popularity. For this reason, BCH increased its block size to handle more transactions at once.
Bitcoin Cash logo
Photo in text: thechalkisdry / Shutterstock
Initially, the block size of BCH was 8MB, while BTC used blocks of 1MB each. But then, on 15 May 2018, BCH increased the block size to 32 MB to better prepare the coin for mass use.
At the end of 2017, bitcoin reached its first high of $20,000 due to new money coming into the crypto ecosystem. Apparently, the BCH team foresaw this and assumed that the network in its current state would not be able to handle the number of transactions that would grow in the near future. So they looked for an alternative that was more suitable for growth and scaling.
Node mechanism. This was another factor of disagreement.
Bitcoin supporters wanted to keep block sizes small so that nodes could operate with fewer resources. This is probably more in line with the decentralisation philosophy behind cryptocurrencies.
The Bitcoin Cash team proposed increasing block size, which would have resulted in nodes needing more powerful computers to run. This, in turn, requires a more funded and centralised ecosystem.
Bitcoin supporters believe that second-layer protocols, such as the Lightning Network, are the best way to scale. At the same time, the Bitcoin Cash team believes that larger blocks will eventually make the network easier to run multiple transactions. They hoped BCH would become PayPal 2.0 in the future.
Differences between Bitcoin and Bitcoin Cash
First and foremost, the currencies differ in transaction costs and fees.
Bitcoin checks 3-7 transactions per second worth $5-50 each.
Bitcoin Cash checks 100 transactions per second at a minimum cost of a few cents.
Bitcoin is often positioned as digital gold, and Bitcoin Cash supporters criticise this approach while promoting their currency. They make the following argument on their website: the global cash currency market is valued at $100 trillion and the global gold market at $10 trillion. Since the cash market is 10 times larger than the gold market, Bitcoin Cash not only has a more robust application, but also "greater growth potential".
"If BCH covers just 1% of global transactions, there will be 82 million transactions online every day," reads the Why Bitcoin Cash website.
Bcash enthusiasts also highlight that of the 3 trillion annual global transactions, 75% come from cash, only 13% from credit and debit cards, and 12% from "other". These figures, they argue, underscore that due to low fees and accelerated processing times, BCH is more suitable for everyday mass use.
Bitcoin Cash disadvantages and predictions
Apart from BCH, there have been other offshoots in the bitcoin ecosystem. Few of these projects remain relevant.
In late 2017, Bitcoin Gold (BTG) emerged, which was based on a change in the mining algorithm.
In late 2018, the Bitcoin Cash blockchain was hardforked, resulting in a new cryptocurrency, Bitcoin Satoshi Vision/Bitcoin SV (BSV), which supports block sizes up to 2MB.
One thing is certain: at the moment, all offshoots of Bitcoin and Bitcoin Cash are attracting a fraction of the attention and investment compared to the original BTC, which has a market capitalisation of over $1 trillion. According to Coin Market Cap, three other closest competitors - Bitcoin Gold, Bitcoin SV and Wrapped Bitcoin (WBTC) - together cover only over $17bn.
Bitcoin Cash itself has a market capitalisation of just over $18bn, 50 times less than bitcoin.