Bitcoin Cash (BCH), also known as BCash, was born based on this theory. However, unsatisfied with Bitcoin’s development path, some developers, supporters, and miners decided to create their own version.
Bitcoin Cash (BCH) ecosystem’s adoption and growth have disappointed. Over the past 4 years, its price dropped 86% compared to Bitcoin (BTC).
What is Bitcoin Cash?
In 2015 a group within the Bitcoin community started to advocate increasing block capacity, hoping to reduce the bottleneck during periods of high network use. Those supporters made two failed attempts to release a clone (fork) that would increase the block size to 2 megabytes.
By mid-2017, that same voice gathered a larger group, including 80% of the miners, some important exchanges, and custodians. However, Bitcoin’s users, ordinary people, insisted on not updating the software. Instead, those users claimed that scalability should be pursued in another way, using a second layer.
That story culminated in Bitcoin Cash (BCH) creation on Aug. 1, 2017, an independent copy (fork) that kept Bitcoin’s previous transaction record.
- Mining difficulty was reduced, expecting a drop in the processing power behind the network.
- The block size limit was increased from 1 megabyte to 8, aiming for a larger processing capacity.
- The SegWit update, which would allow scalability using a second layer, was removed.
- BTC holders were rewarded with the same amount of BCH.
In short, a new cryptocurrency was created, using almost the same source code and mining algorithm.
The first month of BCash operation was troublesome, as the number of active miners in the network varied drastically. Furthermore, not every exchange had BCH listed, and others took months before delivering the fork coins to their customers.
The Blockchain Trilemma
Although blockchain technology has the security provided by miners, it presents some disadvantages compared to centralized systems. For example, setting the block interval too short could cause network participants with slower connections to fall behind.
Similarly, a large block size dramatically increases the cost for users who want to store and validate the entire network independently.
It is impossible to reach an optimal point in all aspects: security, scalability, decentralization. By opting for higher scalability, one will create attack vectors or make the network more centralized. This issue became widely known as the “Blockchain Trilemma”.
Discontentment and New Fork
When a small group has notable influence among miners and developers, as BCash’s case, centralization tends to appear. In this sense, those leaders were Roger Ver, owner of Bitcoin.com, and Jihan Wu, former CEO of Bitmain mining company and ASIC manufacturer.
It is easier to approve changes in centralized systems, so dissidents are forced to leave the network and create their own fork. Thus, some miners and developers decided to create BitCash Satoshi Vision (BSV) in Nov. 2018.
The result? The BCash network became even less secure as it lost some of its miners and users.
Scalability Via the Second Tier
The truth is, there is no consensus on what the best solution is to increase blockchain processing capacity. Some projects seek to increase the block size, while others create parallel channels (sharding). Lastly, Proof of Stake cryptos uses a small group of validators, making the transaction registry more straightforward.
Each solution brings its challenges and different levels of centralization. For example, BCash (BCH) believes that miners should have more power, so it’s not a problem if the regular user nodes are negatively affected. Thus, it opted to increase the block size.
Can Bitcoin Cash (BCH) Win?
There is no longer a dispute between BCash (BCH) and Bitcoin. The market has already spoken, with BCH price and mining power (hash rate) falling below 1% of Bitcoin’s.
It is worth noting that when a network claims to be “faster” than Bitcoin, one should measure the processing power that guarantees each transaction. That’s why exchanges require more miners’ confirmations to accept altcoins deposits, taking longer than Bitcoin.