Before I delve into the topic at hand I must be transparent with the reader. I am a Bitcoin maximalist, it’s my personal belief that there is only one Bitcoin, and any forks or alternate implementations are simply other Altcoins. With that being said, I want to take an even-handed and fair look at the differences between Bitcoin (BTC) and Bitcoin Cash (BCH). Come along for the ride, and I promise I’ll do my best not to let my personal opinion cloud my vision too much.
What is the difference between BTC & BCH?
Before we can compare the differences between BTC and BCH, we need to first take a look at the history behind the contentious hard fork that birthed the two chains and sparked the rivalry between the splintered factions of the once united Bitcoin community.
The story of why BCH split from BTC really begins back in the early days of Bitcoin. Satoshi realized early on that Bitcoin had a flaw, it couldn’t meet the demand put on the network if it were to be used on a mass adoption level.
The Bitcoin blockchain can optimally handle 7-8 transactions per second, and those transactions must be included in the blocks issued every ten minutes, in order to be confirmed. The blocks have a one MB block size limit. Visa, to give some perspective, handles around 1600 transactions per second (tps) on average and can handle up to 55,000 tps. In order to compete BTC (and BCH) would need to scale by a factor of 1000.
If too many people are transacting, miners begin including only the transactions with the highest fees, because they profit from the fees. As transactions increase, the ones with lower fees, get skipped over and end up in the mem pool ( a pool of unconfirmed transactions), in a state of limbo, until fees drop enough for miners to include it in a block. During the height of last years bull run, the demand caused a backlog of transactions, and fees skyrocketed.
The Bitcoin developers and even Satoshi himself have been aware of this shortcoming since Bitcoin’s inception. They hoped that in the short term future a solution would be developed that allowed Bitcoin to overcome this limitation.
After a long drawn out multi-year debate, it basically came down to this:
Bitcoin in a nutshell
Bitcoin’s developers wanted to maintain a one MB block size, and implement segwit, an upgrade which fixed several issues with Bitcoin’s code and allowed more transactions per block and fixed the transaction malleability issue which was holding back layer two payment processing via the Lightning Network.
The Bitcoin devs, see Lightning Network and off-chain scaling as a far more efficient solution to Bitcoin’s scaling issue, millions of transactions could take place on the payment processing layer and be batch settled to the blockchain underneath, with little to no sacrifice of Bitcoin’s security, or decentralization, and privacy would be significantly improved.
The reason to keep the one MB block size limit is to keep the blockchain’s size small enough for users to run their own nodes, to verify transactions themselves.
This ensures censorship resistance because users who run full nodes do not rely on any third party. You are truly your own bank. Bitcoin prioritizes being censorship resistant, permissionless and trustless, and decentralized over every other quality, and it is this uncompromising stance, that caused contention with the BCH side of the debate.
The BCH point of view
BCH, on the other hand, has a community of those who don’t prize censorship resistance, decentralization, being permissionless or trustless, with the same fervor.
They would rather sacrifice some of these qualities, in order to facilitate Bitcoin’s wider use as a currency. They see mass consumer adoption of Bitcoin as far more important, than decentralization.
BCH developers have chosen not to implement the segwit upgrade, they have chosen to increase the block size, to fit more transactions per block in order to immediately meet consumer demand, and keep fees low, with fast confirmation times.
There is a lot of reason to believe this is an unrealistic and unsustainable solution for Bitcoin scaling because even with the block size increase, it is nowhere near enough to meet a mass adoption level of demand from consumers. Even with the block size increase, it’s not enough, and it’s insufficient by several orders of magnitude. Undeterred by math, the BCH community wants to just keep increasing the block size as needed.
This presents another interesting issue because there comes a point that with enough block size increases, nobody but large institutions, and corporations would have enough capital to run and maintain nodes. The cost for a normal user would put verifying the blockchain yourself, out of reach for 99% of the user community. This re-introduces trusted third parties and reliance on institutions and takes the financial independence away from the network’s participants. Also if one of these large institutions running a node decided to become a bad actor, users would have no way to verify the malfeasance.
BCH proponents argue that mass adoption will tip over the apple cart, so to speak, and accelerate crypto adoption, and bankrupt corrupt financial institutions as consumers abandon fiat in droves and adopt cryptocurrency during hyperbitcoinization. They see this as counteracting any short-term sacrifices they have made to decentralization, and censorship resistance. They see the positives, as outweighing the negatives and that compromising decentralization and security for more adoption as a good trade-off. They would rather be a widely adopted medium of exchange now, than fulfilling a role similar to Bitcoin, as a store of value/sound money, first.
How does Bitcoin stack up against Bitcoin Cash?
|Bitcoin (BTC)||Bitcoin Cash (BCH)|
|Market Capitalization||$158,571,902,318 USD||$28,250,833,248 USD|
|Transactions last 24h||206,819||19,347|
|Transactions avg. per hour||8,617||806|
|Sent last 24h||1,014,590 BTC|
5.96% market cap
3.31% market cap
|Median Transaction Value||0.051 BTC|
|Blocks last 24h||154||148|
|Reward last 24h||1,925+31.31 BTC|
-2.04% in 24 hours
+4.81% in 24 hours
-2.74% in 24 hours
|Blockchain Size||196.72 GB||196.72 GB|
The above chart compares both chains to see how they stack up statistically. BTC is on top and BCH is on the bottom.
As you can see from the chart, BTC has more than ten times the transactions of BCH, and about ten times the USD amount of value being sent through the network. BTC also has about ten times the hashing power which means it’s 10 times more popular to mine BTC than BCH, and the BTC network is 10 times more secure, against attacks, and bad actors. These statistics were provided by bitinfocharts.com and were current as of the writing of this article.
How decentralized is BTC vs. BCH?
In order to get an understanding of how decentralized each network is, we need to take a look at node distribution. The more nodes on the network, the more decentralized and secure the network. Miners process the transactions and include them in the blocks, but full nodes operated by users, verify, validate and relay the transactions, that the miners include in the blocks. We can’t have one without the other and both types of nodes are of vital importance to the network, and it’s security.
First, we will take a look at BTC nodes
From the map, you can see the concentration of nodes in North America and Europe, with less prolific concentrations in Asia, Australia, South America, and South Africa. The 10,365 nodes are spread out across all inhabited continents and there is even a satellite node that users can connect to if the governments of the world try to shut down the internet or there is a catastrophic power outage. That sounds very decentralized to me, and also pretty censorship resistant.
Next, we will take a look at BCH nodes
From these charts, we can see that BCH does not have as many nodes as BTC. It’s currently got 2179 nodes in a variety of implementations, of the protocol. It has about a 20 percent of the nodes as BTC. This means that the network has less security, but it’s proportional. If Bitcoin only had 2179 nodes it would have a similar level of security as BCH does, now. Keep in mind BCH has the same code for the most part so it’s very, very secure. Bitcoin has never been hacked, and that claim stands for both chains. That being said, BTC is orders of magnitude more secure than BCH at the moment. Unfortunately, these charts do not show the geographical distribution of the nodes, but I am willing to accept it’s mostly spread out about the same as BTC, with the vast majority being in North America and Europe, but with a lesser distribution throughout the rest of the inhabited continents. I will throw one caveat out there, but I can’t confirm or deny it myself. I simply put it forth because if true, the implications would be damning.
54% of reachable Bitcoin ABC (bcash) nodes are running on Hangzhou Alibaba virtual servers in China. Compare that to 2% of reachable Bitcoin nodes running on Hangzhou Alibaba servers. pic.twitter.com/hXuYuXkYrp
— Jameson Lopp (@lopp) December 20, 2017
Bitcoin expert, developer, and evangelist Jameson Lopp claims That 54% of the Bitcoin ABC (a BCH implementation) nodes are being run by one web hosting web hosting service, compared to just two percent of BTC nodes. This suggests a high degree of centralization and that a large concentration of BCH nodes are being hosted by a single party or organization. I am not sophisticated enough to verify this, so take it with a grain of salt, but just keep it in mind when you decide which chain is more decentralized and secure.
What does the future hold for BTC?
Bitcoin is not controlled by anyone, which means gaining consensus in the community is a must for any sort of change to take place with the protocol. This is not an easy task. The last issue that the community had to decide on, was the scaling debate which splintered the community into the BTC and BCH factions, each with their respective chains. That being said, now that both sides have their own coin, each community can pursue what the think is best. BTC has seen a hurricane of awesome technical innovation. Many new groundbreaking features are coming to the code, like MAST, Bulletproofs, Taproot, and Graftroot. The Lightning Network is already working in beta on the BTC main net. The future is looking really, really bright. Bitcoin is leading innovation for the entire cryptocurrency sphere.
What does BCH have in store for the future?
In an effort to not be one-sided, I want to also mention some of the priorities that the BCH community has announced with the release of their 2018 roadmap.
- For starters, they want to further increase the block size to allow for even more on chain transaction throughput.
- They want to implement canonical transaction order which would help them add scaling solutions like Gavin Andreson’s Graphene.
- They want to try to fix the difficulty adjustment algorithm.
- They want to eventually make the block size adaptive similar to Bitcoin Unlimited.
- They want to re-enable opcodes that were disabled, that would allow colored tokens and simple smart contracts.
- They are going to change the address format for BCH wallets to make it less likely to mistakenly send BTC/BCH to the wrong chain’s addresses.
- The new addresses will be based on BTC’s Bech32 native segwit addresses.
- They want to implement something called Bobtail which prevents double spends and makes mining more efficient.
- They have already implemented “Memo” an on chain social media app, that lets users save messages on the chain.
The future is not looking all that bad for BCH enthusiast either it seems. The BCH team has definitely been very busy, working on improvements for the chain, and they are definitely taking it in a very different direction than BTC. We’ll see how it all plays out. May the best coin win