The transaction fees on the Bitcoin Network are rising to huge amounts – 10€ for a basic transaction – and its competitor, Bitcoin Cash, is doing really well. In the last week, Bitcoin Cash’s price tripled, you can view the graph here. However, I’d like to tell you why Bitcoin Cash won’t last for long.
We explained some terms here, so you can understand this article even if you’re not a Bitcoin expert.
What’s Bitcoin Cash?
Bitcoin Cash is a variation of the Bitcoin. It was created with a hard fork when the Bitcoin community wouldn’t agree on a solution to the scaling problem. The Bitcoin (BTC) has a block size of 1 MB, whereas Bitcoin Cash (BCC) has 8 MB.
What’s a hard fork?
A hard fork is a copy of the blockchain, that will be continued in a different way. As an example, Ethereum was hard forked. They made a copy of their blockchain and started over just before the DAO Hack, effectively undoing all the damage.
What scaling issue?
In its current state, the Bitcoin network can only handle approximately 3 transactions per second, whereas companies like Visa can process 1000 per second. This limit of 3 transactions is created by the block size. A block is 1 MB big and is created every 10 minutes. A simple transaction has a median size of 226 bytes, which means that there could only be 4424 transactions per 10 minutes or 7.38 transactions per second. However, this speed was calculated using simple transactions, which only consist of 2 recipients – the person you want to send money to and your return address.
If you’re interested in how many transactions Bitcoin Cash can handle per second, have a look at this article: How many transactions per second can Bitcoin Cash handle?
So, what is the problem?
At the moment, the block size is locked to 1 Megabyte and there is much controversy regarding its solutions.
One of these solutions is Bitcoin Cash, a hard fork of the Bitcoin with a block size of 8 Megabytes. Some might call this a solution but in my opinion, it’s just a delay.
Increasing the block size allows ~60 basic transactions per second and that’s about it. The blockchain will grow 8x faster in size and the BTC’s is already huge – 141 GB. Currently, the BCC blockchain is growing slower due to fewer users, but would you like to store a blockchain that can grow up to 1.1GB per day?
Currently, it’s value is rising because of the Segwit controversy and the Bitcoin’s price. Users are panicking and seeking desperately for an alternative. They believe that BCC has solved BTC’s scalability issue but forget that BCC is creating a whole new problem. Instead of increasing block size, they should aim to reduce the transaction size. If you’re interested in this, have a look at the Lightning Network.
As I state in most of my articles, the price of a coin does not determine its actual value. BCC is doing really well right now but it doesn’t have a future. Bitcoin Cash will have many problems in a few months from now when its blockchain is bigger than most hard drives and users hit the limit of 60 transactions per second.