bitcoin cash BCH

Bitcoin cash (BCH): What is the difference with Bitcoin?

Niels
Niels Bitcoin

On the 1st of August 2017, a hard fork took place within the blockchain of Bitcoin. This hard fork created Bitcoin cash (BCH). What a hard fork is and what the differences between BTC and BCH are is clearly explained in this article.

Bitcoin Cash Bitcoin difference

What is a hard fork?

A hard fork can best be seen as a software update where some of the users agree, and another part of the users disagree with this update. Within a blockchain application this difference in viewpoints results in the fact that the blockchain itself is splitted in two. This is exactly what happened when BCH was created.

BCH was created by splitting the blockchain of Bitcoin in two

During the splitting of the blockchain, a part of the users keeps on using the old blockchain where the old rules still apply. These users therefore do not install the new upgrade. The other part of the users do install the new upgrade. This forms a branch of the blockchain where the new rules apply.

This process is clearly visualized in the image below. In the case of the hard fork when BCH was created, the new BCH network was applied from the moment the new rules were applied by the network.

BCH hard fork

Why was a hard fork to BCH required for Bitcoin?

The problem with Bitcoin is that Bitcoin is slow, very slowly. The well-known credit card company called VISA processes 150 million transactions every day. This equals 1,700 transactions per second. The maximum capacity of bitcoin is currently only 3.3 to 7 transactions per second. Everyone agreed that a solution should be created for this. However, Bitcoin users strongly differed on how exactly this solution should look like.

VISA processes 1,700 transactions per second. The maximum capacity of bitcoin is currently only 3.3 to 7 transactions per second.

Supporters of BCH

The present supporters of BCH stated that the blocksize of Bitcoin should be increased. Every 10 minutes a block is added to the blockchain of Bitcoin. By increasing the block size from 1MB to 8MB, 8 times more transactions would fit into a block.

BCH is faster than Bitcoin

This is the reason why the BCH network can currently handle more transactions per second than the Bitcoin network. A negative point of the BCH network, however, is that the user will need a faster computer to process this data. This will reduce the degree of decentralization that is present in the BCH network.

The downside of BCH is that the user needs a faster computer to process the data.

Supporters of Bitcoin
Bitcoin Cash (BCH)

The current Bitcoin supporters disagreed about this increase in the blocksize since this would result in a decrease of decentralization. They therefore stated they would not support this update. The current Bitcoin supporters wanted to implement an update called SegWit2x. Due to the SegWit2x update, the so-called ‘signature data" would not be included in the blocks. The signature data contains 65% of the data stored in the blocks of the Bitcoin blockchain. The currency BCH supporters did not agree with the SegWit2x since this would reduce the transparency of the Bitcoin network.

BCH supporters did not like the SegWit2x solution to increase speed

The creation of BCH

During august 2017, 80% to 90% of Bitcoin’s computing power decided to support the SegWit2x update. The currency BCH supporters still wanted to increase the block size. This is why they decided to create a hard fork on the Bitcoin blockchain. By creating this hard fork and increasing the block size to 8MB, the blockchain of Bitcoin was split into two versions. The new version was called Bitcoin cash (BCH), while the old version kept the original name Bitcoin.