Bitcoin Cash is not the paper version of the famous digital currency.With a major update called Taproot coming this weekend to the Bitcoin network, and yet another fake news story leaked last week about The Kroger Company accepting Bitcoin Cash (BCH) as a payment method, let’s take a look at the two digital currencies.Although the two assets have many traits in common, they are now both separated due to a divergence of opinions within the community.Here’s a look back at the clash! Both cryptocurrencies aim to be digital currencies for exchanging value around the world.Both have the same mining algorithm, i.e.proof of work protocol, the same reward system and the same ambition (to facilitate peer-to-peer transactions).Even from the point of view of units in circulation, the maximum number of tokens on BCH is 21 million and a block is mined every 10 minutes in the same way as the “authentic” Bitcoin.
You might be wondering why Bitcoin Cash exists.
it all started when the gradual adoption of Bitcoin led to network congestion in 2017:
Number of active addresses on the Bitcoin network (2009-2018)
Source: Glassnode
This congestion has led to slow transaction execution (several hours) and steadily increasing fees.As an example, the average transaction fees in 2017 reached peaks of over $50.This made the situation unsustainable for small transactions.Here is a graph showing the number of bitcoin transactions between 2016 and 2020.
Number of transactions on the Bitcoin network
Source: Statista
The community had to find solutions to solve this problem.
The open-source software does not belong to one person or organization but to a global consensus.The community consists of developers, miners and users who can manage a “Bitcoin node”.
To put it simply and very briefly, a node on Bitcoin is the point of entry to the network via hardware.It stores the blockchain in memory, in other words, it saves the history of transactions made on the network since its creation, and in addition, it verifies and validates the components of transactions made.
The interaction and connection between each node ensures the integrity and robustness of the system.At the time of writing, there are more than 12,000 nodes around the world: Distribution of Bitcoin nodes worldwide
Source: Bitnodes.io
A majority of the community wanted to keep the decentralized nature of Bitcoin at all costs.
To do this, its defenders did not want the blocks to increase in size because, according to them, this increase would threaten decentralization.Indeed, an increase in the size of the blocks would lead to an increase in the weight of the blockchain.Let’s take an example:
Bitcoin: 1 block = 1 MB
Bitcoin Cash: 1 block = 32 MB
Bitcoin: 100 blocks = 100 MB
Bitcoin Cash: 100 blocks = 3200 MB
Imagine on a large scale, over several hundred thousand blocks, the weight of the blockchain would be disproportionately large, extremely heavy and therefore no longer accessible to any type of computer (a copy of the Bitcoin blockchain is currently available to everyone for a few hundred GB).The solution was to improve the blockchain by integrating the SegWit (Segregated Witness) protocol, which would restructure the information and make it more efficient so that more transactions are recorded in each block.This operation would have the effect of decongesting the blockchain and thus reducing transaction costs.Above all, this solution would make it possible to keep the original size of 1MB per block.
The Bitcoin community (BTC) would thus retain its philosophy of resistance to censorship and centralization.
A different take on the cryptocurrency
Meanwhile, the Bitcoin Cash community supports Satoshi Nakamoto’s original plan to “scale up” the blockchain (i.e.increase the block size).By increasing the block size, more transactions could be processed and aggregated.As we’ve seen, increasing the block size would weigh down the blockchain, which would no longer be accessible to everyone and thus potentially centralized by specialized mining companies.They considered that the technology provided by Segwit would be insufficient to solve the problems of slowness and transaction costs.This community felt that the widespread adoption of Bitcoin is more important than the decentralized nature.
In the end, the two communities were unable to reach a consensus and decided to split by a hard fork (a modification of the code that results in a split in two and not backwards compatible blockchain).
Bitcoin Cash was born on August 1, 2017 at the 478,559th block.The BCH community is increasing the block size from 1MB to 8MB and then gradually up to 32MB with a target capacity of 1TB per block in mind.
Today Bitcoin Cash allows transactions to be carried out very quickly at an extremely low cost (often below a penny) but it suffers from bad press in the cryptosphere due to its centralization.
Currently, 1000 nodes make up the Bitcoin Cash network, with an increasingly heavy blockchain, thus restricting its access more and more and thus favoring large mining infrastructures with a computing capacity superior to the lambda miner…Which, in terms of decentralization, is far from optimal.Indeed, mining entities with obscure intentions could combine their powers to form a stable coalition by holding more than 50% of the network and thus attack the rest of the network.
This would lead to potential unconfirmed transactions, the possibility of reversing confirmed transactions or creating a new chain by modifying the code of old blocks…
Not very reassuring.For its part, the crypto-queen has integrated the SegWit protocol and continues its evolution by maintaining a block size of 1 MB allowing everyone to contribute to the development of the blockchain
.Size of the blockchain (2010 – 2021)
Source: Blockchair
The current size of the Bitcoin network is 375 GB.If the network had chosen the scaling solution, in other words, the move to 32MB per block from August 1, 2017, the network would weigh over 8TB today.Suffice to say, this would not be within everyone’s reach…
Price and performance
Bitcoin has been performing insanely well for many years despite volatility being pushed to the extreme.The current capitalization of Bitcoin oscillates at the time of writing between 1200 and 1300 billion dollars for a price gravitating around $65 000.
MarketCap Bitcoin (BTC)
Source: CoinMarketCap
As for Bitcoin Cash, it experienced a strong acceleration in its early days, propelling it to over 60 billion in capitalization at the end of 2017, before falling back sharply during the bear market of 2018
.
It has never regained its all-time highs since then, but with a capitalization standing at $12 billion currently, it can boast of holding its position in the TOP 20 in terms of Market Cap.The price is currently hovering around $680.
MarketCap Bitcoin Cash (BCH)
Source: CoinMarketCap
Now, let’s compare the transaction fees on both networks.
Bitcoin’s 1-year transaction fees
Source: bitinfocharts.com
Bitcoin Cash’s 1-year transaction fees
Source: bitinfocharts.
com
The win is definitely for BCH.
While fees peaked at over $60 in May 2021 on Bitcoin, fees on BCH reached $0.04 over the same period.Still, these numbers have to be put into perspective with the much higher traffic on the crypto-root network.Now, it’s a technical-philosophical debate between the two assets, with one favoring decentralization first and foremost, and the other favoring large-scale adoption.The “Taproot” update on Bitcoin should come this weekend to allow for greater transaction privacy but also and especially to allow for the optimized use of the famous smart contracts on Bitcoin.We should be able to observe a greater development of these complex contracts, especially on the DeFi (decentralized finance), which have been particularly popularized thanks to Ethereum.
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