What is the Difference Between Bitcoin and Bitcoin Cash

Table of Contents

• The Origin of Bitcoin Cash
• The Problem With Bitcoin
• How Is Bitcoin Cash Different?
  • Increased Block Size
  • Block Difficulty
  • Which Bitcoin Should You Buy?
• Making Sense of Cryptocurrency

Bitcoin is the original cryptocurrency. It launched in 2009 and was initially given away for free to early adopters. The digital currency slowly gained traction over the next few years before eventually evolving into the cryptocurrency market we have today. Currently, there are thousands of cryptocurrencies available to buy and trade, leading to a $3 trillion crypto market. But bitcoin is still the most valuable, and many crypto enthusiasts think it always will be. If you're looking to buy bitcoin, you might be confused to find other cryptocurrencies that use the name "bitcoin." For example, bitcoin cash, bitcoin gold, and a dozen other variations. Are they spinoffs of bitcoin, or are they legit? Bitcoin Cash is completely legit, as it's one of the largest cryptocurrencies by market cap. But how is it different than the original bitcoin? Keep reading below to find out now.

The Origin of Bitcoin Cash

As mentioned above, bitcoin first hit the scene in 2009 as the world's first cryptocurrency. It was always intended to operate as a decentralized form of currency. That's why you can use bitcoin to make transactions online and in certain stores. But rather than using bitcoin as a currency, like the dollar, more people saw it as an investment, like gold. They treated (and still treat) bitcoin as a hedge against inflation. Bitcoin Cash, on the other hand, was designed specifically for making transactions. Hence the "cash." If you're in the market to buy cryptocurrency, Bitcoin Cash is not something you buy and hold long term, necessarily. It's what you use to make purchases or send funds to others without needing to go through an intermediary like a bank. Bitcoin Cash is similar to bitcoin in many ways. In fact, Bitcoin Cash is a hard fork of bitcoin. That means both cryptocurrencies share the same foundation. But at a certain point in the blockchain, Bitcoin Cash diverged onto its own chain. Bitcoin continued on its path, using the same code and rules it has always followed. Meanwhile, Bitcoin Cash is on a new path, with alterations to the code that provided many upgrades for this newer cryptocurrency.

The Problem With Bitcoin

Bitcoin, and the blockchain technology that powers it, prioritizes decentralization and security. It's a network that doesn't need a middleman or a single authority to manage. And it's a network that is very difficult to hack, thanks to a global network of miners, all participating in the network safety process. But the thing that bitcoin doesn't prioritize is scalability and transaction throughput. The amount of transactions that bitcoin can handle at any one time is very limited. This is a big problem if you're trying to become a global payment system for billions of people. Major payment providers like Visa are capable of processing more than 1,000 transactions per second. Bitcoin can only handle around seven transactions per second. But bitcoin's popularity has exploded in recent years, leading to slower transaction times, resulting in higher transaction fees. If you've sent bitcoin before, or tried to make a purchase, you'll notice that your transaction isn't actually confirmed until 10 to 30 minutes later. This dilemma has fed the narrative that bitcoin is better used as a long-term investment vehicle rather than a daily currency.

How Is Bitcoin Cash Different?

Many avid bitcoin users, miners, and developers sought to solve the bitcoin scalability problem. But you can't just alter the code of a cryptocurrency without the wider community accepting the change. Ultimately, an agreement couldn't be made between those wanting to "upgrade" bitcoin, and those wanting to keep the original code. So a hard fork occurred in May 2017 and Bitcoin Cash was born.

Increased Block Size

The biggest difference with Bitcoin Cash is the block size. Blocks in the blockchain are where transactions are stored. Each transaction takes up a certain amount of data. Each block in the original bitcoin chain can only handle 1 MB of transaction data. Any looming transactions that don't fit into the current block will be added to a backlog and hopefully make it into the next one. When Bitcoin Cash launched, it immediately increased the block size to 8 MB, Right off the bat, this allowed the new network to process more transactions in less time. In March 2022, the block size was again increased to 32 MB. The larger block size means that transaction fees are much lower. With the original bitcoin, a congested network means that miners prioritize transactions that are willing to pay higher fees. This has historically led to fees upwards of $50 per transaction, making it much less convenient for daily purchases. With the current block size of bitcoin cash, there's rarely, if ever, competition for block space, making transactions cost fractions of a cent.

Block Difficulty

The other major difference is the block difficulty. Blocks are created by miners who compete with each other to solve mathematical equations. With Bitcoin Cash, the degree of difficulty can be adjusted to either speed the network up or slow it down. If there are too many transactions taking place, and blocks need to move faster, then the difficulty decreases. This allows miners to solve the equation faster, create the next block sooner, and process more transactions. If blocks are ahead of the currency transaction volume, the difficulty increases, slowing down miners and keeping everything in balance.

Which Bitcoin Should You Buy?

Bitcoin and Bitcoin Cash are now two very different cryptocurrencies, with different communities, use-cases, and visions. For the average investor and crypto enthusiast, both have a place in your portfolio. Bitcoin puts its priority on decentralization and privacy and is willing to sacrifice transaction throughput for that end goal. It's also an ideal inflation hedge and long-term investment vehicle, as the bitcoin value has seen some impressive increases in recent years. Bitcoin cash, on the other hand, prioritizes transaction speed and low fees. It exists to handle daily payments with ease.

Making Sense of Cryptocurrency

The cryptocurrency market moves fast. And while the market is growing, it's still very young. Many new investors don't understand the intricacies of investing in crypto and the importance of safeguarding crypto. It's actually quite easy to lose crypto by sending it to the wrong wallet address or misplacing your recovery phrase. It's even easier to lose your crypto to hackers and scammers.