Bitcoin vs. Bitcoin Cash: Clashing Cryptocurrency Ideologies

The cryptocurrency world is in rapid expansion, and that means constant change. One such change occurred in August 2017, in the form of a hard fork in the Bitcoin blockchain, which created Bitcoin Cash.

This article will compare Bitcoin (BTC) and Bitcoin Cash (BCH) and explain the difference between the two cryptocurrencies. We'll also explore which one might be a better investment for you.

Bitcoin and the Scaling Issue

Before we pit Bitcoin vs. Bitcoin Cash, we first have to talk about Bitcoin's ability to adapt to an increasing number of transactions. 

The Bitcoin network has a specific speed limit and capacity of how many transactions it can process per day. Currently, the average number of Bitcoin transactions per day is approximately 280,000.

Bitcoin wasn't initially designed to be used as a currency on such a large scale. This became evident when the number of Bitcoin transactions per day began to increase extremely quickly.

This scaling issue became something that Bitcoin developers and community needed to address, if the cryptocurrency was to have a future.

Bitcoin and Bitcoin Cash before the split were part of the same project and community. The fork happened when the solution for processing more transactions per day needed to be implemented.

The Bitcoin block size has always been set at one megabyte, meaning that the Bitcoin network can process approximately seven transactions per second.

A blockchain block contains the records of transactions approved by the node network.

Since it has limited space and a relatively set processing time, the number of transactions it can include is immutable. To allow more transactions to be processed, part of Bitcoin’s developers proposed increasing the block size.

That's where the first difference between Bitcoin and Bitcoin Cash would emerge. There was much debate within the community about how scalability would be addressed: Some people thought the block size should be increased to two megabytes, while others believed it should be even larger.

There was also disagreement about whether increasing the block size would centralize power within the Bitcoin network, as those with more processing power would have an advantage.

This debate led to the aforementioned hard fork and creation of Bitcoin Cash.

The majority of BTC-related business owners and miners representing 85% of the computing power of the Bitcoin network decided against a hard fork and agreed to implement a SegWit2x upgrade in March 2017.

Segregated Witness: The Bitcoin vs. Bitcoin Cash Block Size Debate

SegWit is short for Segregated Witness, and it was a soft-fork solution to the Bitcoin scalability issue. SegWit would not essentially change the Bitcoin block size limit from one megabyte, but instead remove “witness data” from each transaction and store it in a separate file.

This would allow more transactions to be processed per second without increasing the block size limit. Witness data represents validation confirmations that are now stored separately from new Bitcoin blocks.

The Bitcoin Cash hard fork was created in response to SegWit, meaning that it used the same code as Bitcoin and split off into a new project.

The community supporting it changed the block size rather than implemented a “Layer 2” solution. This hard fork was supported by a minority of the Bitcoin community, as most people thought that increasing the block size limit would centralize power within the network.

Therefore, the primary answer to “What’s the difference between Bitcoin and Bitcoin Cash?” is the block size.

As mentioned, Bitcoin’s block size has a one-megabyte limit; Bitcoin Cash’s block size initially had an eight-megabyte limit, which was then scaled up to 32 MB in May 2018.

This means Bitcoin Cash can process many more transactions per second than Bitcoin without Layer 2 solutions, such as the Bitcoin Lightning Network.

Still, most of its community was against increasing the Bitcoin blockchain block size, as that would grow it too rapidly.

Since Bitcoin's nodes are responsible for validating and relaying all the transactions that take place on the BTC network, they also play a role in maintaining Bitcoin's decentralized consensus by ensuring that all the code-established rules of Bitcoin are being followed.

Increased block size would lend more power to those who could process more transactions, leading to centralization.

No matter what team you support in the Bitcoin vs. Bitcoin Cash debate, the facts remain: The centralization of cryptocurrencies potentially leaves them vulnerable to attacks.

On the downside, the low number of transactions per second makes it nearly impossible for the decentralized system to scale up.

Since the split occurred in 2017, both cryptocurrency projects have since developed other aspects that make them stand apart.

Comparing Bitcoin Cash vs. Bitcoin: The Main Differences

We now have two cryptocurrencies with different developer goals relying on code from Bitcoin’s mysterious creator, Satoshi Nakamoto. Here’s what further separates BCH from BTC.

Block Size

We’ve explained how block size was the main point of division in the Bitcoin community. The result is that BCH has a 32 times larger block (or 16 times if you take into account the additional transaction data held by SegWit) than BTC.

What’s more, BCH transaction fees are a fraction of Bitcoin’s, and the network can process up to 200 of them per second.

However, now there’s also the Bitcoin Cash vs. Bitcoin SV (BSV) battle; the latter emerged from BCH, and its block limit is 4 GB (and growing).

DeFi and Smart Contracts

Bitcoin doesn’t support smart contracts, which are the foundation for building decentralized finance systems, like independent cryptocurrency exchanges, NFT trading platforms, crypto lending venues, or option trading sites.

On the other hand, Bitcoin Cash uses Cashscript, enabling it to interact with complex functions and stay competitive with projects such as Ethereum - the primary blockchain used for smart contracts.

Tokens

Tokens are a type of digital asset or utility based on smart contracts. They’re often traded on decentralized exchanges that support many different types of tokens.

The most well-known token is probably Ethereum’s Ether (ETH), which is used to power the Ethereum network and pay transaction fees.

As mentioned, the difference between BTC and BCH is that Bitcoin doesn’t support smart contracts natively. However, thanks to a process called “wrapping,” BTC can be turned into a token that can be traded on Ethereum’s decentralized exchange. One popular wrapped BTC token is WBTC.

It should also be noted that, while Ethereum has become the go-to platform for launching new tokens, Bitcoin Cash does have the infrastructure to build token projects on its network.

It uses the Simple Ledger Protocol (SLP), which supports token issuing, similar to Ethereum’s ERC-20 tokens and NFTs; unfortunately, it hasn’t been as successful in this field as Ethereum, Solana, Polygon, or Cardano.

The Bitcoin Lightning Network

Is Bitcoin Cash better than Bitcoin when it comes to the number of transactions per second? The answer depends on whether you are using Bitcoin’s Lightning Network.

This is a second-layer solution built on top of Bitcoin. It uses smart contracts to enable near-instant, low-cost transactions between participating nodes.

In practice, the Lightning Network can process millions of transactions per second; for comparison, a company like Visa is capable of processing more than 65,000.

While the Lightning Network is an excellent solution for BTC, it’s not currently needed for BCH, which can already handle high traffic. 

However, despite its technical superiority, it should be noted that BCH has never reached its predecessor’s height.

The BCH market cap of approximately $6.2 billion at the time of writing this article is significantly lower than Bitcoin’s of $781 billion.

BCH and BTC differences are slightly less pronounced when comparing their daily transaction volumes: Bitcoin's 24-hour volume was around $25.6 billion, while Bitcoin Cash had $3.7 billion in the same period.

Closing Thoughts

Nowadays, the values of both Bitcoin Cash and Bitcoin are pretty different than in 2017, when the hard fork created the younger cryptocurrency project.

BCH is currently trading at around $300, a significant drop from its all-time high of approximately $4,300 from the end of 2017.

Nonetheless, although Bitcoin remains the most expensive cryptocurrency, its price has also been downgrading recently, and is currently more than $20,000 below its all-time high of nearly $67,000.

That is not to say that Bitcoin Cash is not used in places where Bitcoin is accepted - it just means that, since crypto has become more of a traded asset and investment opportunity than an actual currency meant to decentralize the banking system, the rules have changed.

Bitcoin performs better as an asset because it’s older and more established in the crypto industry. Bitcoin Cash still needs to prove itself, or end up like other unsuccessful forks, such as Bitcoin Gold, Bitcoin XT, or Bitcoin Classic.