We all know Bitcoin is the first CryptoCurrency that appeared 10 years ago and has become the most powerful Coin today. Today, it is not only the world’s first cryptocurrency, but also the highest priced, largest cap, popular and most famous coin.
However, Bitcoin is not perfect. One of the most important issues for cryptocurrencies has always been scalability. More specifically, it is the size of a block of transactions, Bitcoin is created within the limit of 1 MB. This limit size causes significant delays in transaction processing times and limits the number of transactions the network can process.
Bitcoin Cash was created to solve this problem with the ability to increase the block size from 1 MB to 8 MB. With this distinction, the goal of BCH is to increase the number of transactions that can be processed by the network.
1. How is Bitcoin Cash created?
From the problem that Bitcoin faced, the community and developers came up with two possible solutions to this situation: Bitcoin Unlimited and Segregated Witness (SegWit).
Bitcoin Unlimited will remove the block size limit altogether. Miners have supported this solution, as the lack of a block size limit will not only prevent blocks from piling up, but will also increase miners’ overall fees per block.
However, a lot of developers opposed this proposal, arguing that it would lead to small miners going bankrupt, which in turn could lead to centralization of the entire network by centralized pools. large mining group. The result was a compromise protocol called SegWit2x that was agreed upon. The solution of this protocol is to store some information outside of the Blockchain as well as increase the block size limit to 2 MB.
However, increasing the block size to 2 MB did not make the situation any better, so they decided to increase it to 8 MB. This major change required a fork from the original Bitcoin network, and the fork hard fork took place on August 1, 2017. After the fork happened, all Bitcoin holders before the hard fork occurred. The fork will receive an equal amount of Bitcoin Cash tokens.
2. Difference between Bitcoin Cash and Bitcoin
Obviously, after the split Bitcoin Cash is an independent coin from Bitcoin and it must have a new name. The intention of Bitcoin Cash supporters is to make it the new cash of the future.
3. Advantages and Defect
Larger block size with 8MB helps Bitcoin Cash solve the problem that Bitcoin has with speed and transaction fees. Bitcoin Cash can handle more transactions at a cheaper cost. Bitcoin Cash provides a way to adjust the Proof-Of-Work difficulty faster than the 2016 Block difficulty adjustment period found in Bitcoin.
Many people think that the solution to expand to 8 MB of Bitcoin Cash is just short-term, because in case BCH becomes popular and transactions increase, 8 MB will not be enough, then they will have to increase. Go ahead and it’s not the good way.
Bitcoin has a lot of miners, mining pools, decentralization is so large that the possibility of an individual attacking 51% of the Bitcoin network is impossible. Bitcoin Cash, on the other hand, is very centralized. They currently have 3 main mining pools, together they can generate more than 51% of all BCH coins. This is a dangerous situation for the Bitcoin Cash network.
Technically Bitcoin Cash uses a different Hash algorithm than Bitcoin. The technology of Bitcoin Cash allows to increase the number of blocks. Right now it is 8 MB and can grow more. Bitcoin Cash has a different transaction signature to verify its difference from Bitcoin. Bitcoin Cash uses a new algorithm that ensures the chain works properly regardless of the case of a significant change in the number of miners.
4. Bitcoin ABC and Bitcoin SV
In November 2018, a chain split of Bitcoin Cash (similar to a Bitcoin fork) occurred between two factions known as Bitcoin ABC and Bitcoin SV.
This split stems from a split in the Bitcoin Cash community. The first faction is led by Roger Ver and Jihan Wu of Bitmain, who come up with a proposal called Bitcoin ABC (short for “Blocksize Cap”) with the ability to maintain the block size at 32 MB. The second faction, represented by Craig Steven Wright and billionaire Calvin Ayre, also offers a competing protocol, called Bitcoin SV, which stands for “Bitcoin Satoshi’s Vision”, which will increase the block size limit up to 128MB.
This is the cause of the appearance of Bitcoin SV and Bitcoin ABC in the market. Later, when Bitcoin ABC gained the upper hand, it was officially returned to the original name Bitcoin Cash.
Should you mine Bitcoin or mine Bitcoin Cash?
The process of mining BCH cryptocurrency is very similar to BTC mining, but there are a few key differences. First and foremost, Bitcoin Cash’s block size limit is 8 MB, while Bitcoin’s is just 1 MB. Of course, larger blocks will require more computing power, requiring more scaling and investment to mine. On the other hand, larger blocks need more transaction fees for miners to make them profitable.
Since the two cryptocurrencies use the same Blockchain, the reward for each block mined is the same. However, there is still to mention transaction fees, because the cost of Bitcoin Cash is very small compared to Bitcoin’s fees. As such, mining BCH is not actually more profitable than mining Bitcoin.
Above is a summary of the information you need to know about the Bitcoin Cash (BCH) cryptocurrency. The fact that the hard fork of coins to generate new coins is misleading for many investors, especially for newbies. You need to distinguish and understand the origin of Bitcoin Cash and Bitcoin SV coins to avoid confusion in investment choices.