Whis is Bitcoin cash？Is it the same as just Bitcoin? And what’s the difference between the two and which is the true Bitcoin will stick around in this episode of crypto whiteboard Tuesday, we’ll answer these questions and more.
Hi, I named Martin from 99 bit coins dot. COM and welcome to crypto whiteboard Tuesday, where we take complex cryptocurrency topics, break them down and translate them into plain English before we begin. Don’t forget to subscribe to the channel and click the bell so you’ll immediately get notified when a new video comes out. Today’s topic is Bitcoin cash and also known as BEC H.
The story of Bitcoin cash goes much deeper than just the creation of another cryptocurrency it was actually one of the fiercest tests for Bitcoin is decentralization, so let’s get started. A lot of people who are just starting out with Bitcoin or cryptocurrency in general get confused when they see that there is 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 are versions that will 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, on the other hand, 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 were not agreed to by everyone. So what happened is that an alternate version of the coin or hard fork stemming from the original Bitcoin was created and new coins came into existence. If you want to complete detailed explanation about forks, make sure to watch R Bitcoin whiteboard Tuesday, fox video as well. 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 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 a part of a block of transactions on the Bitcoin ledger known as the block chain. A new block of transactions is added to the block chain 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 megabyte. When you consider the average Bitcoin transaction size, you’ll find that the block is able to hold about 2700 transactions, 2700 transactions.
Every 10 minutes means 4.6 transactions a second, and that’s not a lot visa for comparison can confirm seventeen hundred transactions per second of. 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 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 Who cut the line with their transactions.
This isn’t something you want to have happen if you’re building Bitcoin to become a global payment method. As a result of this scalability issue, Two different camps emerged.
The first camp was the big blocks camp. This camp was led by Chinese mining giant bit main and Roger via, an early Bitcoin investor who is involved with a number of start ups. When Bitcoin was just gaining initial adoption, big blockers were afraid that Bitcoin scalability issue would prevent it from becoming what satoshi nakamoto, Bitcoin inventor initially intended a peer to peer payment system.
With such long confirmation times in 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 bit coins, block size to 8 megabytes will be able to confirm as many as eight times the number of transactions per second, And this will reduce the existing congestion of the network, and in the future we’ll increase the block size as much as needed as Bitcoin achieves further adoption, opposing them was the small blocks camp.
The supporters of this camp routed for keeping the current 1 megabyte blog sites while finding solutions for optimizing transaction size and handling in order to enable scaling. One such solution was segregated witness or segment for short. Segway is an upgrade to the Bitcoin protocol, which, among other things, effectively reduces the transaction size by 75%. This means that a 1 megabyte Segway block can hold the same amount of transactions is what would be a 4 megabyte non seg wit block.
Additionally, small blockers talked about the development of the lightning network, a second layer on top of the Bitcoin protocol that allows for instant and fearless transactions. Now the lightning network is a pretty broad topic on its own, so make sure to catch our lightning network episode for a detailed explanation on how it works, but why were the small blockers against increasing the block size to begin with?
The reason is that small blockers believe that in the long run, this would hurt bit coins, decentralization and functionality. Here are some of the arguments to justify their claim. For one, an eight megabyte or even 32 megabyte block takes more time to travel through the network than a 1 megabyte block. Additionally, once the block reaches a computer on the network, that computer now needs to verify all of the transactions inside that block. If the block is too big, it might not be able to finish verifying all the transactions before the next block arise within 10 Minutes or so now.
This means that network will start lagging behind new transactions, which can create disputes about the current state of the Bitcoin ledger. On top of that, by not optimizing transactions, you’re also not optimizing the size of the block chain, which already takes up several hundred gigabytes. Forcing computers to verify oversized transactions reduces the number of computers that can store the block chain on their hard drive and therefore diminishes the network’s decentralisation.
I mean, let’s think about it for a second, If only high end.
Computers that are maintained by a handful of companies can validate transactions on the network. We’re basically taking away bit coins. Basic advantage to have a large amount of participants to make sure no one is breaking the rules. To make it simple to understand, consider this analogy. Imagine a street that is suffering from heavy traffic, while the obvious solution would be to increase the number of lanes effectively the same solution as increasing the block size.
But what would you do once the street becomes more popular and even more cars come in?
Eventually there is a limit to how many lanes you can add before running out of land to build it. On the other hand, you could reduce traffic congestion by promoting public transportation routes or car pooling. Solutions is similar to optimize in the transaction size and how transactions are handled by the network. This heated argument between the two rival camps went on for several years until it climaxed in August of 2017. Back then, Bitcoin was making its first steps For the twelve hundred dollar mark, And the network was getting pretty crowded due to an overflow of transactions.
As a result, many transactions got delayed and transaction fees skyrocketed as people were outbidding each other to cut in line and get confirmed faster. The average fee around that time was as high as 37 dollars per transaction. Now you may be wondering why nobody took action to avoid this situation well. In order to answer this question, we need to understand who Ashley decides anything on the Bitcoin network.
You say Bitcoin is decentralized, and this means there is no one person that decides anything. Participants in the network vote through their actions. Their vote is actually whatever version of the Bitcoin protocol they choose to run on their computer. There are several players in the Bitcoin network. At first, there are the miners and mining pool operators. They’re the ones in charge of creating blogs and updating the ledger of transactions.
Some would argue that they have the ultimate say, and what changes are finally accepted to the Bitcoin network will. Then we have the developers, which are a group of individuals collaborating together to maintain Bitcoin is a source code, and some believe that this group has the ultimate power, since they’re the ones writing the actual code that runs the network. We also have exchanges which are the gateways for cryptocurrency adoption, while they can decide which version of Bitcoin to list under the ticker symbol BTC, But they’re the ones who have the power of connecting people with the actual coins.
Another important group are the wallet providers, but they write software that allows users to manage their coins. Additionally, we have the nodes which are the different computers which run the Bitcoin code and makes sure no one is breaking the rules. These nodes are the backbone of the Bitcoin network, and owners of the nodes can decide to only accept transactions that support specific changes, And finally, we have the Bitcoin users who get to choose which going to buy, which exchange to use, and which wallet to download Without even knowing it they actually have the most power.
The coin that users decide to adopt will have the brighter future. A good example for the power of user adoption is the case of a theorem is hard for back in two thousand sixteen, after several million dollars were stolen from an a thorium based project called the Tao, the ethereal developers suggested rolling back the ethereal block chain and erasing the malicious transaction Will.
This treated a heated debate, at the end of which a theory mm fork into two different coins, a theory and a theory in classic. However, what’s known today as a theory is actually the alternate theory and version and not the original one. The reason that this is considered the true ethereal is because that’s the coin most of the users decided to adopt.
Miners, exchanges, wallet providers, and even developers all rely on the acceptance of the public to survive. That’s why, in the end, the users have the finals today. Now you understand why it’s so hard to get any change to the Bitcoin protocol approved.
You basically need to get all of these groups to agree throughout bit coins history. There have been several cases where such agreements were reached, but as the network grew larger, it became harder to reach a consensus going back to our story in 2017. The end result of this Mexican standoff between the two camps was that each side did what they initially intended to do, leaving it to users to decide which coin to adopt as the true Bitcoin.
On August 1st of two thousand seventeen, small blockers activated segment on the original Bitcoin protocol, while big blockers created Bitcoin cash, a Bitcoin fork with an eight megabyte block size. Initially, it was unclear which version of Bitcoin would win when winning in cryptocurrency terms means having a longer block chain or ledger of transactions.
The more miners a coin has on board means more computational power, hence a longer block chain and a more robust network. Bitcoin cash had support from mining giant bit main, and as a result, the original Bitcoin hashing power was cut nearly in half when the fork occurred. However, when the dust settled, it became clear that the original Bitcoin was still standing strong even after the fork, Since the fork Bitcoin cash has consistently maintained its space at the top of the crypto currency charts, the coin is backed mainly by Roger ver, a libertarian who allegedly owns around 100,000 bit coins, making him one of the first Bitcoin billionaires. They’re also purchased the domain name Bitcoin dot COM to promote Bitcoin cash, as opposed to Bitcoin dot org, which is the website for the original Bitcoin Bitcoin cash, is mostly similar to Bitcoin, but with some exceptions. First, its block size is bigger. When it first started out, Bitcoin cash as block size was kept at 8 megabytes. Later on, the coin went through another update and its block size limit increased to 32 megabytes.
In practice, Bitcoin cash is not as popular as Bitcoin, and its blocks rarely surpass 1 megabyte of transactions. Second, Bitcoin cash does not support segment or the lightning network, and finally Bitcoin cash adjust its mining difficulty for mining new blocks more quickly than the original Bitcoin. I won’t go into detail, but it is claimed that miners can actually manipulate this feature to create questionable advantages.
While there are additional differences between the two coins, the ones I have mentioned are the ones that are most notable. In November of 2018, Bitcoin cash went through its own hard fork, this time the two camps where the original Bitcoin cash, also known as ABC and Bitcoin SV, which stands for Soto. She’s vision Bitcoin.
Abc’s camp was led by Roger beer and bit me. The Bitcoin SV camp was led by Craig Wright, a person who previously claimed to be C toe shin Akimoto but never supplied ample proof, and Calvin Ayre, the owner of the largest Bitcoin cash mining pool coin geek. There are two main differences between the two Bitcoin cash versions.
Bitcoin ABC maintained a maximum block size of 32 megabytes, while Bitcoin SV increased its block size to 128 megabytes, with additional increases planned in future updates. Additionally, Bitcoin ABC added smart contract like functionality into its code, while Bitcoin SV chose to not accept this change.
For now, it seems that Bitcoin ABC has become more popular and is considered by most as the true Bitcoin cash. Before we conclude today’s extensive video, i’d like to leave you with some food for thought. Sometimes the obvious solution to a problem is not necessarily the best one. Low transaction fees are important to the usability of Bitcoin, but not at all costs, and a quick fix often has unforeseen consequences.
I mean, just imagine what life would be like if, instead of investing in and developing file compression technologies, we would simply have to buy additional hard drives just to save all of our uncompressed documents, photos, videos and projects to our computers. And how much longer would it take to transmit those files along the Internet to our friends, family, colleagues or clients? Keeping this in mind, it would seem as though optimizing data within small blocks while maintaining decentralization will pay off in the long run.
Adding to the block size might prove necessary, but it should be used sparingly. For now. The Bitcoin cash hard fork saga stands as a Testament to the decentralized nature of the Bitcoin network. It demonstrated how unbiased the system is and how no single party can dictate what will happen even when very powerful interest groups are involved. That’s it for today’s episode of crypto whiteboard Tuesday.
Hopefully by now you understand what Bitcoin cash is, a hard fork of Bitcoin protocol that created a new coin with a larger block size. You may still have some questions.
If so, just leave them in the comments section below. And if you’re watching this video on YouTube and enjoy what you see, don’t forget to hit the like button. Then makes sure to subscribe to the channel and click that bell so you will be notified as soon as we post a new episode. Thanks for watching me here at the whiteboard, 4 99 big coins out. COM. I am Nate Martin and i’ll see you in a bit.