Bitcoin vs Bitcoin Cash: What’s the Difference?
You can say that one originated from the other, but despite having both ‘bitcoin’ in their names, these cryptocurrencies have a unique distinction.
As a bit of background, Bitcoin Cash actually has its roots based on Bitcoin. In more technical terms, Bitcoin Cash is a fork of Bitcoin. But which one is better and what’s the difference between both of them if, in essence, one is a ‘copy’ of the other.
If you’ve never heard of Bitcoin, you’ve been living under a rock for the past decade or so. Bitcoin is actually the world’s first cryptocurrency but for many years before it boomed, it was relatively unheard of. Fast forward to now and Bitcoin is actually one of the most used cryptocurrencies with the highest value.
Because of the way Bitcoins are made, their blockchain technology (code) makes it impossible for it to be faked or hacked. It is also decentralized, meaning that no single entity owns all the Bitcoins. Compare this to say the US Dollar. This type of currency (fiat) is owned by the US government and is controlled by banks, Transferring funds requires the bank to authorize the transaction before it actually goes through. Cryptocurrency does away with this and instead relies on computers to do the transaction - computers like those you use at home.
On the blockchain (where transactions are recorded much like a virtual ledger), transactions are kept and processed in ‘blocks’. Computers then take this block and compute every single transaction by solving extremely complex math problems. When the problems are solved, this serves as a verification for the transaction. In turn, a new Bitcoin is created in the process which serves as the reward for solving the problem. This entire process is called ‘mining’.
There is currently 16 million Bitcoin in circulation, but the total number of Bitcoin that can exist is limited to 21 million. It will definitely take a long time before this quota is reached because every four years, the number of Bitcoin created per block is halved. The idea here is that as more people continue to invest in Bitcoin and while its production decreases, its value will, over time, increase.
There are many other cryptocurrencies in the market that are all vying to outclass Bitcoin as the leading cryptocurrency but few can even come close. However, there is one challenger that could, in time, overtake Bitcoin - Bitcoin Cash, a fork of Bitcoin.
A fork (not the utensil), in essence, is when a cryptocurrency’s code is ‘copied’ and improved upon, creating a better (in theory) version of that cryptocurrency. Any cryptocurrency created from this new fork will be a separate entity and be a new cryptocurrency.
Similar to Bitcoin, Bitcoin Cash (BCH) has its own blockchain and mining process. BCH was created with the goal of improving upon the original Bitcoin. However, these changes could not be agreed upon and so, a small group of developers banded together and forked Bitcoin with some modifications, which are:
- Cheaper transfer fees (transactions done with Bitcoin charge about 1 USD per transaction, BCH transactions charge just 0.20 USD)
- Faster transfer times (it won’t take ten minutes to verify a transaction)
- More transactions can be handled per second
All these are possible because one change the developers of BCH made increase the blockchain’s size by eight times that of BTC.
So what’s the difference?
For one, BCH is cheaper than BTC and can also be used faster. This is due to it being more ‘scalable’ - more people can carry out transactions on its blockchain at any given time. This also allows BCH to have a greater possibility of being adopted for different uses. Other than that, it’s also cheaper to move BCH from one point to another.
But BCH also has its disadvantages. One of those is that BCH doesn’t really instil that much confidence in its investors. Another disadvantage is its low adoption rate and market penetration. All these can be traced back to BCH being relatively newer than BTC. Let’s face it - no one really wants to invest in a copy of something if it’s performing relatively lower than its original.
One other trade-off is the fact that BCH is just about 10% to 15% the price of BTC but the cost of mining both is still the same. Put into perspective, someone who mines BCH makes about 50% to 60% less of a profit than he would if he would mine BTC. This is also one of the reasons why there are few people who choose to mine BCH.
In terms of trading BCH, there isn’t that many wallets or products that make use of BCH. This means that even though the trading price is cheaper, there isn’t that much you can trade BCH with.
Bitcoin, on the other hand, can be called the 'OG’ - the first cryptocurrency against which all other cryptos are measured against. It’s also widely accepted in trades with other cryptocurrencies since it’s the most popular. As of March 23, 2018, BTC made up 44.5% of the cryptocurrency’s capital and is widely viewed as the standard of the industry.
One clear advantage that BTC has over BCH is its community - almost anyone who hears the word cryptocurrency automatically defaults to Bitcoin.
But, again, if there are advantages, there are also disadvantages. One of these is its scalability. BTC, in a way, is older (it is the first cryptocurrency after all), it’s slower, and it costs more per transaction. It’s very likely that as the industry continues to expand, BTC will lose its place as the king of cryptocurrency.
Words: Carlos Corpus