What Are the Main Differences Between Bitcoin and Bitcoin Cash?

one bitcoin on blue background

In 2008, the financial world saw an innovation the likes of which it had never seen. The unknown developer Satoshi Nakamoto debuted his idea for a digital currency, untethered to any government fiat currency.

As a result, this new “cryptocurrency” would be free from inflation, a massive problem during the Great Recession of that same year. We know this cryptocurrency as Bitcoin. Thirteen years later, it remains the most valuable cryptocurrency on the market.

However, as the project took off, developers had different ideas about how Bitcoin should function. As a result, we now have Bitcoin and Bitcoin Cash.

Despite sharing a name and a developer, these two cryptocurrencies have several significant differences. If you’re not sure which of these to purchase or invest in, don’t worry! In this guide, we’ll explore the essential differences and similarities between them.

Bitcoin: How It Works

To understand the differences between Bitcoin and its later spinoff, we must first explain how Bitcoin (BTC) functions. Doing so will make it easier to see the differences that Bitcoin Cash introduces.

As we mentioned before, Bitcoin is a decentralized digital currency. Unlike fiat currencies such as the US dollar, no single source regulates this currency.

Instead, it records and monitors transactions through a distributed ledger. We call this ledger a blockchain. Blockchain technology is the critical component that secures transactions and helps keep them anonymous.

The original Bitcoin developers had a vision for how the cryptocurrency would evade inflation. Rather than allowing people to create as many Bitcoin as they want, the developers determined that only 21 million Bitcoin can exist.

Currently, about 18.78 million Bitcoin exist. So, how do Bitcoin users use Bitcoin?

Participants in the cryptocurrency market can either buy or sell tokens in one-on-one transactions or through exchanges. Typically, people use Bitcoin tokens for one of two purposes.

Some prefer to use cryptocurrency as a way to hedge their assets and protect themselves from inflation. This is perhaps the more common Bitcoin use. The other usage involves using Bitcoin as a currency in itself.

The Origin of Bitcoin Cash

If Bitcoin sounds as impressive to you as it does to many others, you may wonder why a separate cryptocurrency had to exist. The answer pertains primarily to Bitcoin’s function.

The original vision for Bitcoin in its 2008 launch was that it could become an alternative currency for transactional use. However, several years into its existence, Bitcoin still had features that made it difficult to use in transactions.

There were also concerns about the scalability of Bitcoin. Around 2016, Bitcoin developers wanted to incorporate a software called SegWit2x that some believed wouldn’t address scalability in a significant way.

As a result, those developers initiated a blockchain fork and essentially created a new cryptocurrency: Bitcoin Cash. Though similar in many ways, Bitcoin Cash (BCH) differs in significant ways from the original.

Bitcoin and Bitcoin Cash: Similarities and Differences

Due to their common origins and overlapping visions, these two cryptocurrencies have many similar features. However, since BCH hoped to address Bitcoin shortcomings, it also has features unique to it. For the remainder of this article, we’ll give a birdseye view of these differences.

How Many Tokens Can Exist?

Both Bitcoin and Bitcoin Cash remain true to Satoshi Nakamoto’s vision for only 21 million Bitcoin tokens. This way, both remain viable options for safeguarding assets from inflation. They each help to ensure their cryptocurrency’s value remains viable.

Differences in Blockchain Technology

For the most part, Bitcoin and BCH utilize similar blockchain technology. However, there is a critical difference between the two: block size.

A cryptocurrency’s block size impacts the speed at which a transaction processes. As of 2019, the average block size of Bitcoin increased to 1.305 MB. This size surpassed previous records.

What does this mean practically? In short, attempts to use Bitcoin as a currency can be slow to process, especially compared to other cryptocurrencies.

In contrast, BCH implemented a block size of 8 MB. This increased size helped accelerate verification processes. However, the BTC spinoff recognized that faster transactions could also impair the anonymity and security of transactions.

As a solution, they created an adjusted level of difficulty for the blockchain to protect it from any danger the new size could create. This security remains regardless of how many miners support the chain.

BCH didn’t stop its development with 8 MB blocks. In 2018, they increased their maximum block size to 32 MB. However, most participants continue to use 8 MB blocks.

Because of these innovations, Bitcoin Cash can handle more transactions each second than Bitcoin’s network. So, why is it that fewer people have heard of Bitcoin Cash? We’ll discuss that in the next section.

Reputation of BTC and BCH

While Bitcoin Cash utilizes many innovative features, it remains the lesser-known of the two cryptocurrencies. Because of this, despite BCH’s attempts to function as a currency, more companies accept BTC.

In recent years, several leading companies have decided to allow Bitcoin as a viable payment method. Examples of these include Starbucks, whose most recent app updates provide options for Bitcoin payments.

Another example is Microsoft. Although the software giant doesn’t accept Bitcoin universally, it does allow people to make purchases on the Xbox Online store using the cryptocurrency.

What About Cryptocurrency ATM Use?

Did you know that over 20,000 cryptocurrency ATMs exist across the world? Many of these are in major US cities.

These ATMs function like most others. You can use their interface to either purchase tokens of a cryptocurrency or request the cash value of your crypto assets. You can view how that works here.

Most cryptocurrency ATM options prioritize Bitcoin; some may not even have other cryptocurrency options available. However, others may include Bitcoin Cash options as well.

Decide Which Cryptocurrency Is Best for You

We hope this guide helps you understand the differences between Bitcoin and Bitcoin Cash. Use this information to decide which of the cryptocurrency options best suits your purposes.

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