The most widely recognized cryptocurrency, Bitcoin, fluctuates in value which is a much scrutinized topic among tech savvy investors. If one decides to make the leap and invest in blockchain stocks, and specifically Bitcoin, he or she will have to decide between the two most popular versions of Bitcoin: Bitcoin Cash ($BCH) and Bitcoin Core ($BTC).
Bitcoin was the first decentralized digital currency.
Bitcoin.com was invented by an unknown person or group of people under the name “Satoshi Nakamoto,” and the open-source software was released in 2009. It functions without a central bank or single administrator and transactions take place directly between users within its peer-to-peer network without the need of an intermediary. These transactions are verified by network nodes, which use cryptography, and recorded in a blockchain, which is a public distributed ledger.
The recent scaling failure of the Bitcoin Core network reduced the BTC coin’s usefulness as a form of money because fees continue to climb while transaction times slowed. Bitcoin.com states that it is committed to Bitcoin Cash education and promotion, in part because Bitcoin Cash is a version of Bitcoin. The original properties of digital money still exist in Bitcoin Cash.
Bitcoin Cash is an upgraded version of the Bitcoin Core software, released on August 1, 2017.
The most significant upgrade offered by Bitcoin Cash is an increase of the blocksize limit to 8MB, which means that miners on the BCH chain can process more payments per second. As a result, transactions are faster, cheaper, and feature an improved user experience.
That is some of Bitcoin Cash’s recent developments, but, to better understand the cryptocurrency, we should explore other aspects of hits history. In short, Bitcoin Cash was created to bring back the essential qualities of money that were inherent in the original Bitcoin software. Over time since its inception, these qualities were filtered out of Bitcoin Core. Further progress was impeded by various individuals, organizations, and companies that were involved in Bitcoin protocol development.
Increasingly high fees per transactions and transfer times taking hours to days rendered Bitcoin Core essentially unusable as money.
These issues stem from Bitcoin Core’s “blocks,” or the ways that Bitcoin Core groups new transactions, being full. This means that blocks were processed in a way that was not best in that context.
Originally, Bitcoin was designed to target six blocks per hour. When Bitcoin was still young, an artificial limit to the size of blocks was added to the Bitcoin Core code in an attempt to prevent a possible attack vector in which a mass number of transactions could weaken the network. These transactions were free to make, and an individual intent on attacking Bitcoin could send a large number of transactions between his or her own wallets, forcing everyone on the network to download and store massive amounts of data. Over time, Bitcoin resolved these issues.
In 2018, the Bitcoin Core network is at maximum capacity, and processes approximately 2,500 transactions per block.
This artificially small blocksize led to network congestion as demand for bitcoin transactions continued to grow. To be verified and processed, a bitcoin transaction must be included in a block, and if blocks are full, transactions will be queued and will have to wait to be verified and processed. This has led to a “fee market” in which users pay extra to “cut in line” and move their transactions to the front of the queue.
As of January 2018, there are more than 280,000 unconfirmed Bitcoin Core transactions.
Bitcoin Core developers have openly stated that they view this “fee market” and backlog of transactions as a positive trait of the Bitcoin Core network, despite the fact that this situation has caused many in the community to create alternative cryptocurrencies as an alternative to Bitcoin Core’s increasing fees and transaction times. The result is clear and stark–by January 2018, Bitcoin Core has gone from nearly 100% market share in the cryptocurrency space to below 50%.
This is when Bitcoin Cash becomes important.
Bitcoin Cash is a community-activated upgrade, also called a “hard fork,” of Bitcoin that increased the block size to 8MB. This, at least for the time being, promises to solve the scaling issues that plague Bitcoin Core.
Is Bitcoin Cash less expensive per transaction than Bitcoin Core?
The short answer is yes. The longer answer is much more interesting.
Transaction fees in both versions of Bitcoin are measured in satoshis per byte. (The smallest unit of a Bitcoin is called a “satoshi”; a unit of Bitcoin is divisible to 8 decimal places.) The way you have to accurately measure Bitcoin fees is in satoshis, not dollars or other pre-existing currencies.
As of December 2017, due to Bitcoin Core blocks’ capacity and queue, the bouncer is charging more than 900 satoshis per byte for inclusion into a block. This means that it costs more than $30 to make a single Bitcoin transaction, although this number is subject to change as Bitcoin’s value can fluctuate greatly.
Bitcoin Cash, on average, requires significantly fewer satoshis per byte than Bitcoin Core.
On the other hand, Bitcoin Cash’s average fee is 19 satoshis per byte, and fees can be manually set as low as 2 satoshis per byte and be included into the next block. This is due to the fact that there is plenty of room for everyone who wants to send a transaction.
Keep in mind that these fees are just the cost of doing business; they are not including the amount of money involved in the specific transaction itself. Thus, it is quite clear that Bitcoin Cash has a lot to offer individuals wary of the system currently in place with Bitcoin Core.
Though Bitcoin Cash appears to have more to offer, Bitcoin Core is not completely useless.
In fact, supporters of Bitcoin Core sometimes claim that it was never meant to be a currency; instead, it was intended to function as a store of value, or as “digital gold.” These Bitcoin Core supporters tacitly accept, and even encourage, high fees and slow-as-a-digital-snail transaction times.
It is worth noting that both Bitcoin Core and Bitcoin Cash are demand-backed currencies; that means that a Bitcoin derives value both because of its utility as a currency and but also because people want to own them. However, Bitcoin Core no longer functions as a currency because of its aforementioned fees and slow confirmation times; nevertheless, as long as demand for it continues, it will have meaningful value.
Bitcoin Cash is Bitcoin, not some fake version of it.
Bitcoin Cash is, however, a hard fork of Bitcoin Core, meaning that it shares the same transaction ledger and history of Bitcoin Core. However, Bitcoin Cash manages to be what Bitcoin was intended to be all along: an electronic peer-to-peer cash system. Bitcoin Core and Bitcoin Cash have different networks, ticker symbols, and trade at different prices, but they are, for all intents and purposes, the same.
As individuals, nations, and companies use blockchains such as Bitcoin more, regulation will also increase. While we have yet to see what form these regulations will take, they will undoubtedly significantly impact Bitcoin. (To learn more about the potential value of Bitcoin, read The Futility of Government Bans – Bitcoin Always Finds a Way.)