What's the Difference Between BTC and BCH

What's the Difference Between BTC and BCH

Bitcoin (BTC) and Bitcoin Cash (BCH) share similarities that go beyond their names. Bitcoin is the first cryptocurrency to have ever been created and is often seen as digital gold, or “gold 2.0.” The cryptocurrency is treated as a store of value and inflation hedge.

Bitcoin Cash, on the other hand, is a cryptocurrency meant to serve as digital cash, with its supporters trying to ensure that it’s cheap and easy to use. BCH was created through what’s called a hard fork of BTC, which means both assets share a transaction history, common code base and more.

The Bitcoin scaling debate

Since its inception, questions surrounding Bitcoin’s ability to scale effectively and become a widespread global currency have been floating around. The cryptocurrency’s use of blockchain technology allows it to be decentralized and censorship-resistant. Still, the novel technology has a significant tradeoff: the volume of transactions that the Bitcoin blockchain can process per second — its transaction throughput.

The Bitcoin Cash hard fork

On May 23, 2017, a number of Bitcoin business owners and miners representing over 85% of the computing power securing the network held a meeting behind closed doors to decide the future of BTC. What came out was what’s known as the SegWit2x upgrade.

SegWit2x was designed to help Bitcoin scale by implementing Segregated Witness (SegWit), an upgrade that “segregates” some data outside of the limited block space and adjusts the block sizes to 2 MB, which would be implemented through a hard fork.

How Bitcoin Cash differs from Bitcoin

Over time, the number of differences between Bitcoin and Bitcoin Cash kept growing as developers working on each network had different goals in mind. The difference between both cryptocurrencies became so big they are now seen as completely different assets in the community.

Difficulty adjustment

One of the main differences between Bitcoin and Bitcoin Cash is the difficulty adjustment algorithm added to BCH. Because both networks use the same SHA-256 hashing scheme, Bitcoin miners can move to the Bitcoin Cash network when it becomes more profitable for them to mine on it.

Block size differences

The main difference is related to the block size of each network. While Bitcoin maintains its 1 MB block size, with Bitcoin Cash, block sizes have grown to 32 MB. This means that transactions on BCH now cost less than a penny and it can process as many as 200 transactions per second.

Smart contracts and decentralized finance

Bitcoin does not support smart contracts, although work is being done to help build decentralized finance (DeFi) services on top of it, as Square CEO Jack Dorsey revealed. Meanwhile, Bitcoin Cash has started using smart contract languages like Cashscript to enable more complex functions on it.

Token issuance

To issue tokens on top of the Bitcoin blockchain, projects have to use the Omni layer, a platform “for creating and trading custom digital assets and currencies.” Omni transactions are Bitcoin transactions with “next-generation features,” but the layer’s adoption has mostly centered around stablecoins.

Bitcoin Cash has, on the other hand, created the Simple Ledger Protocol (SLP). The protocol allows developers to issue tokens on top of BCH, similar to the way tokens are issued on top of the Ethereum blockchain.

Created on 6th Aug 2021