With bitcoins’ meteoric rise in the last year, it seems everyone is talking about the digital currency. However, what is Bitcoin and why is it often combined with other nouns like “cash” and “gold”? This is because the original Bitcoin network has been upgraded and altered several times throughout its 12-year existence, resulting in several offspring chains that are flourishing in the crypto ecosystem. Three major implementations — Bitcoin (BTC), Bitcoin Cash (BCH) and Bitcoin Satoshi’s Vision (BSV) — have been competing for dominance since 2017. Despite sharing the same network, the three coins are very different, sharing different objectives, despite having some general similarities.
Since Bitcoin is primarily viewed as a store of value rather than a payment network (at least for now) due to its slow transaction speed limits, the others are positioned as digital currencies for everyday use, thanks to their larger blocks. Bitcoin Cash’s original hard fork from Bitcoin in 2017 was the start of years of discord and open hostilities between its proponents, each claiming to be the “true Bitcoin,” aka the one closest to Satoshi Nakamoto’s original vision of the cryptocurrency. We need to examine the nuances of each platform, such as fees, transaction speed, and adoption rate, to assess each asset’s theoretical case for the crown.
What Are Bitcoin Forks?
A Bitcoin fork is a clone of the original Bitcoin blockchain created when the decentralized network undergoes a hard fork due to disagreements among the community members. In this way, we have a new division where the original blockchain and its new alteration each continue in their own directions, taking their supporters and miners along with them. It is important to note that a fork may end up having entirely different features from its parent chain, depending on the reasons behind the split and the changes implemented. Incredibly, there have been over 100 forks of BTC that have attempted to take advantage of Bitcoin’s success and siphon off some of its support, most with very little success. There are 74 variants that are still officially active, while the others have been declared dead coins. Some of the leading Bitcoin hard forks include Bitcoin Cash and Bitcoin SV. Others include Bitcoin Gold, Bitcoin Cloud, Bitcoin Classic, Bitcoin Private and many more.
Forks are typically community-driven and are intended to add more functionality to conventional Bitcoin, or arise out of disagreements over critical features such as speed, transaction fees, and block size.
What’s The Difference Between a Hard Fork and a Soft Fork?
Note that a hard fork is different from a soft fork, since the latter merely introduces code changes to a blockchain without creating a new chain, whereas a hard fork introduces substantial and contentious code changes that require a new chain. This was most recently seen when Bitcoin Cash was split into Bitcoin Cash ABC and Bitcoin Cash Node after a network upgrade, with the latter winning out in support and getting the BCH ticker on exchanges.
In contrast to a soft fork, after a hard fork, two decentralized networks cannot natively exchange messages since they have no backward compatibility. Once a platform has forked, the new network is free to set its own course and establish its own rules.
Bitcoin (BTC) History
An anonymous entity named Satoshi Nakamoto created the original Bitcoin network. Several conspiracy theories have surrounded Bitcoin’s origins and the real identity of its creator, but no verifiable evidence has ever been found. In January 2009, Satoshi released Bitcoin into the mainnet, making it the world’s first cryptocurrency. When the very first block of the blockchain was mined, known as Genesis Block or Block 0, it marked the beginning of the blockchain technology. This provides a reference point for other blocks on the chain.
However, prior to its release, its whitepaper appeared on the internet in October the previous year. The Bitcoin whitepaper outlines the key spheres of the digital currency. When mining the genesis block, Nakamoto enshrined a message in the code, stating, “The times 03/Jan/2009 Chancellor on the brink of second bailout for banks.”In 2017, a hard fork, which is an upgrade on the network, was proposed in order to allow the Bitcoin blockchain to scale further. This upgrade was known as Segwit2x, which was meant to increase Bitcoin’s block size from 1 megabyte to 2 megabytes. But although Segwit2x could potentially decrease transaction fees thanks to the increase in block size, it consequently transfers the burden to miners and full node operators, who then have to store larger data. Therefore, this proposal created a lot of tension and debate between the community.
Eventually, many clones of the BTC project launched, each promising a better outcome. To date, BTC is still the largest cryptocurrency in existence, and is recognized by the majority as the one true Bitcoin network.
Bitcoin Cash (BCH) History
Bitcoin Cash is the second-largest fork of the Bitcoin network, next to BTC. Interestingly, prior to the division, the community had to go through nearly seven years (from 2010 to 2017) of drama before BCH came to life in August 2017. Bitcoin Cash has a passionate and vibrant community which includes investor Roger Ver and BitMain co-founder Jihan Wu.
Among the significant differences between the spinoff and the parent platform is the block size. Bitcoin has a 1 MB block size, while blocks on the BCH network can reach a maximum of 32 MB.However, Bitcoin Cash’s tumultuous journey had many new forks along the way. One was BSV (more on this later), and then there was Bitcoin Cash ABC (BCHA), whose lead developers had proposed an 8% miner tax to fund future protocol development.
Bitcoin Satoshi Vision (BSV) History
After thriving well for a year, the BCH community had to face another fork in 2018. A faction in the BCH community led by Craig Wright, a highly controversial Australian computer scientist who claims to be Satoshi Nakamoto, and billionaire Calvin Ayre, wasn’t satisfied with the implementation’s 32 MB block size, and instead proposed to raise the size limit to 128 MB.In November 2018, Craig Wright’s efforts compelled his faction to fork BCH and give birth to a new Bitcoin chain, Bitcoin SV. Partially as a result of Wright’s actions online in 2019, many exchanges delisted BSV in response.
Bitcoin Split (Halving)
Mining is the process of confirming transactions on the network and finding new blocks in a PoW network, which uses intensive computational power to solve a mathematical puzzle.
Therefore, the more computational power a miner has, the higher the chances of finding a new block faster than other miners on the network, consequently, the more the chances of receiving mining rewards.
When Does Each Halving Take Place?
Bitcoin automatically halves block rewards approximately every four years, or after mining 210,000 blocks.
However, the implication of the Bitcoin split engulfs the entire Bitcoin ecosystem, not just the mining revenue. For instance, a halving also affects the number of new coins entering active circulation in a given period, which is a clever way to tackle inflation.
Additionally, with Bitcoin having a capped supply of 21 million coins, controlling its scarcity may have a positive impact on its price.
The first Bitcoin halving occurred on Nov. 28, 2012, cutting mining rewards from 50 BTC per successfully-mined block to 25 Bitcoin. The second Bitcoin split took place on Jul. 9, 2016, further eating into miners’ revenue by half (12.5 BTC). In May 2020, the most recent BTC split took place, reducing miners’ incentives to 6.25 BTC for every new block.
Bitcoin Cash and Bitcoin SV Split
BCH experienced its first mining rewards’ split in April 2020. The event slashed the incentives from 12.5 BCH per block to 6.25 BCH. The Bitcoin Cash halving rides on the same functionality as the parent platform. Notably, the Bitcoin SV halving happened in the same month as BCH. The two share the same mining block rewards splits, from 12.5 to 6.25 BSV/BCH per block.
Transaction Fees and Speed
Bitcoin vs Bitcoin Cash Transaction fees
One of the visible differences between Bitcoin and Bitcoin Cash is the transaction fees. Although the costs fluctuate depending on either blockchain’s congestion, the Bitcoin network suffers from high transaction processing fees compared to Bitcoin Cash. However, this may not be a significant selling point for the Bitcoin Cash platform, since its transaction volume is only slightly above that of BTC as of March 2021.A transaction on the Bitcoin Cash network is likely to cost you roughly $0.0027, while a similar trade on BTC requires a network fee of around $20, and could go even higher [data as of Mar. 1, 2021].To solve the first decentralized platform’s high transaction fees, BTC developers introduced the Lightning Network (LN), a second-layer scaling solution. LN sits on top of the main chain and operates using payment channels. It helps drive Bitcoin transaction fees low and increases its transaction speed. LN continues to gain momentum with its growing number of nodes and payment channels. Furthermore, cryptocurrency exchanges like OKEx and Bitfinex have embraced the solution, providing cheap and faster Bitcoin deposits and withdrawals.
On speed, Bitcoin is capable of handling seven transactions per second (tps), while the BCH-powered platform averages 116 tps. The Lightning Network theoretically beats BCH by enabling up to billions of transactions per second — but it’s nowhere near its final stages that would allow for that amount of transactions.
Another key metric to compare between the two platforms is the mempool. A mempool is a virtual place where a decentralized protocol like Bitcoin or Bitcoin Cash stores valid but unconfirmed transactions waiting to be added into a block.
Note that the higher the number of transactions in the memory pool, the higher the network congestion. To decongest the network, network nodes set a transaction cost threshold. All transactions below this mark are removed from the pool. In this case, BCH wins over BTC since it has a less-congested mempool.
BSV’s Fees and Speed
On the other hand, Bitcoin SV beats BTC and BCH on transaction fees since it charges the lowest price, which is mostly thanks to its larger block size. This reduces the number of transactions on the mempool, hence, positively impacting the BSV network’s throughput.For example, the network hit 9,000 transactions per second using its scaling platform known as BSV Scaling Test Network (STN). STN is a project by a committed organization, Bitcoin Association, that drives adoption for BSV. The BSV scaling product targets corporate BSV usage and adoption.Furthermore, Bitcoin SV’s huge block size allowed it to set a new record when bundling 16.4 million transactions in a single block.
Bitcoin has kept the adoption wheel rolling since the start of 2020’s pandemic, which is evident in the number of major corporations and institutions like Tesla, MicroStrategy and Square adding BTC to their balance sheet as a safe haven asset that hedges against a weakening U.S. dollar. As of March 2021, the network processes about 300,000 transactions per day. Despite the congestion in its network, the vast majority of crypto investors still prefer to hold BTC, since it has been purported as a store of value superior to fiat money.And with most DeFi protocols running on the Ethereum blockchain, BTC has found its way into the space through wrapping services that have resulted in new coins like Wrapped BTC.
Bitcoin Cash Adoption
The adoption of Bitcoin Cash took a different route. After the fork, the blockchain platform had started targeting the payments sector. However, while it’s yet to cover this market thoroughly, it has new hunting grounds. For instance, it powers the Simple Ledger Postage (SLP) token on its network.
The token eliminates the need for BCH users to pay for transaction costs using BCH. Notably, SLPs reduce the transaction processing fees while enhancing the transaction speed and reliability.
Bitcoin SV Adoption
Lastly, Bitcoin SV’s biggest adoption use cases come from a banking application called Gravity and an education platform called Bitcoin SV Academy, which piggybacks on the narrative that it is the only network that lives up to Nakamoto’s vision of a genuinely peer-to-peer financial infrastructure.
The three major implementations of the Bitcoin protocol continue to thrive and compete for dominance in the crypto industry, but it’s no contest anymore. BTC has clearly won the branding and price battles, considering that it is worth 70x more than the other two chains combined — but there is plenty of room for more payment-focused cryptocurrencies like its rivalrous siblings in the booming and still nascent digital asset sector.
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