Confused between Bitcoin and its spinoff? We’ve got the answers
Created in 2009, bitcoin is a virtual currency (or cryptocurrency) that allows its users to send and receive funds directly to each other without requiring a bank or other payment processing intermediary to facilitate the transaction. This peer-to-peer system is based on blockchain technology, which maintains a public ledger of all transfers on the bitcoin network while preventing fraudulent activity such as double spending.
Bitcoin is the world’s most popular cryptocurrency by a wide margin but has faced significant challenges as it continues to expand, especially when it comes to scalability and handling its rapid growth. Disagreements within the bitcoin community about how to address these issues eventually led to a hard fork in its blockchain and the creation of a new standalone cryptocurrency named Bitcoin Cash (BCC).
More Transactions, More Problems
Bitcoin utilizes the Proof-of-Work (PoW) method to confirm transactions on its network and subsequently add them to the blockchain. When a transaction first takes place, it is grouped with others that have yet to be confirmed in a cryptographically-protected block.
Computers, commonly referred to as miners, then use the processing power of their GPU and/or CPU cycles to solve complex mathematical problems. They pass the data within a block through the SHA-256 algorithm until their collective power discovers a solution and therefore solves the block.
Those who opted to pay larger transaction fees garnered priority, but the overall bottleneck was evident. The average time for validating the legitimacy of a bitcoin transaction had slowed down significantly, a trend that would most likely continue.
The Birth of Bitcoin Cash
The solution to this problem may seem simple at first glance: just increase the block size. It isn’t that easy, though, as there are multiple high-impact pros and cons to factor in when making such a change. Many in the bitcoin community argued to leave things as-is, while others clamored for a larger maximum block.
In the end, that hard fork of the blockchain was the path decided upon by those in the latter group. This split took place on Aug. 1, 2017, marking the creation of Bitcoin Cash as its own independent cryptocurrency. This meant that folks who held bitcoin at the time of the fork now also owned a similar amount of Bitcoin Cash.
All transactions that occurred after block #478558 on the bitcoin and Bitcoin Cash blockchains, however, are part of completely separate entities and have no relation to each other going forward. Bitcoin Cash is an alternative cryptocurrency, also known as an altcoin, featuring a unique code base, developer community and set of rules.
Bitcoin Cash vs. Bitcoin: The Key Differences
- Bitcoin Cash’s maximum block size is 8 MB, as opposed to bitcoin’s 1 MB limit. This theoretically results in lower transaction fees and faster confirmations.
- Bitcoin Cash transactions utilize an updated signature hashing (SigHash) algorithm, deeming them invalid on the original bitcoin blockchain and preventing replay attacks.
- As opposed to bitcoin’s main development team, Bitcoin Cash is maintained by multiple independent groups of programmers in an effort to decentralize software implementations.
- Emergency Difficulty Adjustment (EDA) is designed to encourage miners to migrate to the Bitcoin Cash network and provide protection against sudden fluctuations in hash rate.
Buying, Selling and Trading Bitcoin Cash
Bitcoin Cash can be bought, sold and traded for fiat currency such as US dollars or other cryptocurrencies, including bitcoin itself, at many popular exchanges like Coinbase, Bittrex, Kraken and CEX.IO.
Bitcoin Cash Wallets
As with bitcoin, Litecoin, Feathercoin, and other cryptocurrencies, Bitcoin Cash can be stored in digital wallet software or a physical hardware wallet – both protected by private keys. You can also choose to store your BCC offline in a paper wallet, but this method is only recommended for advanced users.
For a list of recommended Bitcoin Cash wallets, visit BitcoinCash.org.