As more people around me getting into the crypto craze, one question that I have been getting a lot is: What is Bitcoin Cash? And how is it different from Bitcoin?

To explain this difference, it would first be helpful to learn about forks in the blockchain. In this video, I explain what a fork is, what it does to a blockchain, and how that impacts the development of the blockchain system.

Basically, a fork is when a blockchain splits into 2 different versions. Remember that a blockchain is essentially a software chain of different blocks that contain certain data and transactions. So, a “fork” is a change to this software; and it creates two separate versions of the blockchain with a shared history.

Why do forks happen in the first place?

One of the foundational characteristics of a blockchain is the consensus mechanism—meaning that the majority of the participants must agree – or be in consensus—about any rules, and any changes that are to be made to the protocol or program. Obviously, that does not always happen.

If you have ever worked on a group project, you know that people have different ideas and different visions of where they want a project to go, and how to get there. Usually, the majority will agree, and the group will head towards a certain direction. The less popular idea is then abandoned. Or let’s think about when there are two founders of a company, and they start to have really different ideas of where the company should go, and sometimes, when they can’t reach an agreement, one of the founders will leave and go do their own thing.

Now let’s apply this back to blockchain. Currently, most of the well-known blockchain protocols are all open source. “Open source” usually means that the source code is freely open and available to anyone who wants to access it. Having access to the source code means that anyone can take that code and modify it however they want to in order to add features or change the way it works.

There are two types of forking—there is a “hard fork”. Which are changes that are not backward compatible with previous rules. This creates two separate and competing blockchains. Then there is a soft fork, which are changes that are backwards compatible with previous rules, which means that the old version will still remain part of the same network as the upgraded or changed version. To illustrate this better, let’s think of this. Let’s say Destiny’s Child is basically like the blockchain with the old rules. You had Beyonce, Kelly Rowland, and Michelle Williams, and they each got a part in a song. Now Beyonce wants to go solo and do her Sasha Fierce thing and she doens’t think that Destiny’ Child isn’t super on-brand for her anymore. So Beyonce splits from the group—in a hardfork. And let’s say Michelle and Kelly remain as Destiny’s Child. Now, they all have a shared history with songs like Say My Name or Solider, but from here on out, they have become two competing groups. Single Ladies or Crazy in Love have nothing to do with Michelle and Kelly anymore.

Back to the original question. What is the difference between bitcoin and bitcoin cash? Obviously, I am simplifying the debate a lot here, but for our understanding, here’s a basic rundown. The bitcoin blockchain as most of us are familiar with— the one that Satoshi Nakamoto created— fits its transactions all into a block that has a size of 1 megabyte.

Remember that a block is a group of transactions that are bundled up and then validated onto the blockchain. So, with a 1MB block size limit, the Bitcoin blockchain was handling about 7 transactions per second. Here is where some people had a problem. An increase in usage on the bitcoin blockchain meant that transactions took longer to get onto a block. Also, in order to get your transactions onto a block faster, that meant paying higher transaction fees to the miner. But not everyone wanted the upgrade. So a group of participants hard forked the bitcoin blockchain on August 1, 2017, and create Bitcoin Cash. Primarily, Bitcoin cash focused on increasing the block size from 1MB to 8MB.

Interestingly, according to the Bitcoin Cash website, Bitcoin Cash actually has the same exact definition of Bitcoin—this is not surprising, because Bitcoin Cash is a hard fork of Bitcoin. As a side note, Bitcoin Cash is not the only fork of the original bitcoin blockchain. There are a number of others, like Bitcoin Gold, which forked in October of 2017.

What are the implications of forking for blockchain development?

The importance of forking as a feature is best summed up by Fred Ehsam, the former co-founder of Coinbase:

“Forking is a …critical evolutionary mechanism for blockchains. Just like mutations to DNA in biological organisms allow for evolution through natural selection, forking lets us run multiple experiments in parallel where the strongest versions survive.

Unlike Web 2.0 companies [Google, Facebook, Twitter, etc], forking a blockchain is possible because the current code and state of a blockchain can be freely copied. It is the equivalent of any developer being able to make a copy of Facebook’s code and spin up a competing version at any time — something a Web 2.0 company would never allow.”

Basically, forking will allow for the evolution of a stronger blockchain ecosystem. In the end, it is the Beyonce of the blockchain forks that will win out.

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All opinions published on this blog are my own and do not reflect the opinions of any institutions that I am affiliated with in any capacity. None of this should be taken as legal or financial advice. If you are interested in investing in cryptocurrency, please do your research thoroughly.

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