Recently, there have been a lot of questions surrounding the ability of Bitcoin to scale effectively. In other words, is it ubiquitous—and efficient—enough to stand on its own feet in a future where millions more people will want to be involved in cryptocurrency.


For starters, Bitcoin is a revolutionary cryptocurrency existing within a network of computers in a blockchain. So it’s essentially a ledger-recording technology. All the events on the network are verified by a majority rule and it’s decentralized (i.e. not controlled by a single actor).


One of the major challenges with this technology is that it can get extremely slow, compared to other systems such as banks operating on credit card transactions. For instance, Visa processes about 1,800 transactions per second, but their capability is far more than that (24,000 transactions per second). Bitcoin network, on the other hand, can only process about seven transactions per second. So as the network of Bitcoin users expands, the waiting times will get longer. There has been a debate around the scalability of Bitcoin with respect to how the transaction verification process can be increased. The two major solutions to this challenge are either to reduce the amount data to be verified per block which makes the transactions cheaper and faster, or to make data blocks bigger, which allows for more information to be processed at a time.


What is Bitcoin Cash, and where did it come from?


So in August 2017, the Bitcoin Cryptocurrency underwent what is known as a “hard fork”. In simple terms, hard fork usually refers to a change or an upgrade in the protocol. In broader terms, it’s a radical change that usually makes previously valid transactions/blocks invalid (or vice-versa) and as a result, requires all users or nodes to upgrade to the latest version of the protocol software.


This, in essence, creates a fork in the blockchain where one path follows the new changed/upgraded blockchain and other proceeds along the old path. So, in the case of Bitcoin, there were two main groups that disagreed on how to go about developing Bitcoin and improving its scalability. One group mainly made up of Bitcoin miners and the other group composed mainly of Bitcoin users and core developers. The two groups primarily disagreed on how Bitcoin protocol should be scaled.


The miners supported the idea of Bitcoin using bigger data blocks to allow more transactions (data) to fit into each block mined. The developers and users, on the other hand, wanted to integrate Segregated Witness (Segwit), which is basically an upgrade that would help compress transaction data, so that more data (transactions) could fit in each block.


The goals of these groups were essentially the same, but neither of them was willing to compromise on the way forward. As a result of this disagreement, Bitcoin forked (split) into two different currencies. So Bitcoin Cash is supported mainly by miners who were in favor of larger blocks and the regular Bitcoin is supported by developers.


What is the difference between Bitcoin and Bitcoin cash?


Bitcoin and Bitcoin cash are similar in a number of ways. They both have value and you can spend them or invest them just like any other currency. The main difference, as already explained, is their block size limit; Bitcoin Cash currency has a blockchain size limit of 8 MB, while the regular Bitcoin is 1 MB. The larger block size of Bitcoin Cash allows it to process more data (transactions) per day, increase processing times and reduce the fees. The transaction fee for Bitcoin Cash is currently around $0.20, which is much cheaper compared to the Bitcoin’s $6. So when comparing price and speed, Bitcoin Cash seems to have an advantage over Bitcoin.


But just like Bitcoin, Bitcoin Cash has its own share of challenges. For instance, the increased size of the blockchain may create a centralizing effect which reduces the attack resistance of the blockchain network. So in comparison, Bitcoin Cash is not necessarily better or worse than the regular Bitcoin; they are just different. Most importantly, despite sharing names, the two currencies are entirely separate.


The Future of Bitcoin and Bitcoin Cash


This development will have some consequences in the future of cryptocurrency. The situation currently is very fluid and market valuations across the world are quite volatile. It is a little difficult to tell the future of Bitcoin Cash until it has been running for a while. The value of the two currencies tend to mirror each other proportionately, but whether or not that will continue depends on measures that will be taken to improve the levels of security and the speed of transactions.


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