Bitcoin vs Bitcoin Cash – Forbes Advisor Australia

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Bit­coin (BTC) remains the most pop­u­lar cryp­tocur­ren­cy, but it’s not with­out flaws. Specif­i­cal­ly, it allows a rel­a­tive­ly low vol­ume of trans­ac­tions per sec­ond, lim­it­ing its util­i­ty for payments.

Bit­coin Cash (BCH) came into being in 2017 to address this issue, offer­ing a cheap­er, faster way to process pay­ments. Since that time, Bit­coin Cash has grown into one of the top 30 coins in the mar­ket today.

If you are one of the more than one mil­lion Aus­tralians that now own cryp­tocur­ren­cies, you may be won­der­ing what the real dif­fer­ence is between the two and what the pros and cons are of each crypto.

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What Is Bitcoin Cash?

Bit­coin Cash is a cryp­tocur­ren­cy built on the same blockchain as Bit­coin. The coin launched on 1 August, 2017 through a so-called “hard fork” of the Bit­coin blockchain.

Some Bit­coin blockchain par­tic­i­pants pro­posed alter­ing the rules to allow Bit­coin to process a greater vol­ume of trans­ac­tions. Most nodes vot­ed against chang­ing the rules, which result­ed in the hard fork, cre­at­ing two blockchain paths with a com­mon ori­gin: Bit­coin and Bit­coin Cash.

“It felt almost like the frac­tur­ing of a reli­gion,” said Hen­rik Geb­bing, co-founder and co-CEO of Finoa, a dig­i­tal asset cus­to­di­an. “Min­ers had to decide which chain to allo­cate their efforts toward, exchanges had to decide whether or not to sup­port trad­ing of this new­ly forked cur­ren­cy, and mar­ket par­tic­i­pants had to decide whether they had any inter­est in the new cur­ren­cy and what its fair price should be.”

How Does Bitcoin Cash Work?

Bit­coin Cash uses a larg­er block size than Bitcoin—blocks are groups of trans­ac­tions added to the blockchain at the same time.

Bit­coin lim­its blocks to 1 megabyte (MB), which allows only about sev­en trans­ac­tions per sec­ond. Bit­coin Cash expand­ed the block size to 8 MB ini­tial­ly, and lat­er to 32 MB, which allows it to process over 100 trans­ac­tions per second.

Beyond block size and trans­ac­tion speed, Bit­coin Cash works very sim­i­lar­ly to Bit­coin. It’s an open-source, decen­tral­ized dig­i­tal ledger. Min­ers con­firm and add trans­ac­tions to the blockchain by using cryp­tog­ra­phy to solve equa­tions, receiv­ing Bit­coin Cash tokens as reward for their work. They can then sell the coins to oth­ers. Bit­coin Cash will only release a total of 21 mil­lion coins, just like Bitcoin.

How They Differ

As not­ed, the key dif­fer­ence between Bit­coin and Bit­coin Cash is the block size. Because of this adjust­ment, Bit­coin Cash can have faster and less expen­sive trans­ac­tions. A Bit­coin trans­ac­tion costs $US59 on aver­age while Bit­coin Cash costs less than one US penny.

The down­side to pro­cess­ing every­thing more quick­ly though is that it’s poten­tial­ly less secure than Bit­coin. There are few­er min­ers need­ed to process and con­firm trans­ac­tions, which could make it eas­i­er for the Bit­coin Cash secu­ri­ty to be compromised.

“Bit­coin cash would be bet­ter for some­thing like a cup of cof­fee, while a larg­er pur­chase, such as a car or house, may war­rant a slow­er and more secure cryp­tocur­ren­cy like Bit­coin,” said Daniel R. Hill, pres­i­dent of Hill Wealth Strate­gies in Virginia.

Anoth­er dif­fer­ence is mar­ket size. As of writ­ing, Bit­coin Cash has a total mar­ket cap­i­tal­i­sa­tion of around $2 bil­lion. This is a frac­tion of Bitcoin’s $US $392 bil­lion mar­ket cap.

Advantages of Bitcoin Cash

  • Faster, less expen­sive trans­ac­tions. With a trans­ac­tion cost of less than one US pen­ny and the poten­tial to process more than 100 trans­ac­tions per sec­ond, Bit­coin Cash could be a viable pay­ment plat­form. Still, the Visa net­work process­es 2000 trans­ac­tions per sec­ond, so Bit­coin Cash still has a way to go.
  • More scal­able than Bit­coin. Bit­coin Cash’s larg­er blocks allow for a blockchain with increased scal­a­bil­i­ty, result­ing in low­er fees for users and there­fore mak­ing it more transactable.
  • Decen­tral­ized mon­ey. For those wor­ried about too much cen­tral­ized con­trol in the finan­cial sys­tem from banks and cen­tral gov­ern­ments, Bit­coin Cash offers a cur­ren­cy-like sys­tem that is decen­tral­ized and not con­trolled by any one entity.
  • Acces­si­bil­i­ty. Of the thou­sands of cryp­tocur­ren­cies out there, Bit­coin Cash is one of the more pop­u­lar and can be pur­chased through most major exchanges, unlike less­er-known com­peti­tors. The BCH/USD price is only about $US105 per coin, so it’s also more afford­able than try­ing to buy a sin­gle Bitcoin.

Disadvantages of Bitcoin Cash

  • Rel­a­tive­ly low rate of adop­tion. “While most of the debate has focused on such tech­no­log­i­cal debates around pro­cess­ing times and secu­ri­ty, I think there is one big fac­tor over­looked but per­haps most impor­tant with emerg­ing tech­nolo­gies: adop­tion,” said Rus­sell Star, head of cap­i­tal mar­kets at DeFi Tech­nolo­gies.  “The suc­cess of any type of net­work, cur­ren­cy or tech­nol­o­gy depends on the users using it.” With few­er peo­ple using Bit­coin Cash than Bit­coin, it may strug­gle to grow as an accept­ed invest­ment or medi­um of exchange.
  • Weak­er secu­ri­ty. Bit­coin Cash process­es trans­ac­tions more quick­ly and at a low­er cost than Bit­coin because it requires less min­ing pow­er to ver­i­fy new blocks. This makes the sys­tem less secure than Bitcoin.
  • Brand­ing trou­ble. After the fork, there was a bat­tle to see which coin would become more pop­u­lar. Bit­coin has been the clear win­ner, which makes it hard for Bit­coin Cash to dis­tin­guish itself, espe­cial­ly since they share a sim­i­lar name.
  • Envi­ron­men­tal impact. Bit­coin Cash still uses a blockchain proof-of-work sys­tem, where min­ers must run com­put­ers to solve cryp­to­graph­ic equa­tions to process trans­ac­tions, some­thing that uses con­sid­er­able ener­gy. Even though Bit­coin Cash uses less elec­tric­i­ty than Bit­coin, this sys­tem still comes at a high envi­ron­men­tal cost.

How to Buy Bitcoin Cash

Bit­coin Cash is wide­ly avail­able on major cryp­tocur­ren­cy exchanges like Coin­base and Krak­en. You set up an account, deposit cash, and then use that to buy cryp­tocur­ren­cies like Bit­coin Cash. You could also buy Bit­coin Cash on plat­forms like PayPal.

Once you’re pur­chased Bit­coin Cash, hold your coins as an invest­ment in a cryp­to wal­let, exchange them for oth­er coins, or use them for transactions.

Note that Bit­coin Cash has run into some issues due to brand­ing trou­ble. For exam­ple, the cryp­to exchange OKCoin delist­ed Bit­coin Cash in ear­ly 2021 because they thought it might con­fuse investors offer­ing both Bit­coin Cash and Bit­coin on the same system.

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Should You Buy Bitcoin Cash or Bitcoin?

Whether you should buy Bit­coin Cash or Bit­coin depends on whether you are look­ing for a long-term invest­ment or some­thing to use for transactions.

“When mea­sured in BTC, the price of BCH has fall­en steadi­ly since its incep­tion. It stands to rea­son that the orig­i­nal Bit­coin should serve as a safer invest­ment,” said Gebbing.

“If choos­ing a blockchain to trans­act with, though, BCH is accept­ed in many of the same places that accept BTC, and can be used for near-zero fees due to the larg­er block size and the less­er uti­liza­tion of that chain,” Geb­bing added.

Like with any cryp­to invest­ment, Star warns you should be care­ful. “Any­one con­sid­er­ing invest­ing in Bit­coin or Bit­coin Cash should con­sid­er whether they can stom­ach a volatile asset class, which is what cryp­to is.” He also not­ed that those look­ing to learn more about cryp­to and emerg­ing tech­nolo­gies could ben­e­fit by broad­en­ing their hori­zon beyond the most pop­u­lar options like Bit­coin and Ethereum.

The Aus­tralian Invest­ment and Secu­ri­ties Com­mis­sion (ASIC) also notes that cryp­tocur­ren­cies are large­ly unreg­u­lat­ed, high­ly volatile and that many Aus­tralian investors have been scammed.

While the con­cept behind Bit­coin Cash has some poten­tial, it still hasn’t reached its lofty goal of replac­ing the orig­i­nal Bit­coin. If it starts tak­ing off as a more accept­ed medi­um of exchange, then it might give its old­er, big­ger broth­er a run for its money.

This arti­cle is not an endorse­ment of any par­tic­u­lar cryp­tocur­ren­cy, bro­ker or exchange nor does it con­sti­tute a rec­om­men­da­tion of cryp­tocur­ren­cy as an invest­ment class. 

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