Bitcoin vs. Bitcoin Cash: Understanding the 6 Key Differences

Bitcoin vs. Bitcoin Cash

When Bitcoin became a popular cryptocurrency, its usage also increased. As a result, the number of transactions waiting to be confirmed also increased. The block size of the Bitcoin network is only 1 MB and could only contain 1000 transactions in each block. At times, even 100,000 transactions waiting to be confirmed. This resulted in an increase in the fees to process the transactions.

In 2017, several developers of Bitcoin proposed to solve this issue by increasing the block size. This way, the network can process more transactions. The other group of developers opposed this saying increasing block size makes the network less decentralized and vulnerable.

The community was split into two and so was the network. A hard fork, permanent change to the blockchain network, was initiated with the proposed changes. This resulted in the creation of the Bitcoin Cash network. The original Bitcoin network follows the initial rules while the new Bitcoin Cash network works with proposed changes. And, it also has its own Bitcoin Cash (BCH) cryptocurrency.

Bitcoin Vs Bitcoin Cash: 6 Key Differences

The obvious differences between Bitcoin (BTC) and Bitcoin Cash (BCH) are the price and market cap. Bitcoin price around $29,140 and its market capitalization is more than 556 billion, at the time of writing. On the other hand, the Bitcoin Cash price is $226 with a market capitalization of over 4 billion. Let us discuss more differences between these two cryptocurrencies.

Transaction Speed and Fee

Bitcoin network already has predefined rules like the limited supply of 21 million and Bitcoin halving events, that occur every four years. It also has a block-producing time of 10 minutes and adjusts the mining difficulty to maintain that. As a result, it has low transaction speeds and processes around 3-7 transactions per second (TPS).

Each block in the Bitcoin network contains around a thousand transactions. This results in limited block space and makes it competitive to process transactions faster, further increasing transaction processing fees.

Bitcoin Cash has a larger block size compared to Bitcoin and processes around 100 TPS. Being a hard fork of the Bitcoin network, Bitcoin Cash improves some of the original chain’s limitations. Since the block size is more, the competition to process transactions is less. As a result, the fees are less with faster transaction speeds in Bitcoin Cash.

Block Size

Another major difference between Bitcoin and Bitcoin Cash is their block size. Bitcoin has a 1 MB block size whereas Bitcoin Cash has a 32 MB block size. Initially, Bitcoin Cash’s block size was 8 MB and it increased to 32 MB over time. Similarly, its transaction processing speed also increased to 200 TPS.

As a result of the larger block size, Bitcoin Cash costs less than a penny to process transactions. But, the downside of this is the size of the Bitcoin Cash network hasn’t grown much.

Security

Bitcoin network is decentralized and highly secure. The nodes or miners of the Bitcoin network have spread across the world increasing the decentralization of the network. As the decentralization increases, the network becomes more secure.

As we discussed, Bitcoin Cash has bigger blocks and can process more transactions. So, Bitcoin Cash can process transactions faster at lower fees. But, this can make the network less decentralized and secure compared to Bitcoin.

Smart Contracts and DeFi

Satoshi Nakamoto developed Bitcoin to enable peer-to-peer transactions. It does not support smart contracts and dapps like Ethereum. However, developers are working to build these services on the Bitcoin network. But, Bitcoin Cash supports smart contracts and DeFi services. We can even perform complex functions using smart contract languages like Cashscript on Bitcoin Cash.

Token Issuance

We were unable to issue tokens and digital assets on Bitcoin. But the Omni Layer built on Bitcoin helps us to issue customized tokens. It brought advanced features of blockchain technology to the Bitcoin network. So far, the layer is mostly used for stablecoins.

Bitcoin Cash uses the Simple Ledger Protocol (SLP) to issue tokens on the network. With the SLP protocol, Bitcoin Cash also supports NFTs, unique tokens that are non-fungible, on the network. Some tokens exist on both Bitcoin and Bitcoin Cash networks. But as we can see, both networks lack adoption in this area.

Replace-by-Fee Feature

Since Bitcoin has low TPS, transactions often get stuck on the network. To reprocess these transactions on Bitcoin, we can use the “Replace-by-fee” (RBF) feature. As its name suggests, users can replace that transaction with a different one by paying a higher transaction fee.

Bitcoin Cash network doesn’t have the RBF feature. As a result, unconfirmed transactions are irreversible on this network. However, there is a low chance that transactions get stuck on the network. Because the Bitcoin Cash network can process transactions faster.