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Bitcoin Vs. Bitcoin Cash (Main Differences And Similarities)


An objective look between the differences between these two cryptocurrencies:

As most of you know, Bitcoin was the first peer-to-peer transaction system of its kind. It is said that Bitcoin is the original pioneer of blockchain and cryptocurrency. It has been the first and most well known cryptocurrency since its creation after the stock market crash in 2008. In the past 8+ years, it has grown to a market cap of over 250 billion and currently sits with a market cap of 140 billion. Just to put in into perspective, from January 1st of 2017 to December 31st of 2017, Bitcoin saw growth of over 1200% from $863 to $13,170! A $100 investment in Bitcoin in August of 2010 would be worth over $13 million today.

Starting in mid-July of 2017, the mining pools and companies that represented 80-90% of Bitcoin computing voted to start incorporating a technology known as segregated witness, called SegWit2x. What this technology does is makes the amount of data that needs to be verified in each block smaller. It does this by removing signature information from the block of data that needs to be processed in each transaction, and having it attached in an extended block. Signature data has been said to account for up to 65% of all the data processed in each block.

For those who don’t know, a block is a file where transaction data pertaining to the Bitcoin network is stored. When a block is completed (every 10 minutes for Bitcoin & Bitcoin Cash), it becomes part of the past and gives new way to another block. With that knowledge you can now understand that reducing the amount of information needed for verification would in turn make the transaction process quicker.

However, that is not the only way to improve the transaction process. There was still a large group of miners and developers who disagreed with this Segwit technology. The opposing side, we will call them the “BCash group” were a group of bitcoin miners and developers concerned about the future and scalability of Bitcoin. The truth is they did not want to integrate Segwit 2x because they claimed it did not stay true to the founding principles developed by Satoshi. This group wanted to increase the block size to a maximum of 8MB so that more transactions can fit into each block.

So, what we had was one group essentially shrinking the amount of information to fit the block and the other group essentially fitting the block around the information.This disagreement began to split the Bitcoin community into two parts-ones that were for SegWit2x integration and ones that were against it. After what seemed like months of back and forth, a hard fork was implemented effective August 1st of 2017. A hard fork “is a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest version. This essentially creates a fork in the blockchain, one path which follows the new, upgraded blockchain, and one path which continues along the old path.”

  • Block Size: Block size is one of the main reasons for the split. Segwit essentially removes the transaction signature information to make more transactions fit inside the block without increasing the block size, then attaches the signature to an extended block. Bitcoin Cash on the other hand, increased the block size to 8mb and did not remove any of the information to accelerate transaction efficiency. In conclusion, blocks are batches of information that once confirmed are published to the public ledger. There is a specific amount of time it takes each block to confirm. It is 10 minutes for Bitcoin and Bitcoin Cash. So increasing the size of the block will in turn allow more information to be batched in that specific block-which in turn allows more transactions to happen in the same amount of time. Thus, increasing block size increases transaction time.

  • Hashing Algorithm: Both Bitcoin and Bitcoin Cash run on an SHA-256 having algorithm. A cryptographic hash is like a signature for a data file. SHA-256 Hash creates a 256-bit (32 byte) signature for a text. This is one of the strongest hash functions available. SHA stands for Secure Hashing Algorithm and the number represents how many possible hashes there are. A bit has 2 possible values, 0 or 1. So SHA-256 has 2^256 possible hashes since a bit has 2 possible values raised to the amount of bits which in this case is 256.

  • Transaction Signatures: Similar to a credit card transaction, transactions on the blockchain need a signature. A electronic signature is how transactions are verified. With Bitcoin, the transaction signatures are excluded from the transaction id which means they can be excluded from the blockchain. Bitcoin Cash validates their transactions on the blockchain where signatures can be seen and cannot be altered.

  • Segwit: The Segwit integration takes the signature data and removes it from the block and attaches it to an extended block so more transactions can fit into each block. Bitcoin integrated Segwit however Bitcoin Cash did not. They increased their block size to fit more transactions into each block.

  • Mining: Bitcoin mining has always been decentralized meaning there is no one source or party mining all Bitcoin and thus getting all the rewards. There are multiple mining pools, individual miners, etc. which makes it decentralized because not one centralized source or power is mining all transactions, thus receiving all the rewards. **However, with Bitcoin Cash there has been some controversy. In August of 2017, It was brought to attention that 50-90% of Bitcoin Cash transactions were being mined by just 2 addresses. Now this is just based on information from an analyst so, it is not ‘fact’, but keep reading. I think you will find what he has to say pretty interesting.

There was an analyst that released a report back in November of last year that claimed bitcoin cash’s mining is actually centralized. He took a sample of 144 blocks and then analyzed the addresses that were mining or validating these transactions. This is what he found:

    “Bitcoin Cash mining is highly centralized. If you look at the above image, you will certainly be able to put in perspective what I am talking about. This is the hash power distribution for Bitcoin Cash mining for the last 144 blocks mined.If we combine the hash power of Antpool, ViaBTC, and, which makes more than 50% hash power, this is detrimental for any coin. To make a 51% attack on Bitcoin Cash would be a decision of three mining parties coming together.”

      Now I think it is rather bold to say it is ‘highly centralized’ because the true meaning of centralized is that one source or power would hold it. However, I would stretch to say it is concentrated or highly concentrated.

      In Conclusion, the main differences between Bitcoin and Bitcoin Cash are the networks they use to validate their transactions. Bitcoin essentially shrank the amount of information going into the blocks while Bitcoin Cash increased the block size and kept all the original information needed for the transactions to be validated.

      March 12, 2018