What are the differences between Bitcoin and Bitcoin Cash? If you are a beginner in the crypto industry and want to invest your money in some coins then you will probably choose Bitcoin in the first place.
This is because this is the most popular and commonly known cryptocurrency. However, there are other coins as well that are equally good to invest in. One such coin is Bitcoin Cash.
This coin, certainly, is not the same as Bitcoin and as a beginner, it is important to know the differences between Bitcoin and Bitcoin Cash so that you make the right choice and make a productive investment.
It is true that the BCH or Bitcoin Cash is a hard fork of Bitcoin but that does not mean it is the same as Bitcoin.
In fact, there are some significant variations between them in spite of the fact that there are some parallels between them that make Bitcoin and Bitcoin Cash distinctly different crypto coins.
Since these two coins are essentially different and you should not even send Bitcoin Cash to a Bitcoin address and vice versa.
All savvy crypto investors are aware of the different terms and types of crypto coins in the market and therefore you too need to understand clearly the different investment opportunities offered by the crypto space.
Ideally, Bitcoin and Bitcoin Cash sound similar but there are lots of distinctions between them.
It is required for you to know to comprehend their history and why and how these coins became household names today in the crypto market.
Well, this article will help you a lot in that matter.
- 12 Differences Between Bitcoin and Bitcoin Cash
- Which is Better – Bitcoin or Bitcoin Cash?
12 Differences Between Bitcoin and Bitcoin Cash
Ideally, Bitcoin is one of the most common and valuable crypto coins available on the market and several crypto investors have shown interest in it whether they are beginners or seasoned investors.
However, if you are a beginner it may be more confusing when it comes to choosing between investing in Bitcoin or Bitcoin Cash.
It is important that you do not confuse the original Bitcoin and Bitcoin Cash because the crypto experts say that you should consider investing in Bitcoin and Ethereum if you are planning a long-term investment.
This article features some of the basic information and differences on both these crypto coins that have emerged as the most accepted digital currencies all over the world. Read on.
Bitcoin, as such, was established by Satoshi Nakamoto in 2008 and is referred to as BTC. People however do not know who Satoshi was and few people say he is a person while others say that it refers to a group of individuals.
However, it was in 2009 that this currency was utilized for the first time and typically, every mining process resulted in the creation of Bitcoin.
Bitcoin Cash, on the other hand, is referred to as BCH and is not only a crypto coin but is also a payment network.
It is actually a hard fork of Bitcoin that was created in December 2017. It was created by the Bitcoin developers as well as the miners who were worried about the future and scalability of Bitcoin in the future.
The primary objective of creating BCH was to increase the number of crypto transactions that could be accomplished.
This coin has its own blockchain and specs which is the one key distinction of it from Bitcoin.
2. Hash Algorithm and Hashrate
BCH or Bitcoin Cash has its own hash algorithm. This means that there is little or no chance of any replay between the blockchain of it and Bitcoin.
This wipeout and replay safety mechanism eliminates the chances of any confusion if, in case, this coin divides in the future.
This is because both the chains are expected to coexist and create little or no interruption when the parties get involved in a transaction when the fork occurs.
However, in comparison, this is not the case with Bitcoin. Ideally, the miners of Bitcoin use their processing power in order to ensure that the transaction is completed and the network is secured.
Bitcoin is about one hundred exhalations long unlike Bitcoin Cash which is about two exhalations long.
This is probably the most significant difference between Bitcoin and Bitcoin Cash that you need to consider before investing in one of them.
3. Transaction Speed and Fees
When you consider the speed of making a transaction, Bitcoin Cash happens to be much ahead of Bitcoin. It is this enhanced speed of it that, in turn, expedites the confirmation process of the purchases made as well.
However, when you consider the fees to make a transaction, the cost of dealing with Bitcoin Cash is much lower on an average as compared to the transaction cost of Bitcoin.
It is due to the large transaction cost of Bitcoin that it is not being able to fulfill the demand for it by the users.
When it comes to the value of the coins, it is very hard to beat Bitcoin, if not impossible.
Over the years, the value of Bitcoin has increased by more than twelve million percent. This is something that is unheard of and a very rare incident that happens in the world of finance.
On the other hand, in comparison, the Bitcoin Cash does not seem to have had a very good run particularly in terms of its price.
In fact, the price of Bitcoin Cash has dropped significantly by more than 65% since it was launched first in 2017.
The Bitcoin Cash comes with a maximum block size of 32 MB. This makes it more scalable than Bitcoin and can make a large number of transactions per second.
In fact, Bitcoin Cash claims to be able to process as many as 200 transactions. It is this ability of Bitcoin Cash that reduces the cost of transactions and this, in turn, also reduces the impact on the environment. Also, theoretically, it also increases its viability as a currency.
On the other hand, the maximum block size of Bitcoin is just 1 MB. It is known to be able to process just seven transactions which is much less than that of the rate of transactions made by Bitcoin Cash.
This increases the cost of making a transaction, its environmental impact, and, at the same time, it reduces its viability significantly.
6. Value of Investment
As a matter of fact, since the price of Bitcoin is much higher than the price of Bitcoin Cash the value of an investment will be much higher.
Also, for most of the investors, this value does not hold priority because the appreciated value of the coin is not as much as it.
On the other hand, the value of investing in Bitcoin Cash will be much lower because of its higher transaction speed and much lower transaction cost.
This means that more and more people can adopt this crypto coin simultaneously.
However, one significant aspect that should be kept in mind while investing in Bitcoin Cash is that these coins in particular do not hold as much trust among the consumers as it is enjoyed by the Bitcoin holders, as of now.
7. Price History
If you want to know which among Bitcoin and Bitcoin Cash is more valuable, you will need to know the price history.
As for Bitcoin, the price of it has been recorded to increase up to $60,000 from zero in its lifespan from 2009 till now.
However, the ride was not smooth at all with its prices falling dramatically, up to 50% or less, in quick time.
Bitcoin Cash, on the other hand, has a somewhat rocky price history being available only since 2017. Its price reached a high point immediately after its launch to about $3,785 per coin.
However, it is not devoid of the volatility aspect and its prices typically hovered around $200 and $1600 last year.
8. Smart Contract Support
In terms of smart contracts, Bitcoin does not support it in spite of the fact that the developers are working on creating better DeFi or Decentralized Finance services for the crypto currently.
However, on the other hand, the developers of the Bitcoin Cash ensured that it can take up smart contract languages such as Cash Script.
This enables it to handle more complex functions apart from the basic transactions that Bitcoin can handle as well.
9. Issuance of Token
When it comes to issuing tokens using the Bitcoin blockchain the projects need to make use of the Omni layer. This is a special platform that helps in creating and trading custom currencies and digital assets.
A transaction made by using this layer is called an Omni transaction which refers to those Bitcoin transactions that come with next-generation features. However, the adoption of this layer is mostly restricted to the stablecoins.
On the other hand, in the case of Bitcoin Cash, the project needs to adopt the SLP or Simple Ledger Protocol while issuing tokens.
This special protocol allows the developers to issue tokens in a much simpler manner through Bitcoin Cash compared to the way in which coins are issued on the Ethereum blockchain.
Another good thing about the SLP protocol is that it also supports NFTs or Non- Fungible Tokens and these can be distinguished from each other easily.
However, the adoption of the SLP protocol on Bitcoin Cash is still limited unlike their adoption on other types of blockchain such as Ethereum.
10. Replace-by-Fee Feature
Bitcoin usually has a unique ‘replace-by fee’ feature or RBF. This special feature enables the blockchain to cancel or double spend unconfirmed transactions.
The RBF feature allows the users to replace a transaction that is stuck and not processed with another version of it.
However, this comes with a much higher transaction fee attached to it.
Though this feature enables making a transaction as fast as possible on the Bitcoin blockchain, the critics claim that it has also made it much easier for the malicious actors to double spend the same fund.
In contrast, the protocol of Bitcoin Cash has cleared away this feature and has introduced double spent tests from May 2021 onwards.
This has enabled it to make the crypto coin much more secure because it does not allow revoking the unconfirmed transactions.
This also helps to make faster transactions of small amounts. The most significant benefit of this feature of Bitcoin Cash is that it has actually raised its utility additionally to serve as a useful and reliable payment solution.
This is especially helpful in those settings where there are high volumes of transactions made in small amounts and all of these are needed to be processed within a limited period of time.
11. Upgrades and Primary Role
The Bitcoin Cash network puts in efforts to innovate and increase the usability and embraces the latest hard forks more openly and can be used as cash.
Its primary vision is to create usable P2P electronic cash and has been quite successful in it due to its low transaction fees and faster transaction speeds.
It also allows publishing every post created on top of the blockchain which includes social media platforms.
The Bitcoin network, on the other hand, is more careful to push upgrades and therefore is considered to be a store of value and as a hedge against inflation.
It is also quite unfeasible to publish every post on the Bitcoin blockchain. The Bitcoin supporters usually value censorship resistance and decentralization much more than a higher transaction output.
In such a situation, the primary role of Bitcoin is as a store of value. However, it is dependent on its ability to deal with the attacks made by any imaginable entity.
Bitcoin preserves the pseudonymity of the users by using upgrades such as Taproot. This allows the users to make complex transactions such as multi-signature components or time-lock releases.
This feature makes a simple transaction and that made by creating a Lightning Network channel quite impossible to differentiate from one another.
However, on the other hand, on Bitcoin cash, the privacy of the users and their transactions is preserved in a different method called coin mixing.
In this method, several transactions of the BCH users get grouped together. This makes the origin of the coins quite obscure.
However, this process is quite controversial because critics say that it allows the malicious actors to hide their tracks.
Which is Better – Bitcoin or Bitcoin Cash?
In order to know which among Bitcoin and Bitcoin Cash is better, you will first need to look into the history of the two a little bit along with a few other aspects.
Bitcoin, as you may know, is the first crypto coin released in 2009 by Satoshi Nakomoto, a pseudonymous figure.
The price of this coin fluctuates drastically, sometimes falling to $10,000 or going as high as over $60,000 for each coin.
The coin was designed initially to be used as a P2P electronic cash system to make payments.
However, it was not successful due to its high volatility and slow processing speed.
Instead, people started to hold the coins in anticipation that the price of it would increase in the future, much like gold.
Then in 2017 came a group of Bitcoin users who wanted to improve the transaction processing speed of Bitcoin and created the Bitcoin Hard Fork – Bitcoin Cash. Still, the volatility issue remained.
It is for this reason you should consider the volatility aspect while differentiating between Bitcoin and Bitcoin Cash and choose the one you want to invest in more cautiously.
The difficulty adjustment algorithm added to Bitcoin Cash also makes it significantly different from Bitcoin.
Both these networks, as you may know, utilize the same SHA-256 hashing scheme.
This allows the Bitcoin miners to move to the Bitcoin Cash network very easily when they find it to be more profitable for them to mine new tokens on this blockchain.
This means that the computing power can vary significantly given the fact that the crypto markets fluctuate wildly.
The primary job of the difficulty adjustment algorithm is to ensure that, when such things happen, the rate of generating new blocks is quite stable and is done every ten minutes.
This is done by either cutting the difficulty in half when these are generated behind the schedule or by doubling the difficulty level as and when these are generated ahead of schedule.
The differences in the block sizes of each of these networks also affect their respective ability to fill up the additional block space and grow exponentially.
Typically, in spite of its larger transacting ability, Bitcoin Cash has not been able to grow exponentially as it was expected to because it has not been processing a lot of transactions to fill up the extra block space.
As a result, a new crypto coin Bitcoin SV or BSV was created through a fork of Bitcoin Cash.
The primary objective of it is to increase the size of the block up to 1 TB so that the size of the blockchain grows much larger than the blockchain of Bitcoin.
Also, the ability of Bitcoin Cash to use smart contract languages such as Cash Script not only enables it to perform more complex functions on the network but also aims to bring DeFi to Bitcoin Cash.
This will help the network to grow significantly and compete with other blockchain networks such as Bitcoin and Ethereum.
A few notable and useful tools that have already been developed by this smart contract language include:
- Cash Shuffle and
- Cash Fusion
Both these aim to secure the network and improve privacy on it, while making a transaction.
Another significant point to note when you differentiate between Bitcoin and Bitcoin Cash is the RBF feature.
As mentioned earlier, this feature expedites a transaction spend as much as possible but along with it increases the chances of double spending.
The critics argue that when a malicious actor uses the RBF feature a transaction can be sent for a good or service with a very small fee as the payment for it.
If the receiver does not wait for getting an adequate number of confirmations from the participants on the network, the attacker can then send the same transaction to a wallet that is controlled by them but with a higher fee.
In such a situation, the network will confirm the second transaction first instead of the first transaction that would have paid the merchant for the good or service and drop it subsequently.
However, in order to prevent this, most of the RBF versions now need the transactions to have a lot of similar outputs.
Still, the best way to go ahead is to wait to get a significant number of confirmations from the network participants because that will confirm the transaction and which will make double spending using the RBF feature impossible.
Thankfully, you do not have to worry about it if you want to invest in Bitcoin Cash because it has dropped this feature and included new ones as mentioned earlier.
Unconfirmed transactions are virtually irreversible on its network and since the transactions are made in large numbers and confirmed much faster on it, double spending by using RBF will be a lot harder, if not impossible.
There are other factors that you need to keep in mind as well before investing. For example, as for Bitcoin, you must know that:
- You can use it to trade goods, services and other currencies
- The real-world value of it fluctuates drastically
- It can be used to make illicit transactions by some users
- It needs a lot of energy to mine tokens thereby causing a significant carbon footprint and
- There can be exchange thefts and hacking.
In both these networks, the monetary policy seems to be the same, in spite of their difference in visions.
The issuance of coins is controlled and both focus on protecting against censorship, monetary confiscation, and devaluation due to inflation that is higher than expected.
Both these blockchain networks are publicly accessible and quite transparent and cannot be changed by one particular entity.
Therefore, to summarize it can be said that:
- The cost of a transaction is lower on Bitcoin Cash than on Bitcoin
- Bitcoin Cash transfers data and confirms transactions much more quickly but Bitcoin takes 10 minutes for it
- Bitcoin Cash has a higher transaction rate per second
- More people can use Bitcoin Cash at the same time than Bitcoin
- Bitcoin enjoys higher customer confidence and
- Bitcoin has more trading pairs which make it more tradable than Bitcoin Cash.
You should know how exactly a particular crypto coin would perform in the near and far future before you choose one to invest in.
Also, widespread adoption plays a significant role to influence your decision, though it is believed that Bitcoin Cash will benefit much more than other crypto coins in the future due to its association with Bitcoin.
Ideally, investing in Bitcoin Cash may make sense if you want to diversify your crypto portfolio, but for that, you should evaluate your portfolio strategy and also have a high risk tolerance to take on the potential losses. Otherwise, stick to Bitcoin.
Therefore, no matter whichever crypto asset you invest in, remember that it needs additional diligence on your end.
This is not only due to the potential losses that you may incur due to the volatility of these two assets but also due to the fact that you will need to report to the IRS while trading your crypto though you will not need to report while making a purchase.
Bitcoin and Bitcoin Cash are two different crypto coins created for different purposes. Bitcoin is very familiar but Bitcoin Cash is not but preferable. Knowing the differences between them will help in choosing the right coin to invest in.