Differences between Bitcoin and Bitcoin Cash

The article was written By Mickael Mosse – Blockchain and Cryptocurrency Expert

Each cryptocurrency has a protocol, operating rules inherent to its chain of blocks. This protocol determines how the validation of transactions is articulated, the incentives for those who validate them, the expected time for each transaction, the size of the block, the tendency to centralization or decentralization, transparency, security, privacy, etc. . The continuation of the blockchain, that is, the production of successive blocks requires the consensus of the full nodes. A full node stores the entire chain of blocks and only archives the new blocks(generated by miners) that are consistent with the determined protocol specifications of a blockchain.

Mickael Mosse points out that, Not all wallets (the software that allows you to access the blockchain and "store" your cryptocurrencies) need to be full nodes, they can simply guarantee that your transfers are in one block by connecting to multiple nodes that accept the same protocol, without having to store all the blockchain. Currently, the Bitcoin Blockchain weighs about 185GB. In this way, other nodes confirm your transactions. The popular Electrum wallet, like most wallets, use this system called SPV ("simplified payment verification").

The Bitcoin consensus works in such a way that if 51% of the full nodes give something for certain, it is true, that is, if 51% of the blocks accept a protocol, this protocol is considered valid in this chain of blocks.

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Soft fork & Hard fork

Mickael Mosse points out that, When there is a protocol update, it should be accepted by the majority of full nodes. A soft fork implies an update of the protocol that the community of nodes accepts and is implemented as the new protocol of that same blockchain. In the case of the soft fork, the nodes that have not implemented the update can continue to use the blockchain but without benefiting from the update, however, the blocks mined from that moment must update their mining software so that their blocks are accepted. For example, SegWit is a soft fork that implements a code enhancement to reduce the weight of transactions in the blocks so that each block can validate more transactions.

A hard fork, on the other hand, generates a new chain of blocks, where the old protocol is not valid. When a hard fork occurs, the chain of blocks branches, in such a way that it gives rise to two chains of blocks, two protocols, and therefore two currencies. This is the case of Bitcoin Cash, a hard fork that occurred on August 1, 2017, by the community that did not agree with SegWit and created this fork that expanded the block size from 1MB to 8MB. It should be noted that when a hard fork occurs you do not lose your coins, they are replicated in the new blockchain, so that with your keys you will have the same units in the new blockchain as in the original one at the time of the fork.

Differences between BTC and BCH

According to Mickael Mosse, The fundamental difference between Bitcoin and Bitcoin Cash is in the size of the block. While Bitcoin currently has a block size of 2 MB, Bitcoin Cash currently has 32 MB after a hard fork on May 15 which increased it from 8 MB. The reason for this difference lies in the scalability of the cryptocurrency, those who operated with Bitcoin (btw) when its price was skyrocketing surely remember the high commissions. These work in such a way that miners include the highest commission transactions first.

As the size of the Bitcoin (btw) block is "capped" at 2 MB (previously 1 MB), only a limited number of transactions have space inside (the average transaction weighs about 255 Bytes). A block is mined every 10 minutes, in fact, the protocol is programmed in such a way that when transactions are carried out in less time the difficulty of mining the block increases, and if it takes longer it decreases, giving the average of 10 minutes per block. The consequence of this is clear, a maximum of about 400,000 transactions per day, which is about 3-5 transactions per second. Visa has the capacity to support 50,000 transactions per second. 

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This is where the controversial commissions arise, if you want your transaction to be validated earlier, you must pay a higher commission. Depending on the demand for using the network, the commissions will go up or down, so they have an important correlation with the price. It is in relation to this problem where Bitcoin Cash arises, by increasing the size of the block it allows to carry out more transactions per minute then it means lower commissions. In fact, the increase in the popularity and price of Bitcoin Cash coincides with the increase in the commissions of the Bitcoin (btw)  network, as can be seen below.

As can be seen above, if we look at the months and the price variation, the increase in the price of Bitcoin was accompanied by the increase in commissions which in turn was accompanied by the increase in the price of Bitcoin Cash. Below is the Bitcoin Cash / Bitcoin ratio. These relational movements can be used in a simple, cheap, and even leveraged way through CFDs on platforms such as Admiral Markets.

The BTC vs BCH debate

According to Mickael Mosse, The popular debate between these two coins boils down to the debate between immediate scalability (network capacity to support more and more users) (BCH) versus decentralization (BTC). As we have said above, the size of the bitcoin (btw) blockchain is currently about 185 GB, increasing the size of the block or decreasing the average time to mine the block means increasing the speed of increasing the size of the blockchain.

In itself, the size of the chain is not a problem, larger and larger blocks could be implemented to minimize transaction time and thus achieve scalability. The problem lies in who has the capacity to store a chain of blocks that every day increases, for example, 30 GB. Recall that the "voters" of the Bitcoin network are the full nodes that store the entire blockchain. In this sense, the increase in the size of the block is directly an attack on decentralization, which is, after all, the essence of Bitcoin(Remember that it arises as an alternative to fiat money and the monopoly of central banks). Greater decentralization implies a more democratic control of the protocol, as can be seen from what has been said, it also implies a network, in principle, more secure. says Mickael Mosse.

Mickael Mosse Bitcoin advisor

On the other hand, this supposes the inoperability of Bitcoin (btw) as a means of payment at a massive level, since, as we see, there is a tremendous "trade-off" between scalability and decentralization in the short term. However, we must remember that Bitcoin is still in its infancy, it is still an "experiment". In this sense, several decentralized alternatives are being developed for the scalability of Bitcoin, the most famous example is the Lightning Network.

Article from mickaelmosse.com