What is the Difference Between Bitcoin and Bitcoin Cash?

If you look at the top 5 currencies, you will notice not just Bitcoin but its alter-ego 'Bitcoin cash' and wonder why there are two types when Bitcoin alone was doing an excellent job at being the king in the world of cryptocurrencies.

Let us understand why Bitcoin Cash was created.

Please note that the following explanation is a simplified version to give a basic understanding.

Some basic facts

If you are fairly familiar with cryptocurrencies, you will know that there are many types which are either imitations of Bitcoin or improved versions of it. Bitcoin cash is also just another type of cryptocurrency but created as a result of 'forking' Bitcoin.

What is forking?

In a blockchain, blocks are created based on a rule or protocol, and these rules are set by the 'Bitcoin miners'. Miners are technical experts who are paid to 'mine' new blocks of bitcoins to be added to the blockchain (they are rewarded in bitcoins).

Also Read: How Does Blockchain Technology Work?

So when you fork it, the blockchain splits to create another chain that follows a different set of rules.

Now, why do the rules matter?

When you want to send say, ten bitcoins to your friend, miners add this transaction as blocks to the blockchain. Only then the transaction is complete, and your friend shall receive it.

In the case of Bitcoin, one block is of the size of 1 MB, so there is a limit to how much a block can handle at once.

Now when you decide to send ten bitcoins, you are not the only person making a transaction at that particular time, there are many more who would want to sell or buy or transfer bitcoins at the very same moment. This is where the problem arises.

 

Hard and Soft Fork

There are two kinds of forks - Soft and Hard. I will avoid the details and stick to the major difference, that is soft fork is backward compatible, but a hard fork is not. Backward compatible in simple terms can be explained using your PC as an example.

Suppose your computer has Microsoft Office 2010 version installed and you get an email attachment of an excel file that was created using Microsoft Office 2013. You can still open the file and view all the data except any new features that can only be viewed in the 2013 version.

Not backward compatible could be trying to play a cassette on a DVD player. That is not possible.

Now that the difference is clear, understand that Bitcoin cash is a result of a hard fork. So whoever possessed bitcoins during its creation got equal amounts of Bitcoin cash. Also, it was only provided to those who had the private keys with them at the time of hard fork and not in exchanges.

Why was forking done? How did Bitcoin Cash come to be?

Bitcoin being the first cryptocurrency wasn't really expected or rather prepared to achieve the wide trading craze that it received after the year of its creation, 2009. The number of bitcoins created in 2009, was traded and mined at a fairly moderate level. With a size of 1 MB per block, Bitcoin could handle 4.4 transactions per second.

Week by week, the number of transactions increased, causing the network to clog. The miners started charging fees to let your transaction go through faster, so if paid the least amount, your transaction could take 13 minutes to complete.

There were concerns about the timings causing inconvenience and the suggestions to increase the size of the block was made. Thus, Bitcoin Cash was introduced in August 2017 with a block size of 8 MB.

Bitcoin is represented as BTC while Bitcoin cash is BCH.