Why Bitcoin Cash Has Emerged and How It Differs from Bitcoin

Michael Kuchar |

The world’s biggest cryptocurrency has after long-standing disputes split on the 1st August 2017 into two separate currencies: Bitcoin (BTC) a Bitcoin Cash (BCC). Today, we are going to describe the cause of this division, how Bitcoin Cash works along with the most important and obvious differences between BTC and BCC.

Why Bitcoin Could Not Take It Anymore and Had to Split

Each network can only confirm a limited number of transactions and the limit of Bitcoin is relatively low. As the currency became more and more popular, the number of users and therefore the number of transactions in the network rapidly increased. Bitcoin, however, was not ready for such a pressure, and after a few years, it started suffering from a lack of capacity.

The situation has gone so far that it has not been possible to make real-time payments anymore. Payments due to insufficient capacity were processed in a matter of minutes, hours, and in extreme cases even days. And users who were in a hurry with their payments had to pay additional fees so that their orders could be put before the payments of others. As a result, the average transaction fee has also begun to significantly increase. Bitcoin has lost two great benefits - fast and cheap payments.

It was clear not only to developers that without a major change the Bitcoin and its value would suffer. On a unified solution, however, the community did not agree, and in mid-2017 Bitcoin separated the new digital currency - Bitcoin Cash.

And Bitcoin Cash Works How, Exactly?

Bitcoin Cash uses blockchain technology, which is something like an electronic book of the entire network that users share with each other. All transactions on the network are recorded using special addresses (contacts of senders and recipients). Payment records are grouped into blocks, one block is always created in 10 minutes. Blocks then merge into a chain that is referred to as a blockchain. A blockchain is a public file that contains information about all payments on the network.

Bitcoin Cash Blockchain – It Is My Turn to Keep on Alone…

Bitcoin Cash comes from Bitcoin's original blockchain. Which means that both blockchains are the same until Bitcoin was divided (the last common block is 478558). From the time of division, each blockchain records its own transactions. Users who owned Bitcoins at the time of separation were automatically awarded the same number of Bitcoin Cash coins. It was the only way, so the original Bitcoin blockchain could be used. In addition, it was expected that Bitcoin's value will fall after the split, so the new coins should have compensated Bitcoin owners for potential losses. That, however, surprisingly did not happen and Bitcoin investors then had Bitcoins with almost the same value as well as new Bitcoin Cash coins.

BitCoin Cash and Bitcoin – Time to Compare Them

Both Bitcoin and Bitcoin Cash transactions merge into a new block every 10 minutes. For Bitcoin, the maximum block size is 1mb, which is the equivalent for approximately 1,700 transactions. That allows to Bitcoin network process about 3 transactions per second. For comparison only, the payment card company MasterCard handles thousands of transactions per second. The community, after lengthy deliberation, agreed that the problem would be solved by activating SegWit (segregated witnesses). These code changes were to increase the number of transactions. In the first cork would be changed the way the data is written, so the block would receive up to four times the number of transactions, and in the second cork (SegWit2x) would the block capacity double up to 2mb.

With this solution, however, many users and developers did not agree. That is why a small group of them decided to take a major step and created a new cryptocurrency in the original protocol, which addressed Bitcoin's problems in a new different approach. Bitcoin Cash differs from the original Bitcoin in two points: it removes SegWit (which Bitcoin implemented from 481,824 block) and has an increased block capacity of 8mb. The time interval for recalculation of the difficulty of mining has also changed. What, on the other hand, remained the same is the used algorithm (SHA256), the coin limit (only 21 million BCC) and the distribution method of rewards.

BitCoin Cash – Let's Make Transactions Quick and Cheap

Cheap and fast payments over the internet are promised and delivered by Bitcoin Cash, regardless of whether you are sending a payment to your neighbour or to someone on another continent. How cheap they really are in comparison to Bitcoin can be seen in the picture below.

(image source: bitinfocharts.com)

BitCoin Cash – Let's Sum It up – Pros and Cons

If you decide to invest in Bitcoin Cash, there are several aspects which you should take into consideration. Bitcoin Cash is relatively new cryptocurrency that is for now not very practical. In online stores you cannot pay with it, so the price is shaped mostly by investors who expect its value to grow. If the popularity of Bitcoin Cash raises and more people will use it and pay with it, just like they do with Bitcoin now, we could see the BCC price skyrocket. It has great benefits that Bitcoin does not have and thanks to BTC it also has quite a good media coverage, so it is a real possibility. But as always, no one can guarantee you that.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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