One of the major hurdles blockchain solutions and particularly bitcoin needs to overcome before a mass adoption is scalability. While a lot of crypto enthusiasts feed on the hype around cryptocurrencies, they fail to ask the pertinent question – can cryptocurrencies at their current state un-sit current traditional systems? The answer is an emphatic NO!
Blockchain is a revolutionary technology. It makes transactions and ledgers far more difficult to manipulate because the network is decentralized, existing on multiple computers, otherwise known as nodes all over the world. But if we are to face the facts, crypto transactions are still slow. Using bitcoin as an example, at its all-time high, unconfirmed transactions rose to over 200,000 and the fees of the network increased significantly. Some users had to wait for up to 7 days before transactions were confirmed, even with the high fees. The same thing happened to the Ethereum blockchain when crypto kitties were introduced, thus, significantly slowing down the network.
In comparison with the size of the industry, and the number of bank transactions that get done every day, this is nothing to write home about. Visa can process up to 150 million transactions a day. This is equivalent to 1,700 transactions per second. And they have claimed to be able to handle up to 200,000 transactions per second. Now guess how many transactions the bitcoin network is able to process in a second? Only seven.
As the network grows, as in the case of late 2017, waiting times will increase. This problem of scalability and the need to modify the bitcoin blockchain to accommodate more transactions facilitated a hard fork, which gave birth to Bitcoin Cash.
There are two common solutions to the problem of bitcoin’s scalability. The first is to reduce the amount of data that each node needs to verify (some blockchain projects are already doing this through sharding). The second is to make the blocks verifying data bigger so that more information can be processed.
Difference between Bitcoin and Bitcoin Cash
To understand the difference between both blockchains, let’s have a look at some history.
In July 2017 mining pools and companies which collectively held about 90% of bitcoin’s computing power voted to incorporate “segregated witness” into the Bitcoin network. Segregated witness, aka SegWit2x, aims to solve the problem of scalability by reducing the amount of data to be verified in each block. The plan was to remove signature data from the block of data and have it attached to an extended block. Signature data accounted for about 65% of the data being processed in each block. Also, there were talks to double the size of blocks from 1mb to 2mb.
Supporters of Bitcoin Cash had a contrary opinion, for them, SegWit2x wasn’t the right solution the network needed. They felt there was a need to increase the block size. And on Aug 1, 2017, some developers initiated a hard fork which gave birth to a new currency – Bitcoin Cash. The new blockchain increased the block size from 1mb to 8mb in order to accelerate the verification of transactions.
In conclusion, while there are a lot of sentiments surrounding which blockchain is the real Bitcoin, the primary difference between both projects is how they are trying to solve the problem of scalability.