One of the biggest pitfalls of Bitcoin at the moment is its scalability and transaction processing speed. Bitcoin Cash was created in order to resolve some of the issues with Bitcoin scalability and transaction processing speed. In order to understand why Bitcoin Cash was created, let’s start by defining Bitcoin and the exact issues that limit it’s scalability:
How Bitcoin Works
Bitcoin is the largest cryptocurrency in the world. It is a digital currency that are sent from user to user on the peer-to-peer network directly, without the need for intermediaries to facilitate the transactions. These transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
There are some issues with the speed of the technology behind Bitcoin. It processes transactions much slower than credit card transactions at the moment. Visa processes on average 1,700 transaction per second. The Bitcoin network takes around 10 minutes to process transactions. It is expected that waiting times will increase as the network grows as well. In order to resolve this issue, the blocks of data need to increase in size, so that more information can be processed at one time. This is what Bitcoin Cash was created to do.
Bitcoin Cash Differences
On August 1st 2017, miners and developers initiated a hard fork in Bitcion, effectively creating a new currency: Bitcoin Cash. These miners and developers believed the SegWit2x (segregated witness, the process by which the block size limit on a blockchain is increased by removing signature data from BTC transactions) technology would not sufficiently be able to address the scalability issues in the long run. Since BCH was emerged from a split in Bitcoin’s blockchain, every person owning BTC received a quantity of BCH equal to the amount of BTC they held.
Bitcoin cash has implemented an increased block size of 8mb, to accelerate the verification process, with an adjustable level of difficulty to ensure the chain’s survival and transaction verification speed, regardless of the number of miners supporting it. These changes were meant to resolve issues with Bitcoin’s slow transaction speeds and ability to scale. I had the chance to speak with Bitcoin.com at a Blockchain conference in Japan and they mentioned we could see Terabyte block sizes in the future.
However Bitcoin Cash does have some pitfalls that have affected is valuation, which you can see in its charts below:
Bitcoin Daily Chart
Bitcoin Cash Daily Chart
You can see that Bitcoin Cash has not faired to well as an investment in the past several months. It has actually had an even bigger retracement from its’ 2017 runup than Bitcoin has. A possible cause for the discrepancy is the concerns about the security of BCH, due to its’ adjustable level of difficulty to ensure the blockchain’s survival and transaction verification speed.