What Exactly is a Hard Fork? An Overview of Bitcoin vs. Bitcoin Cash

History

Bitcoin Cash began as a philosophical disagreement about the future of Bitcoin. The disagreement was whether Bitcoin had diverged from the original Satoshi vision. Should BTC be a great investment, or should it be a great currency?

Many in the community felt strongly that Bitcoin was originally intended to be “a peer-to-peer electronic cash, and a digital currency you would use to make payments.” Back in 2017, the founders of Bitcoin Cash thought that Bitcoin wasn’t living up to that potential.

Bitcoin was not suitable for making payments or capable of functioning as a digital currency. It was an investment, and back then still largely considered to be a bit of a gamble.

Bitcoin miners and developers disagreed about the future of Bitcoin and specifically its scalability. Bitcoin Core is the main version of the software protocol and it is used to make governance decisions. This launched before Bitcoin, as you need governance software in place before you have something to govern.

The off-chain governance model, through Bitcoin Core, gave a lot of power to core developers and miners. They were profiting mightily but the community couldn’t come to a mutually satisfactory conclusion. As a result, a large fragment of those developers created Bitcoin Cash. Interestingly, it’s easier to create a cryptocurrency than we thought.

When Bitcoin Cash was created, everyone who had Bitcoin got an equal amount of Bitcoin Cash.

Why you ask?
Because Bitcoin Cash used the same ledger (i.e. blockchain technology) that Bitcoin used. It used a complete copy of the entire Bitcoin blockchain right up to that point.

Bitcoin fees are measured in dollars and Bitcoin Cash fees are measured in cents.

BCH wanted to be a digital currency and Bitcoin wanted to work as an investment. Think of digital cash (BCH) vs digital gold (BTC).

One of the ideas proposed by the Bitcoin core team was Segregated Witness or “Segwit”, a technology to help solve Bitcoin’s scalability issues. Some developers wanted to separate the tracking and governance model from the cryptocurrency itself, in order to improve the speed of the network.

SegWit
SegWit proposed to remove a part of a crypto coin’s transactional data; Signature data. By removing the Signature data, which is estimated to account up to 60% of data processed in a block, more space becomes available in a block for more transactions. Thus more Bitcoin transactions per second are available.

Opponents thought incorporating SegWit to the Bitcoin network would lead to legal issues (harder to identify the user), would introduce more security flaws, and potentially make it easier to commit fraud. There were also concerns that the introduction of Segwit technology undermined the decentralization and democracy of Bitcoin.

In the end, block size contention was the main reason Bitcoin Cash was created. Among the large Bitcoin community, some supported the idea of increasing Bitcoin’s block size to help with scalability issues while some were against it. The later were afraid larger block size would allow truly massive centralizing control. They felt the proposed technology did not address the fundamental problem of Bitcoin’s scalability issues in a meaningful way.

Bitcoin Cash proposed instead to solve Bitcoin’s scalability issues by increasing the size of blocks to between 8MB and 32MB and thus  enable the processing of more transactions per block.

The benefit of having a larger block size means more transactions per block, lower fees and better utility.

Bitcoin Cash Hard Fork

In August 2017, only a month after Segwit had been proposed, the miners and developers who were against Segwit, because it was too complex, added more problems that might have to be solved later. They created Bitcoin Cash as a fork of Bitcoin itself, which created a faster system.

According to BitcoinCash.org Bitcoin Cash can process as many as 200 transactions per second. Today Bitcoin can only process 4.6 transactions per second. The Flash it is not.

Visa claims to be able to handle 24,000 transactions per second.

Solana claims up to 50,000 as of 2021.

You can see where things are headed.

What about the BSV?

Also worth noting is that a year after BCH was created it underwent another fork that resulted in Bitcoin Cash SV (Satoshi Vision).

The reason for the BCH fork was the same disagreement that led to Bitcoin Cash splitting from Bitcoin! BSV proponents wanted to increase Bitcoin Cash’s block size from 32MB to 132MB. Once again the two sides couldn’t agree and they split and Bitcoin SV came into existence.

​​BSV claims to stay true to the goals of pseudonymous founder Satoshi Nakamoto, as stated in the original white paper.

But then again, so does Bitcoin Cash and Bitcoin.

Comparison BTC vs. BCH

Differentiating Bitcoin Cash from Bitcoin is fairly easy as they had separate original purposes and fairly different uses today. Bitcoin cash is striving to be used everyday as an exchange of value. Bitcoin is more a store of value, where it is hard for the 70 million users to sell or buy Bitcoin. That is the core philosophical difference.

Block sizes

Miners and developers who supported the idea of increasing Bitcoin’s block size eventually ended up creating Bitcoin Cash. Today Bitcoin Cash features a bigger block size of 32MB while Bitcoin has a maximum block size of 1MB. With the 32 time larger limit, Bitcoin cash should be able to process 32 times the number of transactions.

In other words, if BTC can handle about 2700 transactions every ten minutes, Bitcoin cash should be able to handle more than 70,000.

Bitcoin SV supposedly has no upper limit on the number of transactions per second.

Speed

By increasing block size, Bitcoin Cash (now considered an Altcoin) was able to increase the volume of transactions it can process in each block. Like Bitcoin it takes 10 minutes to add a new block to the Bitcoin Cash network. However, unlike Bitcoin, Bitcoin Cash enjoys higher transaction speeds. Bitcoin Cash can process as many as 200 transactions per second while Bitcoin can process up to seven transactions per second.

Energy usage

Both Bitcoin Cash and Bitcoin use the Proof of Work consensus algorithm to add new blocks to their respective blockchains. This means both cryptocurrencies require the use of miners and next-level mining rigs and this means that they both use a lot of energy. The difference comes in the coin’s mining difficulty level, which determines the energy required to mine new cryptocurrencies and add new blocks.

Compared to Bitcoin Cash, Bitcoin’s mining difficulty is pretty high, which makes mining the coin a costly affair. The higher the mining difficulty the more energy intensive mining Bitcoin gets.

According to Coinwarz, considering Bitcoin Cash’s current mining difficulty it would take 18.2 days to mine 1 Bitcoin Cash with a Bitcoin Cash mining hardware consuming 3,250.00 watts of computing power per day.

Bitcoin’s current mining difficulty, on the other hand, would see mining one Bitcoin take 1,273.7 days (41.85 months) with a Bitcoin mining hardware consuming 3,250 watts per day.

Simply put, mining Bitcoin takes longer and consumes more electricity, making it a costly affair.

Cost of transactions

As expected, Bitcoin Cash is much cheaper to use then Bitcoin,

According to ycharts Bitcoin’s average transaction fee as of writing (9/7/2021) is at $3.34. According to BitInfoCharts Bitcoin Cash’s average transaction fee stands at $0.013. Cheaper transactional fees make Bitcoin Cash a highly attractive digital coin to Bitcoin.

Performance and Market Cap

Bitcoin has been leading the cryptocurrency space since it first appeared in 2009. Bitcoin continues to hold the largest market cap, valued at over $900,000,000,000 with an individual coin price of around $50,000 USD (as of 09/2021).
Bitcoin data via CoinMarketCap

Bitcoin Cash is currently the 14th largest cryptocurrency in the world by market cap, valued at $14,000,000,000 and a per unit price of closer to $700 USD.
Bitcoin Cash data on CoinmarketCap

Smart Contracts

Compared to other cryptocurrencies, Bitcoin has few utilities and many  limitations. Developers cannot build platforms and other services on the Bitcoin Protocol. BTC is mainly  an investment vehicle.

Bitcoin Cash on the other hand offers users a network where they can do more than basic transactions. The network allows developers to use smart contract language like Cashscript for more complex functions like the creation of decentralized finance applications.

Smart Bitcoin Cash

Smart Bitcoin Cash is a side chain of the Bitcoin Cash network that seeks to explore new ideas and unlock possibilities.

Smart Bitcoin Cash is compatible with Ethereum and was created to utilize decentralized applications or dApps with more affordable transactions. It looks to compete with Ethereum by offering cheaper space for running decentralized applications.

What’s Next?

Unlike Bitcoin, which seems to focus mostly on the “store of value” narrative, Bitcoin Cash is trying to grow by finding more ways to promote the its use. According to Bitcoin.com over 4,000 businesses are accepting Bitcoin Cash as a form of payment.

The Bitcoin Cash network also boasts the Simple Ledger Protocol that allows developers to create and issue new tokens. The protocol also supports Non-Fungible Tokens (NFTs), which have become quite popular over the years, since they first hit the crypto market.

Meanwhile, many people predict that the value of a single BTC could be as high as $500,000 (USD) in the not too distant future. $100,000 seems conservative in many circles.

Which is better BTC or BCH?

It depends on use. There may be a lot more user of BCH at some point but the value of Bitcoin could vastly outperform it.

All that being said, it does seem as though BCH is way underperforming and/or potentially undervalued. A possible opportunity? Or perhaps Bitcoin has the market covered by now.

What would it take for Bitcoin Cash to catch Bitcoin in value?

Remember, Bitcoin introduced all this “decentralized ledger technology” (blockchains). It brought cryptocurrency to the world and created an industry valued at close to 2 trillion dollars (depending on when you go by).

There’s hardly a cryptocurrency in existence that hasn’t borrowed something from Bitcoin.

For Bitcoin Cash to catch up to Bitcoin in value a few things have to be considered;

Market period

Bitcoin has been in existence since 2009. In 2010 it experienced its first price increase jumping from $0.0008 to $0.08. Over the years the coin has experienced a significant price increase that has set it apart.

Over the ten years that Bitcoin has been around many people have come to trust it. Some people consider themselves Bitcoin maximalist and think that in the end Bitcoin may be the last man standing. The price predictions for a single Bitcoin go all the way up to $1 million each.

Bitcoin Cash has been around since 2017. It has a lot of similarities to Bitcoin and in most areas it outperforms Bitcoin but it’s still way behind in market cap and price.

Looking at the history of Bitcoin’s hard forks, Bitcoin XT is one of the first notable hard forks of Bitcoin that initially saw success before dying. The cryptocurrency is no longer in existence. Some more years in the crypto market can help with Bitcoin Cash’s reputation.

Proven capabilities

Bitcoin stands out as a top-performing cryptocurrency that is highly secure, private, tamper-proof, and censorship-proof. Compared to fiat money, Bitcoin has also proven to be more portable, durable, safe, and divisible.

Compared to Bitcoin, Bitcoin Cash boasts higher transaction speeds and low transaction fees. The two coins have a lot in common. However, where their similarities end is where their differences begin.

Bitcoin has already proven a lot of things that Bitcoin Cash continues to work on. From top-notch security to market dominance, Bitcoin stands out as a highly attractive cryptocurrency to many people and businesses.

For Bitcoin Cash to one day catch up to Bitcoin the coin has a few things to prove it’s here to stay. This means more people have to start and continue using BCH. The coins also have to prove market dominance, which means in a bear market, drops should not be that significant. However, compared to the possible marketplace (billions of people) both Bitcoin and Bitcoin Cash have a long way to go.

Which is harder to find?

BCH is less popular but they are both widely accepted and exchanged.

Bitcoin is more widely available and used than Bitcoin Cash however both are widely accepted and growing in adoption. Both are listed on nearly all crypto exchanges, and there’s an ever increasing number of companies accepting BTC payments.

Proof of Work Mining vs. the Environment

Both Bitcoin and Bitcoin Cash use Proof of Work to mine and secure their respective networks.

A lot of cryptos use Proof of Work.

Environmentalists complain that PoW is harmful to the environment. It can’t be denied that mining  requires a lot of computational power which in turn requires large amounts of cheap electricity.

On the other hand, many of the miners have relocated from China to places where there are better environmental regulations. Proponents also point to the fact that much of the energy used in Bitcoin mining is actually surplus energy and therefore has a very small impact. In fact it even creates a benefit.

In 2021 Tesla started then abruptly stopped accepting BTC as a form of payment. Then they started again. The move was not good for Bitcoin investors as its prices went down in the short term. Tesla for the record did not sell the $1.5 billion it had invested earlier in the year.

Other cryptocurrencies have found new and better ways to verify transactions and maintain their blockchains without harming the environment to the same degree. Alternatives to the Proof of Work consensus mechanism include:

• Proof of Stake (Ethereum)
• Proof of Capacity
• Proof of Authority
• Proof of Elapsed Time

Bitcoin and Bitcoin Cash Adoption

Different industries and businesses have quickly adopted the idea of using Bitcoin and Bitcoin Cash for various reasons including as a payment system. The adoption rate of these coins is impressive.

How many businesses accept BTC?

According to a December 2020 estimate by fintech Fundera, in the US alone over 2,300 businesses accept Bitcoin. The number excludes Bitcoin’s ATMs, which are widely available. California stood out as the state with the highest number of businesses accepting Bitcoin, 440. Worldwide Fundera revealed that more than 15,000 businesses accept Bitcoin.

Some major businesses that accept Bitcoin include Overstock, Microsoft, AT&T, and Wikipedia. Other companies that accept Bitcoin include Twitch, Rakuten, Home Depot, Newegg, Starbucks, Whole Foods, and Etsy.

How many businesses accept BCH?

Bitcoin Cash is also doing well when it comes to market acceptance and adoption. According to Bitcoin.com, more than 4,000 merchants accept Bitcoin Cash as a form of payment. The number is only expected to increase as more people continue to use the coin because of its convenience. With over 50 million companies of one sort or another on earth, that 4,000 is just a start.

What will be the tipping point that causes most companies to accept a cryptocurrency? Something that is simple, easy to execute, and with no possible mistakes.

Cryptocurrencies continue to prove they are not a bubble. Many people and industries continue to adopt digital coins for various uses, including as a form of payment.

Takeaways

Bitcoin is older and more established. It’s the largest and best known cryptocurrency for a reason.

Bitcoin Cash offers an improvement over Bitcoin technically and it has the advantages of being both faster and less expensive. This makes BCH more ideally suited for day to day use and smaller transactions (in other words more like cash).  Many people are starting to realize this and it may bode well for BCH in the future.

Bitcoin is still a far better store of value.

It remains to be seen whether it’s status as the largest and most valuable cryptocurrency will endure but at least for now the number two spot (ETH) is a long ways behind. BCH is in the top 20 as of this writing, so it has an even longer ways to go.

Cryptocurrencies are being developed right now that offer ways to improve on these features and introduce new benefits. Maybe someday one of them will overtake the top spot.

From an investor perspective, Bitcoin has shown to be a safe investment over time and I wouldn’t bet against it in the future. The Bitcoin developers are looking at ways to improve Bitcoin and some of them like Lightning Network are promising.

Bitcoin Cash is considered by a lot of people to be undervalued.

BCH has everything that BTC has but also offers improvements to its acceptance and usability. It may be the case that as more people use and accept crypto, the value of BCH will begin to catch up to BTC.  Surpassing it will be another story.