This post will explore the main differences between Bitcoin and Bitcoin Cash.
If you are unsure how these two cryptocurrencies differ, you have come to the right place.
Let’s get started!
Bitcoin and Bitcoin Cash often cause confusion among new investors and users because of their similar names.
Although both digital currencies share a common origin, they have grown into distinct entities over time.
This article delves into the key differences between Bitcoin (BTC) and Bitcoin Cash (BCH), focusing on their history, scalability, transaction fees, and mining.
Bitcoin was created in January of 2009 by an anonymous individual using the pseudonym ‘Satoshi Nakamoto’.
As the first cryptocurrency, Bitcoin quickly gained popularity for its decentralized nature and ability to make peer-to-peer transactions without the need for an intermediary.
Starting around 2014 and leading up to 2017, two factions within the bitcoin community formed and began fiercely debating about the best way for bitcoin to scale to meet the increased demand for block space without sacrificing its decentralized nature.
In May of 2017, the debate seemed over, however no agreement was ever fully reached.
In August of 2017, the bitcoin network split in two due to a hard fork in the bitcoin blockchain.
This second coin was named Bitcoin Cash and all of the ‘big block’ proponents more or less left bitcoin to join that coin.
Bitcoin and Bitcoin Cash have several technical differences, primarily stemming from their distinct approaches to scalability and transaction processing. Here are the key technical differences between the two cryptocurrencies:
|Feature||Bitcoin (BTC)||Bitcoin Cash (BCH)|
|Block Size/Weight||4 MWU maximum block weight||Initially 8 MB block size, increased to 32 MB|
|Difficulty Adjustment Algorithm (DAA)||Every 2016 blocks (approx. every two weeks)||Every 600 seconds (10 minutes)|
|Consensus Mechanism||Proof-of-Work (PoW)||Proof-of-Work (PoW)|
|Approach to Scaling||On-Chain Optimizations and Off-Chain Layer 2's||On-Chain Block Size Increases|
|Segregated Witness (SegWit)||Implemented||Not adopted|
|Replace-by-Fee (RBF)||Supported||Not supported|
Bitcoin uses a 4 MWU block weight.
To understand block weight more clearly, you can read Jimmy Song’s article on how bitcoin transactions sizes are measured post-segwit.
This smaller block size compared can lead to slower transaction times and higher fees during peak periods.
Bitcoin Cash features a larger block size. It started out as 8 MB and eventually increasing to 32 MB.
This increased capacity allows for more transactions per block, resulting in faster confirmation times and lower fees compared to Bitcoin.
This increased block size comes at a steep cost though. Larger blocks make running a full node significantly more expensive.
Running a full node is necessary to verify your own transactions.
Also, if you can’t afford to run a full node and the network nodes themselves are not sufficiently distributed (a consequence of expensive nodes), then the entire purpose of the blockchain is defeated in the first place.
Bitcoin employs a difficulty adjustment algorithm that recalculates mining difficulty every 2016 blocks (approximately every two weeks).
This approach can lead to longer periods of high or low mining difficulty, however it prevents miners from strategically gaming the difficulty adjustment mechanism for malicious purposes.
Bitcoin Cash adjusts difficulty more frequently; every 600 seconds.
This results in smaller difficulty adjustments, however it does create the risk of centralizing mining further.
Bitcoin implemented SegWit in August of 2017.
Segwit is a scaling solution that separates the transaction signatures from the transaction data, effectively increasing the number of transactions that can fit into a block and reducing the overall transaction size.
Bitcoin Cash did not adopt SegWit, instead focusing on increasing the block size to address scalability issues.
Replace By Fee (or “RBF” ) allows users to replace a transaction in the mempool with a new one that has a higher fee.
This mechanism can be useful for speeding up transactions during times of network congestion.
RBF is not technically a protocol level policy, but rather a full node policy.
That said, all major bitcoin (BTC) clients support RBF.
No Bitcoin Cash clients support RBF because proponents wanted to make accepting 0-conf transactions more appealing to merchants.
The theory behind this exclusion is that if someone can easily replace the transaction to the merchant using RBF, it will make it more risky for merchants to accept 0-conf transactions.
And Bitcoin Cash proponents really like 0-conf transactions because it means no one has to wait to a transaction to confirm before concluding business.
However, there is a good reason confirmations exist - the virtually guarantee those coins cannot be double spent.
This is why Bitcoin proponents think 0-conf transactions are dangerous even without RBF.
A malicious user could easily broadcast multiple transactions spending the same bitcoin, and there is a decent chance the one sent to the merchant is not the transaction that ends up in a block first.
In fact, many Bitcoin and Bitcoin Cash wallets broadcasting multiple transactions spending the same coins incredibly easy to do out of the box.
One of the most significant differences between Bitcoin and Bitcoin Cash is their approach to scalability.
Bitcoin uses what are effectively much smaller blocks than Bitcoin Cash.
The Bitcoin community has opted to scale “off-chain” using layer-2 protocols such as the lightning network.
They also focus on optimizing how current blocks space is used, such as through upgrades like Segwit and Taproot.
The Bitcoin Cash community has chosen to scale via simply increasing the block size of the main chain.
When Bitcoin Cash was first forked off of Bitcoin, it initially started with 8 MB blocks, increasing that limit to 32 MB in May of 2018.
This larger block size allows for more transactions to be processed per block, resulting in faster confirmation times and lower fees compared to Bitcoin.
However, the increased block size also requires more storage capacity and may contribute to centralization as only miners and node operators with greater compute resources and high bandwidth can effectively participate in the network.
Transaction fees are a crucial aspect of any cryptocurrency, as they incentivize miners to process and confirm transactions.
Since Bitcoin has a smaller block size, users face increased competition for space in blocks, driving up fees during periods of high demand.
This issue has led to users experiencing higher costs.
Bitcoin Cash, with its larger block size and tiny user base, can accommodate more transactions and therefore has very low fees.
This advantage allows Bitcoin Cash to be a more cost-effective option for smaller transactions and everyday use, at the cost of centralization and the ease with which adversaries can attack the network and potentially steal coins from other users.
This is especially true since the increased fees of Bitcoin attract more mining power to Bitcoin and away from Bitcoin Cash.
However, it is worth noting that transaction fees for both cryptocurrencies can be volatile and may change based on network demand and other factors.
Mining is the process of validating transactions and adding them to the blockchain.
Both Bitcoin and Bitcoin Cash rely on a Proof-of-Work (PoW) consensus mechanism using the SHA256 hashing algorithm.
However, there are differences in the mining algorithms and profitability between the two cryptocurrencies.
The Bitcoin mining landscape is vast and highly competitive due to the large number of miners hashing on the network.
Bitcoin Cash’s much smaller block rewards (in terms of value) and cheaper fees make it less appealing to miners.
While Bitcoin and Bitcoin Cash share a common origin, they have evolved into distinct cryptocurrencies with differing philosophies around scaling and role.
Bitcoin, with its higher market value and widespread adoption, is often seen as a store of value and digital gold.
In contrast, Bitcoin Cash focuses on faster transactions and lower fees, attempting to position itself as an option for everyday payments with increased risk of attack and loss of funds.