Bitcoin vs. Bitcoin Cash: What's The Difference?

Bitcoin (BTC) and Bitcoin Cash (BCH) may share a name and some technical similarities, but they represent two distinct visions for the future of digital currency. Bitcoin, the original cryptocurrency created in 2009 by the pseudonymous Satoshi Nakamoto, is often referred to as “digital gold”. Its main function has evolved to be a store of value and a hedge against inflation, as many investors see it as a safe-haven asset akin to gold.

In contrast, Bitcoin Cash (BCH) was developed with a different goal in mind: to function as a form of digital cash. Its advocates believe BCH should be fast, cheap, and easy to use for everyday transactions, aiming to preserve the original vision of Bitcoin as a peer-to-peer electronic cash system.

Bitcoin Cash was created through a process called a hard fork of Bitcoin in August 2017. This hard fork split the Bitcoin blockchain into two separate paths, resulting in two distinct assets: BTC and BCH. A hard fork occurs when major changes are made to a cryptocurrency’s open-source code, leading to a split in the blockchain. Some nodes (computers running the network) follow the new version, while others stick to the original, causing a permanent divergence. Both Bitcoin and Bitcoin Cash share a transaction history up until the split, but have since followed separate development paths.

The split was largely driven by Bitcoin’s scaling debate, where a portion of the community sought to increase the block size to allow for more transactions per second. Bitcoin’s block size was limited to 1MB, which some argued led to slower transaction times and higher fees. Bitcoin Cash supporters pushed for larger blocks, allowing more transactions to be processed at a lower cost, which they believed would make it more suitable for everyday use. The disagreement over how to scale Bitcoin effectively led to the creation of Bitcoin Cash, which features an 8MB block size at launch, allowing for more transactions per block compared to Bitcoin.

Since the split, both assets have taken different approaches. Bitcoin has doubled down on its status as a decentralized store of value, while solutions like the Lightning Network aim to address its scaling challenges without altering the blockchain itself. Bitcoin Cash continues to focus on scalability and usability, with an emphasis on being a fast and efficient payment method.

Understanding the differences between Bitcoin and Bitcoin Cash is crucial for anyone looking to navigate the world of cryptocurrencies, as each represents a distinct vision for the future of decentralized finance.

The Bitcoin Scaling Debate

Since its creation, Bitcoin has faced ongoing debates about its ability to scale effectively and become a global currency for everyday use. While Bitcoin’s use of blockchain technology ensures decentralization and resistance to censorship, it also presents significant challenges in terms of transaction throughput—the number of transactions the network can handle per second.

For comparison, payments giant Visa processes around 150 million transactions daily, equating to roughly 1,700 transactions per second (TPS). The company claims it can scale up to handle as many as 24,000 TPS under optimal conditions. Meanwhile, Bitcoin's blockchain, in its current form, processes only about 7 transactions per second, which is a major limitation as the network grows.

The root of the issue lies in Bitcoin’s 1MB block size limit. Each transaction on the Bitcoin network is essentially a piece of data, and as more users join the network, the data grows. Transactions are stored in blocks, which are linked to form the blockchain. When the number of transactions outpaces the space available in each block, a backlog of unconfirmed transactions forms, creating network congestion.

At times, this backlog has grown to include over 100,000 unconfirmed transactions, leading to rising transaction fees as users compete to have their payments processed. In a decentralized system like Bitcoin, the fee attached to a transaction plays a crucial role: the higher the fee, the more likely miners will prioritize processing it. During periods of high demand, fees have surged to unsustainable levels, with some users paying as much as $58 per transaction. This pricing has made Bitcoin impractical for small, everyday payments, pushing some users away from the network.

To address these scalability issues, the Bitcoin community became divided over two primary solutions. The first proposed increasing the block size to allow more transactions per block, which would help reduce fees and transaction delays. This idea became the foundation of Bitcoin Cash (BCH), which adopted larger blocks to support higher throughput.

The second solution focused on maintaining Bitcoin’s 1MB block size while exploring layer-two scaling solutions, such as the Lightning Network. The Lightning Network is a secondary layer built on top of the Bitcoin blockchain, allowing transactions to be processed off-chain before being settled on the main blockchain. This approach preserves Bitcoin’s decentralized nature while enabling faster and cheaper transactions without increasing the block size.

Both solutions come with trade-offs. Larger blocks allow for more transactions but may compromise the decentralization of the network, as they require more storage and processing power, potentially excluding smaller participants. Layer-two solutions maintain decentralization but add complexity to the system.

The division between these two camps ultimately led to a hard fork in 2017, resulting in the creation of Bitcoin Cash. This split highlighted not only technical disagreements but also ideological differences within the Bitcoin community, with each side accusing the other of manipulating the debate to suit their own interests.

Today, the scaling debate continues as Bitcoin remains focused on maintaining its status as a decentralized and secure store of value, while also exploring innovative solutions like the Lightning Network to enhance scalability. Meanwhile, Bitcoin Cash has pursued its goal of being a more practical digital payment system by prioritizing transaction speed and affordability.

The Bitcoin Cash Hard Fork

On May 23, 2017, a group of influential Bitcoin business owners and miners, representing over 85% of the network’s computational power, gathered behind closed doors to discuss the future of Bitcoin. The outcome of that meeting was the proposal known as SegWit2x, an upgrade intended to address Bitcoin’s scalability issues.

The SegWit2x proposal combined two major changes: the introduction of Segregated Witness (SegWit) and an increase in the block size to 2MB. SegWit was designed to improve Bitcoin’s efficiency by “segregating” certain parts of transaction data outside of the limited block space. This freed up more room within each 1MB block, allowing more transactions to fit. The second part of the upgrade involved a block size increase to 2MB, to be implemented via a hard fork. However, this proposal faced significant resistance from parts of the Bitcoin community.

Critics of SegWit2x, especially those advocating for smaller blocks, argued that increasing the block size would make running a full node—which stores the entire Bitcoin transaction history—more difficult, potentially excluding smaller participants. They feared this would lead to the centralization of the network, as only larger entities with significant resources would be able to handle the increased storage and bandwidth demands. Centralization, they argued, would weaken Bitcoin’s decentralized nature and leave it more vulnerable to manipulation.

On the other side, supporters of larger blocks saw the block size increase as a necessary and urgent fix to Bitcoin’s growing transaction fees. As demand on the network increased, so did fees, leading to concerns that high transaction costs could stifle Bitcoin’s adoption as a global payment system. Those in favor of larger blocks viewed SegWit2x as a way to ensure faster transaction processing and reduce costs, making Bitcoin more practical for everyday use.

The dispute over the future of Bitcoin’s scaling solution reached a breaking point, ultimately leading to a hard fork on August 1, 2017. The fork resulted in the creation of Bitcoin Cash (BCH), a new cryptocurrency that adopted larger block sizes to increase transaction throughput. Bitcoin Cash’s 8MB blocks were a direct answer to the scaling debate, allowing the network to process significantly more transactions per second compared to Bitcoin.

Bitcoin Cash supporters believe that their vision better aligns with the original principles outlined by Satoshi Nakamoto in the Bitcoin whitepaper, which emphasized Bitcoin as a peer-to-peer electronic cash system. They argue that BCH preserves the original goal of Bitcoin by prioritizing low fees and fast transaction times, making it more suitable for everyday payments.

On the other hand, Bitcoin (BTC) has focused on maintaining its position as a decentralized store of value, opting for more conservative upgrades like SegWit and developing layer-two solutions such as the Lightning Network to handle scalability. This divergence reflects the broader philosophical divide within the cryptocurrency community—whether Bitcoin should prioritize being a decentralized and secure store of value or an efficient and accessible payment system.

The Bitcoin Cash hard fork marked a key moment in Bitcoin’s history, illustrating the deep divisions within the community over how to scale the network. Today, Bitcoin Cash continues to emphasize usability and speed, while Bitcoin remains focused on long-term security and decentralization.

How Bitcoin Cash Differs from Bitcoin

Over time, Bitcoin (BTC) and Bitcoin Cash (BCH) have evolved into two distinct cryptocurrencies, with developers pursuing different visions for their networks. Although they originated from the same blockchain, the divergence in goals and technical decisions has made them completely separate assets, each with its own community and use cases.

Difficulty Adjustment

One of the key differences between Bitcoin and Bitcoin Cash lies in their difficulty adjustment algorithms. Both networks use the same SHA-256 hashing algorithm, meaning that miners can switch between BTC and BCH depending on which is more profitable to mine. To stabilize the rate of block generation on the BCH network, an automatic difficulty adjustment mechanism was introduced.

The difficulty adjustment algorithm allows BCH to maintain a steady rate of block production every 10 minutes, even when the hash power fluctuates. If block generation is falling behind schedule, the algorithm halves the difficulty. Conversely, if blocks are being generated too quickly, the difficulty doubles. This adjustment ensures the stability of the BCH network in the face of market volatility and shifting miner interest.

Block Size Differences

The most notable difference between Bitcoin and Bitcoin Cash is their block size. Bitcoin has maintained a 1MB block size, while Bitcoin Cash significantly increased its block size to 32MB. This larger block size allows BCH to process more transactions per second, making fees on the BCH network considerably lower. Currently, BCH transaction fees are less than a penny, and the network is capable of handling up to 200 transactions per second.

While the block size increase on BCH was initially feared to cause the blockchain to grow uncontrollably, this has not materialized. In fact, BCH has yet to process enough transactions to fully utilize its expanded block space. On the other hand, Bitcoin SV (BSV)—a fork of Bitcoin Cash—has pushed this idea even further, aiming to increase block sizes to 1TB, although its blockchain has already grown substantially larger than Bitcoin’s.

Smart Contracts and Decentralized Finance

Unlike Bitcoin, which does not natively support smart contracts, Bitcoin Cash has embraced more complex functionalities by incorporating smart contract languages like Cashscript. This development opens the door to building decentralized finance (DeFi) services on BCH, with the goal of competing with platforms like Ethereum (ETH).

While Bitcoin’s ecosystem is exploring DeFi solutions through layer-two technologies and innovations—such as the work being done by Square’s CEO Jack Dorsey—Bitcoin Cash has already introduced privacy-enhancing tools like CashShuffle and CashFusion. These tools improve transaction privacy on the BCH network, and Cashscript is facilitating the development of more sophisticated financial applications.

Token Issuance

Token creation on the Bitcoin blockchain is achieved through the Omni Layer, a platform that enables users to issue and trade custom digital assets. Although Omni has been used to create stablecoins, its overall adoption has been limited. In contrast, Bitcoin Cash has introduced the Simple Ledger Protocol (SLP), which allows developers to issue tokens on the BCH network, similar to Ethereum’s ERC-20 tokens.

The SLP protocol has gained some traction, with tokens issued for various purposes, including nonfungible tokens (NFTs). While SLP supports NFTs, their adoption on BCH remains relatively low compared to the booming NFT markets on Ethereum and other platforms. This feature allows both Omni and SLP tokens to exist on different blockchains, providing users with a choice of networks for their token transactions. However, the adoption of both token standards has been somewhat limited.

Replace-by-Fee

On Bitcoin, the Replace-by-Fee (RBF) feature allows users to replace a transaction that is stuck in the network due to low fees. By attaching a higher fee to the new transaction, users can expedite processing. However, RBF has drawn criticism for its potential to facilitate double-spending. In theory, a malicious actor could send a low-fee transaction to a merchant and then replace it with a higher-fee transaction to another wallet, effectively voiding the original payment if the merchant does not wait for enough confirmations.

Bitcoin Cash has opted to drop the RBF feature, making unconfirmed transactions irreversible on its network. This decision is partly justified by BCH’s higher transaction throughput, which reduces the likelihood of double-spending, as transactions are processed faster. As a result, the BCH network prioritizes speed and security by confirming transactions quickly and reducing the need for RBF mechanisms.

Different Visions, Same Monetary Policy

Bitcoin Cash (BCH) was launched with an 8MB block size at the time of its 2017 hard fork from Bitcoin (BTC) and has since quadrupled that size to 32MB. The network is highly adaptive, embracing frequent hard forks and innovations to enhance usability as a fast and efficient digital payment system. BCH’s goal is to serve as peer-to-peer electronic cash, prioritizing low transaction fees and fast transaction speeds to support everyday payments.

In contrast, Bitcoin (BTC) has taken a more conservative approach to upgrades, with its focus on being a store of value and an inflation hedge. Bitcoin’s scaling strategy has primarily revolved around Segregated Witness (SegWit) and the Lightning Network, both of which aim to improve transaction throughput without altering the core blockchain structure.

The Lightning Network is an additional layer built on top of Bitcoin’s main blockchain, enabling near-instantaneous transactions with minuscule fees by creating user-generated payment channels. This layer allows users to conduct multiple transactions off-chain, which are later settled on the Bitcoin blockchain. While it has the potential to handle up to 15 million transactions per second, Lightning’s adoption has been gradual, with challenges around ease of use and network liquidity. Despite this, the network is gaining traction as an efficient way to scale Bitcoin without compromising its decentralization.

In terms of privacy, Bitcoin has implemented the Taproot upgrade, which improves the network’s ability to handle more complex transactions while maintaining user pseudonymity. Taproot allows multi-signature or time-locked transactions, such as those opening a Lightning Network channel, to appear identical to regular transactions on the blockchain. This enhancement boosts both privacy and scalability, aligning with Bitcoin’s focus on security and resistance to censorship.

Bitcoin supporters tend to value decentralization and censorship resistance above higher transaction throughput, believing that Bitcoin’s long-term success as a store of value depends on its resilience against external threats. By maintaining a cautious approach to network changes, Bitcoin seeks to ensure its ability to resist attacks from any government or entity, thus preserving its role as “digital gold”.

On the other hand, Bitcoin Cash’s vision revolves around being a practical payment method. Its large block size and low transaction fees make it an ideal platform for fast, affordable payments. BCH has even been used to build decentralized applications, such as social media platforms, where every interaction—like posting a message—is recorded on the blockchain. Such applications would be impractical on Bitcoin’s smaller block size and higher fees.

Privacy on Bitcoin Cash is maintained through a different mechanism: coin mixing. Tools like CashFusion bundle multiple transactions together to obscure the origin of each user’s coins. Although this method enhances privacy, it has been controversial due to concerns that it could facilitate illegal activity by making it harder to trace the flow of funds.

Despite their technological and philosophical differences, the monetary policies of Bitcoin and Bitcoin Cash remain identical. Both networks have a fixed supply of 21 million coins, and the issuance of new coins is reduced by 50% roughly every four years through the halving process. This controlled supply ensures that the last BTC and BCH will be mined around the year 2140.

Both cryptocurrencies were designed to protect against monetary confiscation, censorship, and inflation. Their transparent and publicly accessible blockchains prevent any single entity from altering the system, preserving the integrity of the network. Ultimately, both Bitcoin and Bitcoin Cash aim to provide individuals with financial sovereignty, even as their paths diverge in terms of functionality and vision