Looking at the market cap, you may have noticed Bitcoin Cash among the top ten. The price and market cap of Bitcoin Cash are much lower than Bitcoin, making it a seemingly interesting investment. Is it worth investing in? Will its price rise or fall?
To clarify these points, we need to understand what is Bitcoin Cash. Bitcoin cash is a cryptocurrency that was born on July 31, 2017, following a hard fork with Bitcoin. A hard fork in IT is the moment when some developers of a project “split” from the others creating a new version of it, incompatible with the previous one. In the case of Bitcoin Cash, some developers decided to implement some updates to the Bitcoin code, thus creating a separate cryptocurrency, identical (at least at the beginning), except for some details: Bitcoin Cash.
BCH VS BSV: the reasons of 2017 hard fork
Immediately after the hard fork on 31 July 2017, a heated battle broke out between BTC and BCH to decide which of the two coins would take the place of the “old” BTC. The BCH vs BTC debate was born because of different views on how to allow the bitcoin blockchain to “scale up” and handle more transactions. It’s a crucial problem related to the possibility of a global adoption that would imply an amount of transactions that nowadays Bitcoin can’t manage. The purpose of Bitcoin Cash is to allow the bitcoin protocol to “manage” a lot of transactions by increasing the size of the “blocks” in which transactions are entered. In this respect, BCH is similar to BTC: the difference is that BCH can handle more transactions by adding more storage space in the blockchain, while BTC is trying to create new capacity on data structures parallel to the blockchain, like Lightning Network. Both cryptocurrencies are also pursuing many other different solutions.
BCH VS BTC: What are the main differences?
1) The BCH protocol allows you to “record” many more transactions on the blockchain. On the one hand, this is an advantage, making possible a more massive use of BCH (although, for the moment, BCH is less used than BTC). On the other hand, if the BCH blockchain grew too quickly (i.e., with larger blocks every 10 minutes), many users would experience difficulties in downloading the history of all transactions and especially in “synching” their nodes and continuing to download the latest transaction data. If, as a result, fewer people were to have a complete history of transactions executed, BCH could risk becoming centralized (but it’s a virtually limited risk). This risk should decrease with time, as storage devices get more efficient and cheap.
2) BCH pursues a much more “aggressive” development strategy than BTC, with a hard fork every six months. While this makes BCH much more adaptable, it also creates greater technical risks and potential tensions in the community. This is what happened in the disastrous hard fork of November 15, 2018, when BCH split into two coins and collapsed in value; to the date, BCH never recovered from that collapse and price has never risen to pre-fork levels. Indeed, on that occasion, the Australian billionaire Craigh S. Wright (a very popular figure in the BCH environment) took advantage of the hard fork to support some modification proposals (for example, to greatly increasing the maximum limit of the blocks, up to 1GB and more). There proposals were rejected by miners and many developers, leading to a very strong split within BCH and creating Bitcoin Cash SV (or BSV). The subsequent “war” between the two coins led to a collapse of the market.
The consequences of hard fork strategy
In general terms, a hard fork every 6 months means to potentially create compatibility problems for service providers in the BCH network (e.g, wallets, payment processors, and exchanges themselves who have to monitor the situation of their withdrawals/deposits). Also, hard forks are always an opportunity for market speculation, leading to higher volatility of BCH (often also in a positive way, as some users may expect to get two different coins after the hard fork).
On the other hand, however, thanks to hard forks BCH has experimented rather innovative solutions in recent years. So, we cannot exclude that in the future it will be able to obtain a real technological advantage over BTC (which anyway continues to evolve thanks to a series of significant developments, from Lightning Network to new protocols that allow having tokens also on Bitcoin).
The problem of BCH price vs Bitcoin
We have to notice that BCH has a much lower price than Bitcoin (at the moment 1 BTC is worth X BCH). As a result, there are much fewer miners: this makes a 50%+1 attack on BCH easier (someone with more than half of the computational power of all Bitcoin Cash miners may rewrite some of the old transactions). So if, for example, Alice sends 10 BCH to Bob, and the next day Mike rewrites the transaction, Mike can “take” the 10 BCHs that were originally sent to Bob. This is anyway unlikely for a currency like Bitcoin Cash, which has a lot of miners (while it’s more likely in other altcoins). But some circumstances can make it riskier: for example, during the already mentioned hard fork on November 15, 2019, Daniel Craig Wright came to some point to control most of BCH mining power, threatening to rewrite the blockchain with a 50%+1 attack. This becomes easier if price falls and then a lot of miners leave BCH, making a takeover easier.
It is quite evident that Bitcoin Cash is a project with many more unknowns than Bitcoin. Without discussing which of the two projects is technically better, Bitcoin Cash today has a lower price than Bitcoin and greater volatility: it’s, in short, riskier and has greater margins for growth.