Bitcoin Cash (BCH) is a hard fork of Bitcoin. A fork in a project occurs when developers take a copy of the source code from a software package and start developing it according to their own ideas, independently of the original project. The term often implies not only a development branch but also a division in the developer community, a kind of schism.
A bit of history
On July 20th, 2017, the Bitcoin community voted, with a 97% in favour, on the proposed improvement of Bitcoin (BIP) 91. The proposal, carried out by James Hilliard, involved activating the Segregated Witness (SegWit) algorithm on August 1st, 2017 using a soft fork.
However, some members of the Bitcoin community believed that adopting BIP 91 without increasing the block size limit would simply postpone the solving of the real problem of Bitcoin, namely scalability. The Bitcoin network can handle a maximum of 7-8 transactions per second.
By way of comparison, Visa reaches 24,000 transactions per second. This group of people then expressed their intention to carry out a hard fork of the bitcoin cryptocurrency, creating Bitcoin Cash. The fork took place on August 1st, 2017. The blockchain inherited the transaction history of the Bitcoin network on that date, but with the subsequent transactions recorded on a separate blockchain.
Bitcoin Cash vs Bitcoin
Bitcoin Cash is, therefore, the result of a split between the teams that developed Bitcoin and the large mining pools.
What Bitcoin Cash has been trying to solve is the problem related to Bitcoin’s scalability, which is a consequence of the fact that the blocks in the blockchain are limited to two megabytes in size due to SegWit.
Segregated Witness, abbreviated as SegWit, is a solution that aims at improving the scalability of Bitcoin and reduce its cost. In recent months, on average, blocks of 1.2MB have been produced.
Blocks larger than 2 megabytes are automatically rejected by the network. The limit of the block size is a bottleneck of the Bitcoin network and it is preventing its adoption on a global scale.
The number of transactions that the network can handle is too low for large-scale use. Bitcoin Cash developers have opted for blocks of 8MB in size. This way each block can contain many more transactions compared to a BTC block.
So why are Bitcoin developers not willing to increase the size of the blocks? A larger block requires more data to be calculated for each transaction, and the smaller nodes could no longer process the information, thus partially eliminating decentralisation.
Bitcoin Cash is an evolution of BTC: it inherits most of its features and tries to eliminate some of its shortcomings. These are the main points in favour of BCH:
- Fast: faster transactions compared to BTC;
- Reliable: the network is less prone to congestion;
- Economical: fees are very low compared to those of the Bitcoin network;
- Stable: a highly reliable system with a solid and tested blockchain.
Bitcoin Cash (BCH) vs Bitcoin (BTC): the explanation on fees
It makes no sense to compare bitcoin (BTC) fees with those of bitcoin cash (BCH) at this time. Why not? Simply because the demand for blockspace expressed in kb is not the same.
Let’s consider the day 30 May 2019, which will allow to compare the two fully updated technologies underlying BTC and BCH (following the various forks).
- Number of bitcoin (BTC) transactions: 376,714
- Number of bitcoin cash (BCH) transactions: 32,127
- The average fee for bitcoin (BTC) transactions: $4.314
- The average fee for bitcoin cash (BCH) transactions: $0.0148
If we take into account this information, available on bitinfocharts, even though the price of fees per bitcoin (BTC) was around $1 until a month ago, it is obvious that bitcoin cash (BCH) wins. Fees are significantly lower.
If instead, we consider a scenario in which the demand for blockspace in kb is the same, the situation changes, but not by much. Even if bitcoin cash (BCH) were at the same level as bitcoin (BTC), where by level is meant the same demand for blockspace in kb, the situation would be the same. Fees would still be lower on bitcoin cash (BCH).
BCH splits: BAB and BSV
On November 15th, 2018, Bitcoin Cash was in turn split into two different blockchains. This fork was also necessary due to the differences in the views of the developers. Some supported the solutions proposed by the original team that forked Bitcoin, thus creating BCH, others supported Craig Wright.
The BCH chain was thus divided into two different chains. Each blockchain with its own rules, its own nodes and its own miners.
The fork was much talked about because the BSV faction had announced a 51% attack against the other chain. The attack never happened because Roger Ver shifted hash power on the Bitcoin Cash chain allowing him to mine the first blocks much faster than BSV’s blockchain, rendering a 51% attack virtually impossible and too expensive.
The so-called #hashwar was unleashed and the miners mined at a loss for some time in order to support their chain.
At this point, leading ASIC producer Bitmain had sided with BCH and Roger Ver. For this reason, it is not clear why it has recently started to mine BSV through its pool.