Bitcoin Cash was the result of a hard fork of the original Bitcoin blockchain.
- Bitcoin Cash has a bigger maximum block size and lower average transaction fees than Bitcoin (BTC)
- Bitcoin Cash is considered less secure than Bitcoin because it has fewer miners
In this lesson, you will learn about Bitcoin Cash (BCH).
Where did Bitcoin Cash come from?
In lessons 15 and 16 of the Intermediate section, we discussed horizontal versus vertical scaling, Bitcoin’s scalability debate and how SegWit came about. As you may remember from lesson 16, SegWit aimed to increase Bitcoin’s capacity to process transactions by reducing the size of transactions in a block.
In contrast, the idea of Bitcoin Cash originated from SegWit’s critics who believed that Bitcoin was too slow to be “digital cash” as envisioned by Satoshi Nakamoto. In their minds, increasing Bitcoin’s maximum block size from 1 megabyte to 8 megabytes would be the push that was needed to get closer to that goal. On August 1st, 2017, the critics’ vision were realised in a hard fork of the Bitcoin blockchain, resulting in a new blockchain called Bitcoin Cash.
What is Bitcoin Cash?
Since Bitcoin Cash is a hard fork of Bitcoin, it is a cryptocurrency that is based on the Bitcoin blockchain. However, there are a number of differences between Bitcoin and Bitcoin Cash. Since each Bitcoin Cash block can hold 8 megabytes of data, the network can process more transactions than Bitcoin - in theory.
Based on market cap, Bitcoin Cash is currently the fifth-largest cryptocurrency and one of the most important altcoins. Still, Bitcoin Cash is not as easy to spend as Bitcoin because it does not have the same level of adoption amongst merchants, which we will discuss further below.
Fast block times and low transaction fees
If you remember lesson 9 of the Beginner’s section at the Academy, then you will remember block time is one of the key metrics in measuring the throughput of a blockchain.
Bitcoin Cash has an average block time of just under ten minutes, which means it is slightly faster than Bitcoin.
Beyond its faster block time, Bitcoin Cash is also significant because its average transaction fees are significantly lower than Bitcoin’s. Historically, the Bitcoin Cash network has averaged fees between $0.20-$0.25 per transaction and Bitcoin has averaged between $0.4-$2 per transaction. This figure excludes the period between 2017-2018 during which Bitcoin Cash was created and Bitcoin’s transaction fees briefly rose to $55 at their height.
Adoption of Bitcoin Cash
Bitcoin Cash was only launched three years ago. Therefore, it can be difficult at times to find places and people in the real world that accept Bitcoin Cash as payment. In order to come into its own, in the long term Bitcoin Cash will have to attract higher adoption from users and merchants alike.
Beyond the real-world usage of Bitcoin Cash, there is also the question of the downside that comes with 8 megabyte blocks. Bitcoin’s blocks are currently capped out at 2 megabytes for a reason. Block time refers to how long it takes for miners to make a group of transactions(a block) and help it go through on a blockchain network. For Bitcoin, the average block time is 10 minutes, while Litecoin averages 2 minutes.
Is Bitcoin Cash as secure as Bitcoin?
Finally, Bitcoin Cash is less secure than Bitcoin, by the numbers. On the other, another issue may be hashrate, which refers to the total processing power that miners are using to mine and keep a blockchain secure.
Bitcoin surpasses all other cryptocurrencies in terms of security. The hashrate results from the number of attempts miners make when trying to solve a new block - how often they try to create and add a block that corresponds to the current difficulty of a blockchain. The more power consumed in a network, the higher the security of that network.
Consider the following analogy: if Bitcoin were a bank vault, then its hash rate would be the length of the password or thickness of its door. Or think of another analogy to do with security. The same goes for a blockchain. In line with this, since Bitcoin Cash’s hash rate is 5% of Bitcoin’s, it may not be as safe to use as Bitcoin. Still, the Bitcoin Cash network is young. Over time, as it attracts more interest, things might change for the better.