Bitcoin vs. Bitcoin Cash: What’s the Difference and Which Is Better?

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Bitcoin, or BTC, is the world’s most popular cryptocurrency, but it’s not without its problems. The nature of the technology makes it difficult to scale, and as a result, it’s nearly impossible for the average person to use BTC for everyday transactions like buying gas or milk.

Offshoots such as bitcoin cash have been developed as potential solutions to this problem, but to fully understand the differences between these options, it helps to know a bit about bitcoin’s history.

Bitcoin

Bitcoin was created by Satoshi Nakamoto — an anonymous internet user or group working under a pseudonym — in 2009 on the back of the economic recession. It was presented as a form of peer-to-peer currency that didn’t rely on centralized banks.

Whereas fiat currency such as the dollar is subject to spontaneous manipulation by governments, only a finite number of bitcoins will ever be available — 21 million. Until that maximum is reached, new coins are continually introduced to the market by a process called mining, in which powerful computers perform calculations that confirm the validity of transactions. As payment for use of their machines, miners collect fees on confirmed transactions, as well as the newly created bitcoins.

Although bitcoin was meant to be used as digital cash, the volatility of the new cryptocurrency attracted investors while discouraging its use as legal tender.

Bitcoin Cash and The Scalability Problem

Concerns about the bitcoin network’s limitations have been around since before the first block was mined. The bitcoin governance has debated about how to handle this. In 2017, they instituted a “hard fork” in the bitcoin code to create a cryptocurrency that didn’t have the same scaling issues as bitcoin. This was the beginning of bitcoin cash.

Bigger Blocks and Faster Transactions

Bitcoin cash came with its own set of rules, including an increase of the maximum block size from 1MB to 32MB. This change drastically increased the speed at which transactions were processed, allowing BCH to process an average of 116 transactions per second. The Bitcoin network, on the other hand, has never managed to process more than eight transactions per second.

Additionally, the larger block size made space on blocks much less competitive, which decreased fees dramatically. Bitcoin fees currently average about $2 per transaction, according to Y Charts, but they have reached heights of more than $60. BCH fees, on the other hand, currently average a fraction of a cent.

Bitcoin vs. Bitcoin Cash: Key Differences

While BTC and BCH share some fundamental technology, they differ significantly in their philosophy.

Although bitcoin was originally presented as a digital currency, people immediately saw it more as a way to make money. Its developers prefer to adhere to the tenets of decentralization and security first while looking for ways to improve processing times as a secondary issue.

Conversely, bitcoin cash seeks first to make transactions fast and accessible with low fees, which is supposedly closer to the vision originally set forth by Nakamoto.

Which Is Better?

The choice for you depends on the features you’re most interested in. Bitcoin, it’s by far the most widely accepted cryptocurrency, with major companies adopting solutions to allow for everyday purchases using bitcoin and investment brokerages facilitating trades. It also grows as an investment asset as investors hope to capitalize on its increased popularity.

Further, despite the slower transaction speeds, bitcoin remains especially viable in cases where speed is less relevant, such as in real estate and automobile purchases.

Bitcoin cash, on the other hand, is relatively unknown outside of cryptocurrency circles, yet it remains the better option for near-instant transactions, especially for smaller amounts. 

Is Investing In Bitcoin Safe?

Bitcoin is a very volatile currency with prices that have gone up and down drastically. Bitcoin is decentralized, meaning there is no central authority. The computer systems used to trade bitcoin take up a lot of energy and can have outages, according to Charles Schwab. Plus, there are many fraud cases around cryptocurrency.

Because of these factors, financial experts recommend that you only invest in bitcoin if you have a high risk tolerance. You should also follow the same investing advice for traditional assets: keep your portfolio diversified to help protect you from downturns. 

Takeaway

The bottom line is that these currencies represent different approaches to the digital future of finance. One places a greater focus on security, while the other emphasizes transaction speed and minimal fees. No one can yet be sure which is truly a better investment for the long term.

Daria Uhlig contributed to the reporting for this article.

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