As if so many perplexing cryptocurrency terms were not enough, we have another one called ‘bitcoin cash’. It was launched in August 2017. It’s nothing but from a fork of bitcoin itself. It was created in order to decentralize the system even more. It can allow a larger accommodation of blocks as compared to bitcoins.It improved scalability. Both bitcoin and bitcoin cash are on similar lines. However, they are not the same thing. Bitcoin and Bitcoin cash is often treated as the same thing. To state the least, they do have many technical similarities but again they are two different coins. In this article, we will explain the basics of bitcoin cash.
Bitcoin Cash and Bitcoins
Satoshi Nakamota invented bitcoins and its purpose was to get used for transactions that happen regularly. Although in the past few years, bitcoins gained mainstream attention and its rate shooted like anything. People treated bitcoins as an investment portfolio diversification rather than carrying out daily transactions using bitcoins. The blockchains very primitive concept is that it is decentralized.
To keep that intact, bitcoin cash was introduced to make sure that the system is able to handle the rapidly increasing number of transactions. The issue arising was that the block size is 1 megabyte. And since it is limited to that, transactions had to sit in the queue to get confirmed because blocks were not equipped enough to handle those transactions.
Bitcoin cash was introduced to solve these issues. It helped the situation by increasing the size of the blocks to the range of 8 megabyte and 32 megabyte. This allowed the process of transactions per block to happen quickly and efficiently. The average number of transactions increased to the range of 1,000 and 1,500.
Roger Ver proposed that the launch of bitcoin cash invoked Bitcoin inventor Nakamoto’s original plan of bitcoins as a currency or a payment service. As the size of bitcoin increased, it could easily be used for daily transactions. Credit card processing entities like Visa offer transactions across the globe but they charge a high fee for the same. You can create account in immediate edge login and get started with Bitcoin Mining. You can also checkout bitcoin equaliser review and learn more about Bitcoin.
Talking about the various similarities between bitcoin and bitcoin cash. Proof of work is a prerequisite in both the cases to mine new coins. Bitcoin avails the services of the largest cryptocurrency miner in the world Bitmain and bitcoin cash share the services of the same. Bitcoin cash is capped at 21 million and bitcoin is capped at the same figure too.
Both bitcoin cash and Bitcoin use the same mining algorithm called Emergency Difficulty Adjustment (EDA). Emergency Difficulty Blocks is used to adjust blocks after every 2016 blocks that is around after every 2 weeks or 15 days.
This similarity loophole was taken advantage of by clever miners. They alternated their mining activities between the two that is Bitcoin and Bitcoin cash. It was profiting the miners quite a lot. On the contrary, this was also increasing the supply of Bitcoin Cash in the crypto market. Because of which the Emergency Difficulty Adjustment was revised. This revision made it easier for miners to generate the cryptocurrency.
History of Bitcoin Cash
The blockchain system was very vulnerable. Thus, it expected attacks mainly because it consisted of cheap transactions completely. You would assume that the cheapness of a transaction would not really matter but it had the potential to cripple the system.
In the past years, the size of a block of bitcoin on an average was less than or equal to 100 KB. A very minimal fee was charged for the same and the amount would sum up to something around two cents. This was the reason behind the vulnerability of the blockchains.
Something had to be done in order to resolve this issue so as we discussed earlier the size of a block on a bitcoin’s blockchain got limited to a value as less as 1 megabyte. Blocks were generated at the gap of 10 minutes. This enabled the transactions to have time and space. This addition was also to ensure or add another layer to maintain the security of bitcoin’s blockchain system.
As and when the popularity of bitcoins emerged over the years, these safeguards became nothing but a hindrance. Bitcoins sure proved to be a financial asset and showed potential. But on the back hand, the transactions were getting stuck leading to a lot of transactions that were yet to be checked or confirmed. All thanks to the increase in the average size of a block. In January 2015, the size had increased to 600K. Consequently, the average time to check a transaction also increased.
This also led to the fee for transactions to hike up. One of the positives about bitcoins was that a minimal fee was charged for transactions but this hike in fees contradicted this argument. Miners, too, put forward the transactions with higher fees at the very top to maximise their own profits. All of these factors clubbed together was weakening the very core of bitcoin as a currency that was supposed to have a decentralized system and no heavy fee being charged.
The system needed immediate solutions to tackle this situation. Developers began to find fruitful solutions. The two potential solutions that these developers came up with was one to increase the average block size. In addition to that, do not include a particular part of a transaction to be able to fit as much data into the blockchain.
The developers and the core team of bitcoin refused to consider this solution or rather rejected it. They decided to launch a new coin with a flexible size called Bitcoin Unlimited. Unfortunately, this coin got hacked and did not gain much attention. This invited doubts regarding the viability of the cryptocurrency and also it was criticised.
Bitcoin cash finally emerged to be a good solution. It was led by Craig Wright.
In this article, we gave a synopsis of what bitcoin cash really is, how and why it was born and it’s similarities and differences as compared to a Bitcoin.