How did Bitcoin Cash come about?

What is Bitcoin Cash? It is both a cryptocurrency and a payment network, like Bitcoin. BCH can therefore be mined, bought and sold and it can also be used to pay for transactions.

As a newcomer to the world of cryptocurrencies, you may be confused by the existence of several cryptocurrencies called Bitcoin. This article will focus on Bitcoin Cash, but many other Bitcoin “clones” exist, such as Bitcoin SV. We want to explain why they exist and the fundamental differences between them before you get lost in conflicting information online and decide to buy “a little bit of everything, just to be on the safe side”.

Bitcoin is an open-source, community-driven project. In short, decision-making power does not belong to one person or organisation; instead, decisions must be reached through a global consensus. In the active Bitcoin community, there are developers, miners and users who can manage a “Bitcoin node”, a principle which we will explain later.

But when controversial decisions have to be made, members of the community may disagree. That’s what happened with Bitcoin Cash.

Bitcoin is certainly the best known and most talked-about virtual currency. Success stories about buyers who have become millionaires have significantly boosted its popularity with the general public. This sudden fascination has had a significant effect: since 2014, transactions in Bitcoin have increased exponentially. This has led to higher transaction fees and longer confirmation times. Discussions to find a solution were held in 2016 between the different members of the community. Some of the users proposed a simple, short-term idea: increasing the size of the blocks.

In 2016 and 2017, debates about how to scale the Bitcoin network intensified, with a majority opting for off-chain scaling, with solutions such as the Lightning Network and protocol developments such as SegWit to help to implement them. Other users continued to advocate the solution of increasing the size of the blocks. The Bitcoin community didn’t manage to reach a consensus. In the end, users in favour of increasing block size created the Bitcoin Cash project on 1 August 2017.

The development of Bitcoin Cash

Between 2017 and 2019, the price of Bitcoin Cash increased. There are three main reasons for this. Firstly, cryptocurrencies have become democratised among the general public. The emergence of more user-friendly trading platforms has also helped. In addition, it’s easier to access information: videos on YouTube, online training, comprehensive guides on specialist sites, etc. The general public is now much better informed about cryptocurrencies.

In 2020, the pandemic had an effect on most virtual currencies. The price of the Bitcoin Cash token fell but stabilised from December of the same year.

From 2021, the price has fluctuated, rising and falling. Market trends must be taken into consideration, particularly the influence of Bitcoin, the most famous cryptocurrency. It dominates the market, so its price has an influence on all others. It should also be noted that Bitcoin and Bitcoin Cash are in direct competition, which could affect its popularity. However, if Bitcoin’s flexibility causes lasting problems in the future, this could benefit Bitcoin Cash.

Other external factors also influence the performance of Bitcoin Cash, such as competition from new crypto projects and investor perceptions of the short, medium and long term. The media also has a direct effect on prices: an announcement can cause the price to rise or fall.

While its price changes frequently, Bitcoin Cash remains a safe bet for speculation. You can continue to buy and sell Bitcoin Cash: this virtual currency still has a bright future ahead of it. The forecasts all agree that there will be an increase in price in the coming months. Bitcoin Cash therefore represents a profitable investment opportunity, particularly given that it has not yet been widely adopted by businesses and the general public. However, this may change in the near future. Of course, potential buyers must remain vigilant: as with any investment, predictions about cryptocurrencies are not an exact science. The price of Bitcoin Cash, which is more easily manipulated, can therefore be erratic.

Bitcoin Cash is supported by key influencers

Bitcoin Cash has been and continues to be successful because it has been supported by important players within the community. For instance, Roger Ver is a strong supporter of Bitcoin Cash. He is a pioneer of the Bitcoin ecosystem and is also a major investor who helped to publicise and promote Bitcoin in its early years. In his view, Bitcoin Cash is the real Bitcoin, in keeping with Satoshi Nakamoto’s original vision.

Of course, since the real Bitcoin is the one supported by the majority, this claim isn’t true, but Roger Ver has considerable resources. Indeed, he owns the bitcoin.com website, which can be confusing for newcomers. In addition to Roger Ver, the Chinese mining giant Bitmain, led by Jihan Wu, has supported Bitcoin Cash. This resulted in Wu losing his job as CEO of the company.

Differences between Bitcoin Cash and Bitcoin

The differences between Bitcoin and Bitcoin Cash are minimal. At the time of the fork, there was an increase in block size from 1 MB to 8 MB. Since then, Bitcoin Cash has further increased this limit to 32 MB. In principle, Bitcoin Cash can therefore accommodate about 15 times more transactions than Bitcoin, which has a capacity of about 1.8 MB after the implementation of SegWit. However, as the following graph shows, the blocks are empty and struggle to exceed 100 KB, ten times less than 1 MB.

Bitcoin-Cash-block-size – The differences between Bitcoin and Bitcoin Cash are minimal. At the time of the fork, there was an increase in block size from 1 MB to 8 MB.

Even if the blocks were full, increasing the block size every time the Bitcoin network reaches saturation is not a long-term solution. If the use of Bitcoin explodes, infinitely larger blocks would be needed. This would cause huge problems on the network because each block has to be distributed to the various nodes on the network to ensure synchronisation.

In addition, the size of the blockchain would be disproportionately large and this would lead to centralisation, because fewer people would be willing to hold a copy of the blockchain. This would weaken the network. For these reasons, most of the Bitcoin community agrees that scaling the Bitcoin network must be done through second-tier solutions such as the Lightning Network, which is currently operational but still needs to be improved.

Another difference between Bitcoin and Bitcoin Cash relates to transaction fees. As explained earlier, Bitcoin’s massive popularity has led to increased costs. Bitcoin Cash was created as a simple solution to this problem. As such, Bitcoin Cash’s transaction fees are lower than those of Bitcoin. What’s more, because the Bitcoin Cash block has a larger capacity, as we saw earlier, more people can use this virtual currency simultaneously than Bitcoin.

Bitcoin Cash’s transfer times are also faster than those of its “model”. Bitcoin requires a 10-minute delay to confirm a transaction. This period is reduced when processing transactions using the BCH cryptocurrency.

There is a final, more symbolic difference. The Bitcoin community is very focused on the vision of its founder: Satoshi Nakamoto. He or she sees decentralisation as a key element which should take precedence over everything else. However, fans of Bitcoin Cash believe that mass consumer adoption of cryptocurrencies is more important than decentralisation.

Why does Bitcoin Cash exist?

A result of Bitcoin’s open-source nature

Bitcoin is an open-source software, available in the dedicated directory on the GitHub site. It is therefore very easy to use the code and create a new iteration of the Bitcoin software by giving it any other name. This is what we call a “fork” in software engineering.

However, software isn’t everything when it comes to cryptocurrency. Miners must be persuaded to devote computing power to the chain to secure it and must also decide whether to recover the transaction history from a certain point or to start from scratch. In general, Bitcoin’s users decide to fork the chain at a given block of the Bitcoin blockchain so that everyone holding Bitcoins at that block number automatically gets the same number of Bitcoins X on the new chain. This makes it possible to acquire users from the start.

A value proposition must be supported and championed by the team; this does not reflect the overall vision of the Bitcoin community. After all, why would anyone come and use this network, which is so similar to Bitcoin, when it already exists?

A result of Bitcoin’s model of governance

Bitcoin is a community project, run by a community of independent individuals. As such, taking the protocol in a different direction is not an easy task because there are different opinions within the community and there’s no one at the top to make a decision.

Although there’s no formal process for developing the protocol, there are various methods for implementing protocol evolutions. This can be as simple as updating the Bitcoin Core software (the most popular and widely used implementation), miners expressing support via their computing power or network nodes expressing support for decisions which are not unanimously supported.

In any case, anyone can suggest a different implementation of the Bitcoin software and try to persuade the network nodes to adopt it. Similarly, network nodes can put pressure on the team developing the Bitcoin Core implementation by deciding to focus on a new implementation of the Bitcoin software. Although most of the network follows the Bitcoin Core implementation and its evolution, Bitcoin remains a consensus system. The real Bitcoin is the one that the majority of the community supports and manages.

Differences between Bitcoin Cash and Bitcoin

The differences between Bitcoin and Bitcoin Cash are minimal. At the time of the fork, there was an increase in block size from 1 MB to 8 MB. Since then, Bitcoin Cash has further increased this limit to 32 MB. In principle, Bitcoin Cash can therefore accommodate about 15 times more transactions than Bitcoin, which has a capacity of about 1.8 MB after the implementation of SegWit. However, as the following graph shows, the blocks are empty and struggle to exceed 100 KB, ten times less than 1 MB.

Bitcoin-Cash-block-size – The differences between Bitcoin and Bitcoin Cash are minimal. At the time of the fork, there was an increase in block size from 1 MB to 8 MB.

Even if the blocks were full, increasing the block size every time the Bitcoin network reaches saturation is not a long-term solution. If the use of Bitcoin explodes, infinitely larger blocks would be needed. This would cause huge problems on the network because each block has to be distributed to the various nodes on the network to ensure synchronisation.

In addition, the size of the blockchain would be disproportionately large and this would lead to centralisation, because fewer people would be willing to hold a copy of the blockchain. This would weaken the network. For these reasons, most of the Bitcoin community agrees that scaling the Bitcoin network must be done through second-tier solutions such as the Lightning Network, which is currently operational but still needs to be improved.

Another difference between Bitcoin and Bitcoin Cash relates to transaction fees. As explained earlier, Bitcoin’s massive popularity has led to increased costs. Bitcoin Cash was created as a simple solution to this problem. As such, Bitcoin Cash’s transaction fees are lower than those of Bitcoin. What’s more, because the Bitcoin Cash block has a larger capacity, as we saw earlier, more people can use this virtual currency simultaneously than Bitcoin.

Bitcoin Cash’s transfer times are also faster than those of its “model”. Bitcoin requires a 10-minute delay to confirm a transaction. This period is reduced when processing transactions using the BCH cryptocurrency.

There is a final, more symbolic difference. The Bitcoin community is very focused on the vision of its founder: Satoshi Nakamoto. He or she sees decentralisation as a key element which should take precedence over everything else. However, fans of Bitcoin Cash believe that mass consumer adoption of cryptocurrencies is more important than decentralisation.