The history between Bitcoin and Bitcoin Cash is a contentious one, but we’re here to look at the advantages and disadvantages of each coin moving forward. We’ll examine the value proposition of each and their vastly different approaches to scaling. We’ll also dissect branding and levels of decentralization. Finally, we’ll line up the competition and see where the coins are headed in the near future. Will one coin win out? Or can BTC and BCH exist in harmony in the competitive world of cryptocurrency?
Satoshi’s message embedded into the first Bitcoin block provides a clear motivation for the creation of a decentralized currency. “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” After the 2008 banking collapse and subsequent bailout with taxpayer money, clearly, Satoshi was fed up with government and banking control of currency.
It’s deeply embedded into the cryptocurrency ethos that the mistakes of the greedy are not bailed out. There’s a reason Ethereum Classic exists.
Bitcoin’s main value proposition in current form is its decentralization, the ability to take monetary supply out of the hands of the governments and banks. With small, 1-megabyte block sizes and massive amounts of hashing power dedicated to securing the Bitcoin network, BTC’s level of decentralization and attack resistance is number one amongst all cryptocurrencies. It’s no coincidence that Bitcoin also consistently maintains the largest market cap. Obtaining the hardware required for a Bitcoin attack, assuming there was enough supply, would run you at least 7 billion dollars.
However, Satoshi did refer to Bitcoin as “electronic cash.” During the 2017 spike in Bitcoin popularity, it was clear that Bitcoin in its current form cannot function as cash. Transaction times were slow and expensive, often costing over 20 dollars to transfer money. Simply put, with the current codebase, the main Bitcoin blockchain does not scale. However, Bitcoin believers will gladly wait until there is a feasible second layer solution before ever sacrificing any amount of decentralization on the main blockchain.
Bitcoin Cash’s Value
Bitcoin Cash hard forked from Bitcoin to increase the block size from 1mb to 8mb, allowing for more transactions in each block. They believe their approach is more closely aligned with the true vision of Satoshi. It is worth noting that after Satoshi secretly implemented the 1mb cap on block sizes, he said: “We can phase in a change later if we get closer to needing it.” Satoshi predicated that with an increase in internet speed and a decrease in storage cost, the block size could eventually be increased without sacrificing decentralization.
With the combination of larger block sizes and lower demand on the Bitcoin Cash network, people can certainly send transactions more quickly and with significantly lower fees. However, if demand for Bitcoin Cash were to increase, it would eventually run into the exact same problems that Bitcoin had in 2017. To stay ahead of this problem, Bitcoin Cash has already increased block sizes from 8mb to 32mb. If Bitcoin Cash blocks consistently become full, the plan is to increase block sizes once again.
Bitcoin developers do not turn a blind eye to their scaling issue. Segwit was implemented to effectively double the block size. As of July 2018, about 40% of payments are with Segwit and the number continues to climb. The Bitcoin blockchain can now process at most 7 transactions per second, not nearly enough for a global economy. By comparison, Visa can process about 24,000 transactions per second. But Bitcoin users value decentralization above all.
Supporters of Bitcoin want as many people as possible to be able to download the full blockchain to help verify payments. With 1-megabyte blocks added roughly every 10 minutes, the blockchain is already over 200 gigabytes. If the blocks were made bigger, it would quickly become more difficult for people to store the full blockchain on their computer, leading to a loss of decentralization. The larger the blocks, the more bandwidth also required to send out and verify blocks.
The scaling solution currently being pursued involves building a second layer on top of the main blockchain, known as the Lightning Network. The Lightning Network, if properly scaled and implemented, would allow for nearly instant and free Bitcoin transactions. The transactions per second would also completely dwarf that of Visa. The Lightning Network is a work in progress, but growing in size every day. Another advantage of pursuing Lightning is that if it does not work, the main Bitcoin blockchain remains unaffected. And if the Lightning Network fails, there will still be people that hold their Bitcoin and simply wait for the next attempt at scaling.