Although Bitcoin (BTC) is the first and the most popular of cryptocurrencies, it’s more than 10 years old and that in computing, dear reader, is a long, long time.
In other words – and although the following statement may be a little jarring for some people – the reality is that Bitcoin is a bit outdated, especially in terms of scalability and accessibility as a means of payment for daily use.
These were some of the reasons for the creation of Bitcoin Cash (BCH), a new version of Bitcoin that entered circulation in August 2017.
Even though the future of Bitcoin Cash remains unclear, its value has grown substantially, especially in recent months – so much so that many Bitcoin supporters have switched to Bitcoin Cash. Based on this, many people wonder:
Is Bitcoin Cash better than Bitcoin?
The answer is relative. Technically speaking, Bitcoin Cash is superior to Bitcoin, offering a solution to some of its elder sister’s problems. However, Bitcoin Cash presents its own problems as well, and these are some of the reasons why Bitcoin continues holding its reign.
If you’d like a clearer understanding of all of this, then I invite you to continue reading this article.
What is Bitcoin Cash?
Bitcoin Cash is a cryptocurrency created from a Bitcoin hard fork in August 2017 with the aim of increasing the number of transactions that can be processed simultaneously (scalability).
The official website for Bitcoin Cash describes it as “Peer-to-Peer Electronic Cash”, and just like BTC, Bitcoin Cash is developed based on the following factors:
- Decentralization: The network is distributed among many different computers around the world, so there is no central entity controlling it.
- Peer-to-Peer transactions: There is no need for an intermediary to verify transactions, as is the case with banks or platforms such as PayPal.
- High-security level: BCH uses high level encryption to prevent fraud and any computer attack.
- Transparency: All transactions are registered in a public blockchain so that anyone can see and verify them.
The story behind Bitcoin Cash
To better understand the present, it’s necessary to know the past, so let’s review the origins of Bitcoin Cash.
Bitcoin is a first-generation cryptocurrency, so it’s normal that at this point, it presents some problems. One of its main problems has to do with scalability: the size of each block on the BTC blockchain is just 1 MB, which limits the number of transactions per second (TPS) to just 7.
Bitcoin Cash appeared as a proposal to increase the block size to 8 MB, which would also increase the number of simultaneous transactions.
This division in the Bitcoin blockchain is the result of a hard fork; that to this day, is still a topic of discussion for many in the crypto space.
Although everything was going well at first, the scalability problem of Bitcoin became apparent when between 2016 and 2017, and due to the sudden boom of cryptocurrencies at that time, many users complained of having to wait up to 4 days just to receive a single confirmation.
This led to having to pay very high transaction fees on the network, which threw away the possibility of using Bitcoin as cash on a daily basis.
The Bitcoin community looked for a solution to this problem and two proposals were made: Bitcoin Unlimited and Segregated Witness (SegWit).
The first option was discarded, since it’d cause a centralization of the entire network by the large mining groups.
On the other hand, SegWit tried to store part of the information in files outside the blockchain, thus freeing up space, so that blocks could support more transactions per second.
Although initially SegWit was quite popular, in the end, many users saw it as a temporary solution to the underlying problem.
Against this backdrop, a group of community members decided that the best option was to increase the block size to 8MB. This solution could only be applied through a hard fork, which was carried out on August 1, 2017, dividing the Bitcoin blockchain in two, and creating a new chain with a similar operation, but with different rules.
Both the original version of the blockchain and the new one are identical up to the point where the hard fork occurs; after that point, the two networks work independently.
After this event, any user who owned bitcoin before the split would get the same amount of Bitcoin Cash coins on the new network.
What is the difference between Bitcoin and Bitcoin Cash?
Although BCH has inherited the major part of characteristics from BTC, they also have some major differences that make each one a unique blockchain.
Block size
Bitcoin has a size limit of 1 MB for each block, which means that as the network grows in the number of users, and therefore in transactions, the processing speed of the network is less over time, since the transactions accumulate in a queue, having to wait even days to be processed.
In comparison, Bitcoin Cash originally had a maximum size of 8 MB per block, but this limit increased in May 2018 to 32 MB. This allows BCH to process a greater number of transactions simultaneously, increasing the overall speed of the network, while lowering the commissions to pay for its use.
Algorithm
Bitcoin Cash has a different hash algorithm than Bitcoin, so repetition between the two chains is no longer possible. In the event of a Bitcoin Cash split, the network has a plan to avoid repetitions. This way there would be a minimum of inconvenience for all parties.
Stability
The Bitcoin Cash algorithm helps to ensure that the functions of its blockchain continue even in the event that the number of miners changes drastically thanks to the Emergency Difficulty Adjustment (EDA) algorithm. This gives greater stability to the network.
What is Bitcoin Cash used for?
As with BTC, Bitcoin Cash can be used for numerous activities such as trading for other cryptocurrency coins or purchasing goods and services by a number of retailers who accept BCH.
Let’s take a close look at how you can acquire and use BCH.
1.- You could already have BCH
If you had Bitcoin before the hard fork of August 2017, you may already have Bitcoin Cash. All the Bitcoin that you had before this date, you can also claim it as Bitcoin Cash – even if you had kept it on an exchange platform. You can use the private keys associated with your Bitcoin wallet to access equivalent shares on the Bitcoin Cash network.
2.- Buy them in an exchange
Although at first many exchanges were hesitant to support Bitcoin Cash, at this time, and due to an increase in value and consumer demand, more and more platforms are accepting this cryptocurrency. Some of the most popular platforms that support BCH include Kraken, Bitfinex, Bittrex, and Coinbase (affiliate link), just to name a few.
2.1.- Choose a wallet
The first thing you should have is a wallet to store your Bitcoin Cash. Remember that if your intention is to make a large investment, it’s best to purchase an offline storage wallet to protect your private keys. On the other hand, if you want to have small amounts to make transactions in your day to day, a mobile wallet would be the most appropriate.
2.2.- Go to an exchange
Once you’ve chosen a wallet, the next thing is to go and buy them directly with fiat money. If you already have other types of cryptocurrencies, you can also exchange them for Bitcoin Cash tokens in the vast majority of major exchanges. Check out this article to see the Best Places to Buy Bitcoin and Altcoins.
3.- Mining
Bitcoin Cash has received great support from many Bitcoin miners; in fact, many of these went from mining Bitcoin to mining Bitcoin Cash. The new opportunities to earn significant amounts of BCH are a great incentive to attract miners to the network.
4.- Paying for goods and services with Bitcoin Cash
There are also many online businesses that are accepting BCH as a form of payment due to the growth of this cryptocurrency. For those looking to use BCH to buy goods and services, you should know that there are around 4K merchants on the web that accept BCH as a form of payment. Here’s a great list of merchants who accept Bitcoin Cash.
5.- Making money with Bitcoin Cash
In terms of investment, it is difficult to predict the stability of Bitcoin Cash. While many people believe that it won’t be able to replace Bitcoin, BCH supporters believe that it offers an improvement over Bitcoin and therefore will gain long-term value. In this sense, you can also use it as a store of value.
TIP:
Remember that investing in cryptocurrencies involves the risk of losing money, so always conduct proper research before investing, and when in doubt seek out the assistance of a professional financial advisor and/or scholar of Islamic finance.
Why is Bitcoin Cash rising?
In recent months, the price of Bitcoin Cash has been increasing progressively. There are several reasons for this, but it’s important that you first understand what are the basic factors that influence the price of BCH.
- Bitcoin scalability: If Bitcoin doesn’t solve its scalability problems quickly, this can positively affect the price of Bitcoin Cash.
- Regulation: More and more countries are establishing regulations for cryptocurrencies, and this could affect the price of all crypto assets.
- Token supply: BCH also has a total offering of 21 million tokens. When the currency in circulation reaches its limit, a lower supply could drive up its price.
- Competition: There are more and more projects that compete directly with BCH, and this can have an effect on BCH price.
- Reputation: Prices can be affected by public perception, safety and longevity of the currency.
- Adoption: The degree of acceptance that both companies and consumers have towards a cryptocurrency directly influences its price.
Considering what we mentioned above, the following are the possible reasons for the recent BCH price increase.
1.- The new update
On May 15, 2021, an update to the BCH blockchain took place, bringing significant improvements to the network. One of these improvements is the removal of the Bitcoin Cash unconfirmed transaction chain limit. This will allow more microtransactions to be issued without having to wait for block confirmation – previously this limit was 50 transactions.
The other major change has to do with the introduction of multiple “OP_RETURN” outputs.
Currently, the Bitcoin Cash blockchain allows the insertion of certain types of data in a transaction, such as text and images. Previously, only one “OP_RETURN” output could be included per transaction – that is, an image, a text, and so on. The new update will allow multiple pieces of data to be included in a single transaction.
These changes open up the use of Bitcoin Cash to a higher volume of transactions and make it more accessible to trending applications, such as NFTs. Many companies and developers have been asking for these changes for some time to expand the possibilities of BCH.
2.- Greater demand
Overall BCH usage has increased since the beginning of the year, according to data from the Bitinfocharts website. The number of daily transactions went from 20,000 in December, to more than 150,000, which means an increase of 650%. Between February and April, Bitcoin Cash regularly processed more daily transactions than Bitcoin, reaching 414,000, compared to 229,000 for BTC.
3.- Government intervention
In the United States and other countries, many traders are looking forward to the US price index data (CPI), as its impact on interest rates, combined with the monetary policy of the Federal Reserve, brings the possibility that cryptocurrencies such as BCH go from being high-risk assets to being valuable assets.
In recent months, the price of Bitcoin Cash has been increasing progressively. There are several reasons for this, but it’s important that you first understand what are the basic factors that influence the price of BCH.
4.- Lower transaction fees
With BCH having lower fees than BTC, this also makes it a more attractive option for those seeking to use BCH for daily use as cash or for simply being able to move both small and/or large amounts on BCH with short network wait times and low transaction fees.
5.- Ease of use
BCH is known for its ease of use when it comes to onboarding into cryptocurrency. It can be relatively easy to acquire and send BCH for as little as $1 USD due to low fees on the BCH network. This can be difficult to do with BTC at the moment.
Advantages of Bitcoin Cash
Greater scalability
With no doubt, the most notable technical advantage of BCH over BTC is its ability to process a higher number of transactions per second (TPS). This is possible thanks to increasing the block size from 1 MB or 7 TPS in BTC, to 32 MB or 97 TPS in BCH.
Lower fees
The increase in the volume of transactions that BCH can process brings, as a positive consequence, a notable reduction in the cost of fees for the use of the network. This also makes Bitcoin Cash more affordable as a day-to-day payment method.
Disadvantages of Bitcoin Cash
Less security
This increase in the block size implies a greater investment in storage machinery for the miners, making it less accessible in this regard. This means that if there are fewer miners mining BCH, the network is less decentralized and therefore more vulnerable to cyber-attacks.
Less adoption
Many Bitcoin users are wary of the degree of adoption that Bitcoin Cash can achieve. Lower adoption also means a lower price on the market.
Conclusion
Bitcoin Cash is a cryptocurrency that was born as a solution to the problems of Bitcoin. Despite being so young in the crypto world, the cryptocurrency has remained firmly in the market, receiving constant technical improvements, increasingly expanding its user base and therefore increasing its value.
Adding to the above, the failures in the Bitcoin ecosystem and the delay of the community in providing effective solutions to these problems, are placing Bitcoin Cash in an increasingly strong position against its elder sister.
However, there is still time to find out which of the two digital currencies is superior or which is going to dominate in the future. The important thing is to stay informed and prepared at all times to obtain the greatest possible benefit in the event of a twist in circumstances.