Bitcoin Cash (BCH)
What is Bitcoin Cash?
Similar to Bitcoin, Bitcoin Cash is a digital currency that uses cryptography to secure and validate its network. Bitcoin Cash is a fork of Bitcoin, which means that Bitcoin Cash split from Bitcoin’s existing code to create its own cryptocurrency with some different protocols. Imagine a mobile app like Twitter. A Twitter fork would be if somebody else took the existing Twitter platform along with all of its existing tweets, but made some software edits to allow tweets with 500 characters and called it Paragraph Twitter. Everything from the old Twitter would still be there on Paragraph Twitter but from then on, people could tweet paragraphs in addition to normal short tweets. Some users would decide to stay on the original Twitter and some would choose to download the new Paragraph Twitter. This type of fork wouldn’t be plausible with Twitter because they have a private, closed-source code, but many cryptocurrencies including Bitcoin use an open-source code, which means that their technical foundation is free for anybody to use and copy.
Bitcoin Cash resembles Bitcoin but with a few technical revisions. Some people felt that Bitcoin was not scaling well enough to meet the needs of its growing user base and felt that adjustments needed to be made to scale Bitcoin and fulfill Satoshi Nakamoto’s original vision of a peer-to-peer electronic cash. To address this, Bitcoin Cash revised Bitcoin’s block size, segregated witness (segwit) policy, difficulty adjustment algorithm, and also added replay protection.
The most notable change with Bitcoin Cash was that it increased block sizes from 1MB to 8MB. This means that Bitcoin Cash can fit more transactions inside each block in its blockchain. Consequently, this should mean that Bitcoin Cash should be able to process about 8 times more transactions per second than Bitcoin.
More transactions per second? Sounds great, what is the catch? The catch is that bigger blocks demand more computing power to mine, which will result in fewer miners or larger mining pools, which means less decentralization. Some people feel like this gives certain pools of miners too much power and comprises the decentralization that Satoshi promised.
Segregated Witness (Segwit)
What is segwit? Before September 2017, Bitcoin transactions included something similar to a signature to verify transactions. The policy of segregated witness moves that signature from the main blockchain block to what is called an extended block. This streamlines the computing process for miners, which enables more transactions to fit inside a block in a blockchain. Some argue that segregated witness makes the network less secure, but Litecoin successfully implemented it without a security breach in May 2017, so segwit was deemed a safe iteration.
Bitcoin Cash does not use segwit. Bitcoin Cash users generally think that the real issue with Bitcoin was its block size and not the location of its transactions’ witnesses.
Bitcoin Cash implemented a new transaction signature that provides replay protection. Replay protection protects users from somebody else copying a transaction on a forked blockchain. Basically, because blockchain forks use an existing blockchain of another cryptocurrency, it could be hard to differentiate a new transaction on a fork and somebody could try to forge that transaction into the original blockchain, creating an invalid transaction.
A similar example would be somebody sending you an email. When somebody sends you an email you receive it on your phone and your computer. When you reply, it only replies from your computer or your phone, not both. Replay protection ensures that the transaction, or email this example, sends from the appropriate blockchain or device.
Bitcoin Cash added replay protection to protect its users from problems that could be associated with its fork from Bitcoin and potentially future forks.
New difficulty adjustment algorithm
There is an algorithm that dictates the difficulty of the cryptography problem associated with the proof of work of each Bitcoin block. Bitcoin’s algorithm adjusts itself every 2016 blocks so that it takes an average of 10 minutes to mine each block.
Bitcoin Cash’s algorithm adjusts itself every 144 blocks, which means that Bitcoin Cash’s algorithm adjusts itself about every 24 hours whereas Bitcoin’s algorithm adjusts itself about every 2 weeks. Because the adjustment intervals are shorter, the difficulty of mining reacts quicker to an increase or decrease in network activity.
Bitcoin Cash Vs. Bitcoin Core
Bitcoin Cash advocates claim that Bitcoin Cash is the original Bitcoin and that the cryptocurrency using the BTC ticker is really “Bitcoin Core”. Bitcoin cash supporters claim that Bitcoin Cash is the coin that fits Satoshi’s original vision of a peer to peer digital cash. They argue that it has the scaling solution in place (larger blocks) and reduced fees to be the real Bitcoin.