Bitcoin Vs Bitcoin Cash: What's The Difference? (2024)

Bitcoin cash is a cryptocurrency built on the same blockchain as bitcoin. The coin launched on 1 August, 2017 through a “hard fork” of the bitcoin blockchain.

This occurred because some bitcoin blockchain participants proposed altering the rules to allow bitcoin to process a greater volume of transactions. However, most nodes voted against changing the rules, which resulted in the hard fork, creating two blockchain paths with a common origin: bitcoin and bitcoin cash.

“It felt almost like the fracturing of a religion,” said Henrik Gebbing, co-founder and co-CEO of Finoa, a digital asset custodian. “Miners had to decide which chain to allocate their efforts toward, exchanges had to decide whether or not to support trading of this newly forked currency, and market participants had to decide whether they had any interest in the new currency and what its fair price should be.”

Time has shown that bitcoin cash failed to achieve its goal of becoming a widely adopted alternative to bitcoin. The original bitcoin has maintained its dominance, while bitcoin cash has struggled to gain significant market share or user adoption.

Bitcoin cash uses a larger block size than bitcoin—blocks are groups of transactions added to the blockchain at the same time.

Bitcoin limits blocks to 1 megabyte (MB), which allows only about seven transactions per second. Bitcoin cash expanded the block size to 8MB initially, and later to 32MB, which allows it to process over 100 transactions per second.

Beyond block size and transaction speed, bitcoin cash works very similarly to bitcoin. It’s an open-source, decentralised digital ledger. Miners confirm and add transactions to the blockchain by using cryptography to solve equations, receiving bitcoin cash tokens as reward for their work. They can then sell the coins to others. Bitcoin cash will only release a total of 21 million coins, just like bitcoin.

Despite these technical improvements, bitcoin cash’s larger block size has not translated into a proportional increase in network usage or transaction volume compared to bitcoin.

As noted, the key difference between bitcoin and bitcoin cash is the block size. Because of this adjustment, bitcoin cash can have faster and less expensive transactions. While bitcoin transactions can be more expensive, especially during periods of high network congestion, the development of layer 2 solutions, such as the Lightning Network, has significantly improved bitcoin’s transaction speed and cost, essentially making the selling points for BCH redundant.

While bitcoin cash was initially promoted as a better option for small, everyday transactions, this advantage has not translated into widespread adoption or use.

Another difference is market size. As of July 1st, 2024, bitcoin cash has a total market capitalisation of around $US7.8 billion and is worth $US389 per coin. This is a small fraction of bitcoin’s $US1.24 trillion market cap and price of $US62,800 per coin, highlighting the vast difference in adoption and perceived value between the two.

The advantages include:

• Faster, less expensive transactions:With a transaction cost of less than a cent and the potential to process more than 100 transactions per second, bitcoin cash could be a viable payment platform. Still, the Visa network processes 2,000 transactions per second, so bitcoin cash still has a way to go.
• More scalable than bitcoin:Bitcoin cash’s larger blocks allow for a blockchain with increased scalability, resulting in lower fees for users and therefore making it better for regular transactions.
• Decentralised money: For those worried about too much centralised control in the financial system from banks and central governments, bitcoin cash offers a currency-like system that is decentralised and not controlled by any one entity.
• Lower barrier to entry: While bitcoin cash is still available on many major exchanges, its popularity has declined. As of July 2024, its price of $US389 per coin is lower than bitcoin’s $US62,800, potentially making it more accessible for small investors. However, it’s important to note that both bitcoin and bitcoin cash can be purchased in fractions, so the per-coin price difference is less significant than it may appear.

The disadvantages include:

• Significantly lower rate of adoption: With far fewer people using bitcoin cash than bitcoin, it has struggled to grow as an accepted investment or medium of exchange. This has resulted in lower liquidity, less market support, and reduced overall utility compared to bitcoin.
• Weaker security: Bitcoin cash processes transactions more quickly and at a lower cost than bitcoin because it requires less mining power to verify new blocks. The significantly lower hash rate of bitcoin cash compared to bitcoin makes it more vulnerable to potential 51% attacks.
• Loss of relevance: Bitcoin has clearly won the “bitcoin” branding battle, leaving bitcoin cash struggling for relevance and recognition in the broader cryptocurrency market.
• Energy intensive:Bitcoin cash still uses a blockchain proof-of-work system, where miners must run computers to solve cryptographic equations to process transactions, something that uses considerable energy.

Bitcoin cash is widely available on major cryptocurrency exchanges like Binance, Coinbase and Kraken. You set up an account, deposit cash, and then use that to buy cryptocurrencies like bitcoin cash.

Once you’re purchased bitcoin cash, hold your coins as an investment in a crypto wallet, exchange them for other coins, or use them for transactions.

Bitcoin cash has faced challenges in maintaining its presence on exchanges. Several major platforms have delisted it due to low trading volume, potential investor confusion, or simply prioritising more popular cryptocurrencies. This trend has continued, making bitcoin cash less accessible to investors compared to its early days.

Before investing in bitcoin cash, it’s crucial to understand its position in the current crypto market. While it once aimed to improve upon bitcoin’s limitations, it has not achieved widespread adoption or maintained its momentum. As with any cryptocurrency investment, thorough research and careful consideration of the risks are essential.

Considering the digital asset market, bitcoin has clearly emerged as the dominant and more stable investment choice compared to bitcoin cash.

“When measured in BTC, the price of BCH has fallen steadily since its inception. It stands to reason that the original bitcoin should serve as a safer investment,” said Gebbing.

“If choosing a blockchain to transact with, though, BCH is accepted in many of the same places that accept BTC, and can be used for near-zero fees due to the larger block size and the lesser utilisation of that chain.”

While bitcoin cash theoretically offers lower transaction fees, largely due to the lack of activity on the chain, bitcoin’s Lightning Network and other layer 2 solutions have significantly improved its transaction speed and cost, reducing BCH’s potential advantages.

Like with any crypto investment, ​​investors should be careful. “Anyone considering investing in bitcoin or bitcoin cash should consider whether they can stomach a volatile asset class, which is what crypto is,” Gebbing adds. He also noted that those looking to learn more about crypto and emerging technologies could benefit by broadening their horizon beyond the most popular options like bitcoin and Ethereum.

The Australian Government is yet to implement rules and regulations around digital asset investing—although legislation is reportedly planned for this year—resulting in unregulated digital asset brokers popping up without restriction. This has left many Australians with empty pockets after these poorly managed or fraudulent operations disappear with investor assets.

Bitcoin cash has failed to achieve its goal of replacing or surpassing bitcoin. Its declining market share, reduced adoption and lack of significant technological advantages make it a riskier and less attractive investment compared to bitcoin. While bitcoin cash still exists and has its proponents, for most investors, bitcoin remains the more prudent choice in the cryptocurrency market.

Investors should conduct thorough research, understand the risks involved, and consider their investment goals before deciding to invest in any cryptocurrency, including bitcoin and bitcoin cash.

This article is not an endorsem*nt of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class. Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.