If you’ve been looking at cryptocurrencies as a potential addition to your portfolio, then you’ve probably heard of bitcoin and might even have a vague idea that other cryptocurrencies exist. Then when people start talking about bitcoin cash, it’s natural to become a little confused if you haven’t been following the cryptocurrency market every step of the way. It doesn’t take long to get up to speed on the world of cryptocurrency, so here’s a crash course on two of the most well-known digital currencies people are investing in.
Bitcoin vs Bitcoin Cash: What’s the difference?
Those who haven’t studied digital currencies much might think that bitcoin and bitcoin cash are the same, but they are actually two different forms of cryptocurrency. The former was the first cryptocurrency and it was created many years ago by an anonymous programmer who goes by the pseudonym Satoshi Nakamoto. It took a few years for that first digital currency to begin capturing attention, although it didn’t take long for a few others to start arriving on the scene.
Bitcoin cash was created in August 2017 by what enthusiasts refer to as a “hard fork.” This occurs whenever one cryptocurrency splits into two, creating a second one distinguishable from the first. Essentially, bitcoin’s code was changed, which caused a split and the creation of a second cryptocurrency. Cash isn’t even the only one created by a fork from the first cryptocurrency to attract mass attention. One sister digital currency, if you will, is bitcoin gold, which was created by a fork in November.
Other digital currencies such as ethereum are totally separate and were created upon the same principle of blockchain technology, but using separate code and with different purposes in mind. All digital currencies are “mined” using powerful computers solving complex puzzles, and there can ever be only a limited number of them created. Granted, we’re still talking about millions of them, but there’s still a limit on the number that can ever exist.
Blockchain technology, which all cryptocurrencies are built upon, is basically a sort of public ledger which records every transaction that’s made in one unit of each digital currency. Whenever a cryptocurrency forks, it’s because the code is tweaked in a particular way, according to Futurism. For example, bitcoin gold was created to level the playing grounds and make it “more egalitarian,” while bitcoin cash was created by making blocks eight times larger.
Will Bitcoin Cash solve the problem with Bitcoin?
According to Inverse, there is one big problem with bitcoin in terms of using it as a payment system. The transactions using it have gotten terribly slow. The network can only process about seven transactions every second, compared to Visa, for example, which can process about 24,000 transactions each second. In an attempt to fix this issue, the community changed the digital currency’s data format to make each block occupy less space along the blockchain.
Most enthusiasts praised that tweak, but critics felt that it didn’t go far enough, so that’s where bitcoin cash comes in. It’s different from the original cryptocurrency not only in that it’s split off from it, but also in that it uses bigger block sizes. As a result, cash can store eight megabytes of transaction data, whereas the original can only store one megabyte of data. The result is that the cash network is able to process more transactions per second than the original.
According to Inverse, anyone who owned some original bitcoin before block 478558 was mined should have received bitcoin cash equal to the amount of bitcoin they owned when cash was created. Cash was created at the mining of that block, so when the hard fork was completed, all of the previous fork’s transactions were inherited. In some cases, customers using cryptocurrency wallets such as Coinbase didn’t receive their cash because the wallet did not support the new form of digital currency. However, Coinbase enabled full support for cash this week and announced plans to grant users the cash they should have received on the bitcoin they owned at the time of the hard fork.
Problems with Cash
This doesn’t mean that cash is better than its predecessor in every respect, however. Some critics argue that the newer form of cryptocurrency may be less secure than the original because of the larger block size. According to Futurism, there are two schools of thought on the matter. Enthusiasts of the original digital currency argue that each form undermines the currency’s overall strength because it creates a fracture within the cryptocurrency.
However, others argue that hard forks are the best way to keep bitcoin stable as each split will compete with each other, and whichever system ends up being the best will win out in the end. Additionally, each fork is made in the cryptocurrency with a specific tweak targeting a particular audience in mind.
Bitcoin vs Bitcoin Cash as an Investment
Bitcoin has received a lot of attention recently because its value has skyrocketed in such a short time, although it looks like the party is slowing down, at the very least. After peaking near $20,000, the digital currency has since reversed course. Meanwhile, cryptocurrency enthusiasts have been rotating into other digital currencies, especially bitcoin cash. It’s anyone’s guess what the future holds for these or any of the other cryptocurrencies.
Many experts see more value in the technology rather than as a form of digital asset, but at least for now, bitcoin and other forms of cryptocurrency are being bought and sold as mainstream assets now. The introduction of bitcoin futures at the Chicago Board Options Exchange served to solidify bitcoin’s place as a serious asset, so 2018 will undoubtedly bring even more excitement.