The Scaling Debate

The scaling debate has been going on for a long time. Many different upgrades like Bitcoin Unlimited, Bitcoin XT, Bitcoin Classic etc have been proposed to solve the scaling issues. Everything boils down to these two concepts: on-chain and off-chain scaling.

On-chain ideology — All transactions need to happen on the blockchain; increase the block size as the demand increases.

Off-chain ideology — Not all transactions need to happen on the blockchain as doing that is a waste of useful resources. Create efficient solutions to do everyday low-value transactions outside the bitcoin blockchain.

On and Off Blockchain Transactions

The proponents of on-chain scaling wanted that developers of Bitcoin Core (the most popular reference implementation of bitcoin) increase the block size limit anywhere from 2MB to 8MB so that more transactions can be added into a block which could help lower down the fees and confirmation times.

People supporting off-chain scaling wanted segwit support (segwit removes signature data and attaches it in an extended block allowing more space for actual transactions) to be added to Bitcoin which would increase the blocksize to some extent but also help in developing layer two solutions to make bitcoin transactions much faster, cheaper and private.

Increasing bitcoin’s blocksize would need a hard fork to be done which could have negative consequences if not done right. They believe at this scale it was very risky for such a backward incompatible fork as after it, everyone including miners and nodes would need to update their software and if anything goes wrong it could create multiple chain splits which could affect bitcoin’s image to a very large extent.

Bitcoin vs Bitcoin Cash

Even though BTC and BCH share the same history, there are some changes that you need to be aware of:

Block Size

BTC: 1MB + Segwit (can reach upto 2MB with more adoption)

BCH: 8MB (current default)

Segwit Support

BTC: Yes

BCH: No

Other changes include:

New Transaction Signatures — A new SigHash type provides replay protection, improved hardware wallet security, and elimination of the quadratic hashing problem.

New Difficulty Adjustment Algorithm (DAA) — Responsive proof-of-work difficulty adjustment allows miners to migrate from the legacy bitcoin chain as desired, while providing protection against hashrate fluctuations.

New CashAddr format — CashAddr is a new bitcoin cash address format. A new encoding for being visibly different from a bitcoin address. The prefix “bitcoincash:” is added before the address.

Future

It is unclear what the future holds for Bitcoin Cash. It currently, at the time of writing this, trades at 1/6th the price of bitcoin. You can find the roadmap here. This is the official site and this is where you’ll find important announcements from the main bitcoin cash implementation.

Will it become the dominant currency and take the No 1 spot in terms of price and market cap? Will it become as popular as bitcoin and be used for everyday transactions fulfilling the promise of “peer-to-peer digital cash”? Our guess is as good as yours. Share your thoughts on bitcoin cash and let us know if you think bitcoin cash will be able to dethrone bitcoin.

To start trading — Download Zebpay app to buy, sell and trade bitcoin cash (BCH) in India. Available for Android and iOS devices.

Disclaimer- Trading in cryptocurrencies is subject to market, technical and legal risks. Prices in India vary from International prices due to local demand and supply. Zebpay doesn’t guarantee any returns. Users use Zebpay at their own risk.