I’m going to make a prediction about you my dear reader. I’m guessing that you’ve read about the rise of Bitcoin. As you were reading you suddenly came across the name Bitcoin Cash. You’re probably wondering what on earth is Bitcoin Cash and how is it different to regular Bitcoin. You’ve come to the right place.
I’m a simple guy who likes to keep things as simple as possible. If you’ve come looking for detailed and complex explanations as to the origins of Bitcoin Cash then you’ve come to the wrong place. However, I will give you the high level overview so that you will leave this article with a better understanding.
Where did Bitcoin Cash come from?
Bitcoin Cash was born on 1st August 2017. It was a result of a disagreement within the Bitcoin community. The disagreement led to a split in the blockchain and the birth of Bitcoin Cash.
The main disagreement was due to the speed of Bitcoin to process new transactions. Users of Bitcoin began to face problems. Transaction confirmation was taking longer than expected – sometimes hours or even days at a time.
Each block within the Bitcoin blockchain is set up to cope with 1MB of data size. In reality this capacity translates to about one transaction every three seconds. The eventual proponents of Bitcoin Cash felt that this was too slow.
In theory, it is relatively easy for Bitcoin to increase the capacity size of each block. Initially Bitcoin was unlimited in its capacity. However, spam attacks forced it to reduce the size of each block.
The other side to reducing block capacity has been a reduction in transaction speed. Banks can currently process tens of thousands of transactions per second. If Bitcoin is ever to become a global capacity then it needs to be able to handle more transactions, faster.
The birth of Bitcoin Cash
The Bitcoin community has debated the need for greater block capacity for several years. Given the need for greater transaction speed it seems odd that there were any proponents of the current system. Many Bitcoin proponents still argue today that 1MB is sufficient.
The main argument rests on the central tenant of Bitcoin: decentralisation. As discussed in previous articles Bitcoin was setup as a means by which to move the money supply away from banks. With multiple Bitcoin miners verifying transactions there was no risk of an agent to print more money and thus devalue the currency.
The argument against the growth in block capacity rests on the risk of decentralisation failing. If Bitcoin was no longer decentralised then the project will have failed. Increased block capacity size, leads to a risk of a monopoly over the mining process.
Greater block capacity requires Bitcoin miners to have more specialist hardware in order to mine Bitcoins. As such, there is a risk that only a few people will be able to mine Bitcoins. Not only would this mean that only a few people would receive new Bitcoins but the blockchain could be altered by a monopoly cartel without recourse.
Remember that the Bitcoin miners receive Bitcoins as a reward for verifying all of the transactions in the latest block added to the blockchain. If someone controlled the vast majority of the mining they could effectively rewrite the transaction history. Without enough miners to dispute the altered blockchain, a person or group could easily alter the blockchain to their benefit.
Should I invest in Bitcoin Cash
Quite honestly it’s hard to say whether you should invest in any cryptocurrencies. There are no underlying assets. The cryptocurrency is nothing more than a medium of exchange.
On the other hand I prefer Bitcoin Cash as a long term investment over the original Bitcoin. The future of transactions is likely to be something based on blockchain technology. As such to achieve mass usage transaction confirmation must be faster. Therefore, there needs to be greater speed of transactions. Therefore, Bitcoin Cash along with other cryptocurrencies such as Litecoin seems like a better investment. These cryptocurrencies focus on code improvements to increase the speed of transaction.