The recent cancellation of SegWit2x and the rapid rise in Bitcoin Cash’s price ($600 to $2000 in 2 days) coupled with a sharp drop in Bitcoin’s price has once again put the spotlight on the intense feud between Bitcoin and Bitcoin Cash. Many questions have arisen around the two cryptocurrency giants as people scramble to understand the situation. This blog post hopes to answer the most common questions as succinctly as possible.
What is Bitcoin Cash?
Bitcoin Cash is a fork of Bitcoin’s blockchain with two primary changes: an 8mb maximum block size and an emergency difficulty adjustment feature (EDA). The EDA checks, after every block, how long it took to mine the last 6 blocks. If it took over 12 hours, the EDA will drop the mining difficulty by 20%. Bitcoin, on the otherhand, adjusts block difficulty after every 2016 blocks. Each block is set to take approximately 10 minutes to mine.
The EDA was added to Bitcoin Cash to ensure that the new chain won’t stagnate from a lack of hashing power; a dynamic difficulty adjustment algorithm will quickly bring Bitcoin Cash’s difficulty down enough such that it’d be more profitable to mine Bitcoin Cash. This would attract Bitcoin miners to switch to the new chain, albeit as long as the EDA keeps the difficulty low enough. With Bitcoin Cash’s hashing power stabilizing since its turbulent release, the EDA was recently removed and replaced with a new block difficulty adjustment algorithm.
Bitcoin Cash brands itself as the real Bitcoin. It justifies this with its embracing of larger block sizes which significantly reduces blockchain fees and transaction confirmation times compared to Bitcoin.
Bitcoin vs Bitcoin Cash
Bitcoin’s community believes in smaller block sizes. Why? Because there is a belief that larger block sizes increase centralization by making it more expensive to run full nodes. Larger block sizes result in a faster growing blockchain which increases the amount of space and bandwidth needed to maintain a full node. Bitcoin’s community doesn’t believe that scaling can be reasonably achieved through larger block sizes and should rather be accomplished through second-layer technology (i.e. the Lightning network). Bitcoin’s block size is capped at 1mb.
Bitcoin Cash’s community, on the other hand, believes in larger block sizes. Its community wholly backs blockchain technology and believes that scaling can be achieved directly on the blockchain without significantly increased centralization and without much reliance on second-layer technology. This follows very closely with the original spirit of Bitcoin. Bitcoin Cash’s block size is capped at 8mb.
Who can use the blockchain?
Bitcoin Cash’s priorities are: (1) everyone can use the blockchain (2) everyone can run a node.
Bitcoin’s priorities are: (1) everyone can run a node (2) everyone can use the blockchain.
Bitcoin’s community believes that since scaling cannot be done on the blockchain, and block space is a commodity that should be kept scarce, certain transactions are more important than others. Low importance transactions have no place on the blockchain and should be handled by second layer technology. Who determines low importance transactions? Blockchain fees should determine transaction importance. A purist in Bitcoin’s community is happy with high transaction fees. This means that smaller microtransactions will be forced to use second layer technology or pay exorbitant fees.
Bitcoin Cash’s community believes that every transaction is important. Block space should not be a scarce commodity. When demand exceeds supply, the block size should be increased. Blockchain fees should be kept exceedingly low to encourage everyone to use the blockchain.
Bitcoin has SegWit, a precursor technology to second layer technology like the Lightning network. SegWit also has the peripheral effect of increasing block size by reducing the size of individual transactions.
Bitcoin Cash does not have SegWit.
Costs and transaction time
Bitcoin is currently significantly more expensive and slow to use than Bitcoin Cash.
This is because Bitcoin continues to stick with 1mb block sizes while no second layer technology is available to keep up with the demand to use Bitcoin. The closest upcoming technology is the Lightning network but it’s not clear when it will be production ready. The adoption of SegWit has been surprisingly low and stagnant.
Subreddits and censorship concerns
Bitcoin supporters primarily use /r/Bitcoin. Bitcoin Cash supporters primarily use /r/btc.
/r/Bitcoin moderators have been accused of rampant censorship on the subreddit on anything that questions the legitimacy of Bitcoin, Bitcoin Core, and Blockstream. Posts that do not discuss Bitcoin Cash in a negative light are also censored. The accusations are very likely true and have even been echoed by prominent cryptocurrency thought leaders like Vitalik Buterin.
Some have expressed concern that the spirit of Bitcoin was anti-censorship and control, yet /r/Bitcoin is completely controlled and censored by its moderators.
Who backs Bitcoin and who backs Bitcoin Cash?
Bitcoin is backed by Bitcoin Core developers and the Blockstream company. Bitcoin Core is the predominant Bitcoin client. While Bitcoin Core is an open source project, Blockstream is a company formed by a group of Bitcoin Core developers. The Bitcoin Core developer community overlaps with and has a very close relationship with the Blockstream company. Blockstream provides significant funding for Bitcoin Core development.
Blockstream currently makes money through “consulting work”. They have also developed a sidechain called Liquid that is aimed at providing high-speed transactions between Bitcoin exchanges. Blockstream earns the fees paid to use the Liquid network.
Blockstream raised $55 million in its Series A funding. The most prominent investor in Blockstream is AXA, a French multinational insurance conglomerate. According to Wikipedia, AXA had €68.5 billion in equity in 2015 and 165,000 employees in 2017.
Charlie Lee, the founder of Litecoin, a blockchain that started on code forked from Bitcoin Core, supports Bitcoin and is a vocal critic of Bitcoin Cash. Litecoin is branded as a cheaper and faster alternative to Bitcoin.
Charlie Shrem, an early investor in Bitcoin and entrepreneur, who is a founding board member of the Bitcoin Foundation and currently serves as the Director of Business and Community Development at Jaxx, is also a vocal critic of Bitcoin Cash.
Roger Ver is a vocal supporter of Bitcoin Cash. Roger Ver is an early cryptocurrency entrepreneur and investor and is currently the CEO of Bitcoin.com. Ver invested over a million dollars in cryptocurrency startups including Ripple, Blockchain.info, Bitpay, and Kraken.
Gavin Andresen has voiced his support for Bitcoin Cash. Andresen was designated by Satoshi Nakamoto, the pseudonymous inventor of Bitcoin, as lead developer on Bitcoin Core after Nakamoto left the project. Andresen founded the Bitcoin Foundation in 2012 and left his software development role to concentrate on his work with the Foundation in 2014. As of June 2017, he has not contributed to Bitcoin Core since February 2016 and his commit access on GitHub was revoked in May 2016.
Vitalik Buterin, the creator of Ethereum and prominent cryptocurrency thought leader, voiced his support for Bitcoin Cash and has even deemed Bitcoin Cash worthy of taking the Bitcoin name in a series tweets.
Controversial supporters of Bitcoin Cash include large Bitcoin mining companies and their billionaire CEOs and investors. The most prominent member within the ranks of the “Chinese billionaire miners” is Jihan Wu, the founder of Bitmain. Jihan is a vocal supporter of Bitcoin Cash and critic of Bitcoin Core and Blockstream. Bitmain is a company that holds patents on, and manufactures specialized Bitcoin mining hardware. Bitmain also operates AntPool, one of the largest Bitcoin mining pools in the world.
Jihan Wu has been accused of supporting Bitcoin Cash in order to maintain his lucrative mining business. Bitmain’s Bitcoin mining technology doesn’t work with SegWit.