Bitcoin has been in existence for almost a decade now and one of the questions that have continually being asked since it’s a currency and not an investment asset is its ability to effectively scale and meet up market demand. If you are not familiar with the basics of bitcoin, it is a cryptocurrency whose existence is sorely based on a network of internet connected computers that operate within a Blockchain. What is a Blockchain, you may ask? A Blockchain is a ledger recording technology, the most efficient one created to date. The bitcoin system is entirely decentralized as it exists on computers that are located in almost every country in the world.
Although Bitcoins are secure, and more valuable and decentralized as compared to traditional cash, the overall bitcoin network is slow. And when I say slow, I don’t mean it literary but practically. To give an overview of how slow the bitcoin network is, let me compare with Visa, one of the largest transaction and payment processors. Basically, Visa is said to process a total of about 150 million transactions per dat. If you calculate and break this down, you will see that the total number of transaction processed by Visa is 1 700 per second. Yes, although the number is huge, it’s not the limit as Visa is currently able to process a total of 24 000 transactions each and every second.
How about bitcoin? 7. Yes, I will repeat that number again, in a more diplomatic manner. The bitcoin network can only process 7 transactions each second. Which means the transaction confirmation and processing times for bitcoin are crappy and they can take up to 10 minutes, sometimes even more on busy days. Now, this is a crappy number considering how much people are taking up bitcoin because the ultimate goal is to keep the underlying technology constant(i.e., not changing it) while scaling up to handle the increasing demand.
So, we can say the above was a description of Bitcoin and the reason I highlighted the challenge above is because it’s going to help in the defining and explaining of Bitcoin Cash. Firstly, Bitcoin cash was started by enthusiastic bitcoin miners who we can say were concerned about the future of Cryptocurrencies, particularly the bitcoin and its ability to scale to meet market demand. The reason these guys came up with this is because the bitcoin community massively changes the bitcoins data format to what was called Segwit or Segregated witness. This change compromised the privacy of the users even though it meant less space would be taken per block which would obviously increase transaction times.
Bitcoin cash however, instead of reducing the data per block makes use of a larger block size. How is this significant? Because bitcoin only manages to store 1 megabyte of transaction data while bitcoin cash can store up to 8. In turn, more data can be processed at once reducing transaction times which means more people can be served.
Basically, that is the difference between the two. One thing worth noting though is that they aren’t the same that’s if if you owned bitcoin after block 468558 was mined.