The story of Bitcoin Cash (BCH) goes much deeper than just the creation of another cryptocurrency

Bitcoin Cash was created as a result of a hard fork in the Bitcoin network. The Bitcoin Cash network supports a larger block size than Bitcoin

The story of Bitcoin Cash (BCH) goes much deeper than just the creation of another cryptocurrency. It was actually one of the fiercest tests for Bitcoin’s decentralization.

What is Bitcoin Cash Summary

Bitcoin Cash was created as a result of a hard fork in the Bitcoin network. The Bitcoin Cash network supports a larger block size than Bitcoin (currently 32mb as opposed to Bitcoin’s 1mb).

Later on, Bitcoin Cash forked into Bitcoin SV due to differences in how to carry on its developments.

That’s Bitcoin Cash in a nutshell. If you want a more detailed review keep on reading. Here’s what I’ll cover:

Don’t Like to Read? Watch our Video Guide Instead

Hard Forks Explained

A lot of people who are just starting out with Bitcoin or cryptocurrency in general, get confused when they see that there’s not just one “type” of Bitcoin. For example, Bitcoin Cash, Bitcoin Gold and Bitcoin Diamond are all forks of the original Bitcoin.

A fork can be described as an alternate version of an original coin. There are two types of forks: soft forks and hard forks.

Soft forks – Versions that work well with both the original version and the alternate version of the coin, so as a user, you can choose which version to run without a lot of concern.

Hard forks – Don’t play well with the original version. This means that you need to choose whether to update your software to run the alternate version, or to stick with the original one.

In other words, with hard forks, if the alternative is not accepted by 100% of the users, then a sort of split will occur in the network and a new coin will emerge. One that is similar to the original but not identical.

Bitcoin Cash and other Bitcoin versions are actually the results of suggested updates to the Bitcoin protocol that weren’t agreed to by everyone.

So what happened is that an alternate version, or a hard fork, stemming from the original Bitcoin was created and new coins came into existence.

If you want a complete detailed explanation about forks make sure to watch our Bitcoin Whiteboard Tuesday forks video as well.

The Bitcoin Block Size Debate

So now we know that Bitcoin cash is actually a hard fork of Bitcoin, but why was it created?

To answer this question, we need to pause for a second and go back a few years to discuss one of the most controversial topics of Bitcoin’s code – the block size and scalability issue.

Bitcoin transactions don’t get confirmed instantly. In order for a transaction to be considered as confirmed it needs to be included as part of a block of transactions on the Bitcoin ledger, known as the blockchain.

A new block of transactions is added to the blockchain on average about every 10 minutes.

Similar to any type of digital data, adding Bitcoin transactions to a block requires storage space, and the maximum capacity for each block of transactions is 1 MB. When you consider the average Bitcoin transaction size, you’ll find that a block is able to hold about 2700 transactions.

2700 transactions every 10 minutes means 4.6 transactions a second, that’s not a lot. Visa, for comparison, can confirm 1,700 transactions per second.

This means that when a lot of people want to send Bitcoin, during price rallies, for example, transactions get stuck in a very long queue inside the mempool, waiting to enter a block and get confirmed.

Of course, Bitcoin allows you to pay a higher transaction fee if you want to jump the queue, but this might cause fees to reach ridiculous levels as more and more people try to “cut the line” with their transaction.

This isn’t something you want to have happened if you’re building Bitcoin to become a global payment method. As a result of this scalability issue, two different camps emerged.

Big Blocks Proponents

The first camp was the “Big Blocks” camp. This camp was led by Chinese mining giant Bitmain and Roger Ver, an early Bitcoin investor who was involved with a number of startups when Bitcoin was just gaining initial adoption.

Big blockers were afraid that Bitcoin’s scalability issue would prevent it from becoming what Satoshi Nakamoto, Bitcoin’s inventor, initially intended – a peer to peer payment system.

With such long confirmation times and high fees, people wouldn’t use Bitcoin for day to day transactions and would instead treat it as a store of value – like gold.

The supporters of this camp suggested a very simple solution – Let’s increase the block size. If we increase Bitcoin’s block size to 8mb, we’ll be able to confirm as many as 8 times the number of transactions per second.

This will reduce the existing congestion of the network, and in the future, we’ll increase the block size as much as needed