The Bitcoin Cash is considered the closest alternative to Bitcoin. It is valued at between the third and second most valuable cryptocurrency in the world, based on its market capitalization. This digital currency came into existence on August 1, 2017, to offset the rise in the transaction wait-times and fees. Bitcoin Cash raises the bar for transactions that can be processed per block.
The Problem: Why Create Bitcoin Cash?
Most market participants know that Bitcoin has a scalability problem; with the rise in popularity, the number of transactions taking place on the Bitcoin network has also gained traction and is currently pushing beyond the limits of its software.
The major problem is that Bitcoin forces a hard limit on the size of a block; currently, blocks on the Bitcoin blockchain are limited to a size of 1 MB.
Why do Bitcoin limit the number of transactions that the network can process?
Since Bitcoin makes use of a distributed ledger, every user on the network has to download and store a copy of the entire Bitcoin transaction history. Given the situation, unlimited transactions are not allowed; otherwise, the ledger would grow to an enormous size and create problems for ordinary users, who do not possess the sufficient computing storage to use the network.
However, if unlimited transactions were allowed, Bitcoin would be the domain of a few centralized organizations that have sufficient processing-power to handle loads of new transactions, every second. Since the whole idea of creating Bitcoins was to avoid any centralized feature, this option is not that appalling.
Currently, the block size has a 1 MB limit, which means that the transaction-ledger doesn’t expand too large, nor too quickly; new entrants can easily download the transaction history and join Bitcoin. However, this block-limit implies that more transaction demands exist and that the available space can’t fit them all.
As a result, bitcoin miners have started to charge a certain amount of fees to prioritize transactions and have them included the soonest. Meanwhile, free services (without the fees to the miners) take a little over 2 hours on average to get the transaction confirmed, as of November 2017.
Although the founders of the Bitcoin Cash community believe that the block size needs a limit, the 1 MB limit is just arbitrary. They suggested a system with a block size of 8MB, reasonable enough for the new users to download their transaction history. Also, it would be large enough to accommodate for the number of transactions per second several times, similar to the original Bitcoin blockchain into the new system.
While both cryptocurrencies are identical, the two networks are not at all interchangeable. The Bitcoin Cash has implemented a replay protection to create a hard obstacle between itself and its older counterpart; whereas Bitcoin aims to conduct transactions within the fork and not across networks. However, the two currencies shared a common history only up until August 1 last year, when their paths diverted completely.
Due to this, Bitcoin Cash has a separate exchange rate, when compared to Bitcoin. The former was not supported by many wallets and exchanges at the time of its launch. Still then, by the end of its launch day, it acquired the third most valuable place in the field of cryptocurrency, regarding the market cap.