What is better than one group of people working on a project? Two groups of people working on a project assuming of course they are cooperating and not just attacking each other.
Bitcoin Cash is just like this, a team of people took an existing open source project, said fork it, and went their own way. Here are 5 problems with Bitcoin Cash.
1. Number of transactions
Bitcoin Cash was created to solve the transaction scaling problem but the irony is that Bitcoin Cash does not have the transaction to even have a problem.
It’s a bit like seeing one highway having congestion problems so you clone the highway and make it 8x more lanes only to realize that is your clone world you have 25x less population and definitely don’t need a highway with 8x more lanes.
Having said that if for whatever reason people didn’t like paying the highway charge they could start using your new highway assuming the destination was close enough.
2. Transaction spam
Take a look at this chart:
It shows what percentage of the mining reward comes from transaction fees. As you can see Bitcoin has gone from rarely breaking over 10% to hitting 40% in less than a month.
Why is this? It is all to do with scale and the problems that you run into at scale.
There is a hard limit coded in for each block with the expressed purpose of reducing spam transaction. Basically when transactions are free or close to free hackers will abuse this by making lots of fake transactions making volume look big, maybe try and hide the origin of their coins by spinning them through many different transactions, etc etc. This is the biggest difference between Bitcoin and Bitcoin Cash. Bitcoin block size is 1mb and when that was running out they removed signatures and added SegWit. Well the people at Bitcoin Cash didn’t like this idea very much and they instead didn’t add SegWit and simply increased the block size to 8mb. This results in Bitcoin Cash having far cheaper transaction fees combined with the fact that they don’t process nearly the same number of transactions as Bitcoin.
Bitcoin is about to launch their lightning network to solve these problems.
3. Always second to Bitcoin
When you bootstrap your project using the name of something else there is the built in presupposition that it is inferior or niche. There is the possibility that exchanges will start referring to Bitcoin Cash if the market cap goes over that of Bitcoin but if will be met with resistance from many factions.
4. Hard forks are about to get more popular
The moment people realize they have the opportunity to hard for bitcoin and get enough community and mining support you are going to see multiple hard fork launches a month. The business model is simple, fork Bitcoin, drop the difficulty, mine all the blocks yourself to “pay developers” ie. yourself, air drop, bro down.
This is not a bad thing because those holding Bitcoin share in the new currency but Bitcoin Cash will have to work harder to stay relevant once is loses is monopoly on hard forks. They are just lucky that the Bitcoin2x and Bitcoin Gold launches failed.
5. Bigger blocks equals more centralization
You might be thinking wtf is centralization and why do I care. It is when fewer people control more, in the case of Bitcoin it is when fewer mining pools are mining most of the blocks because they are bigger. It’s a bit like if you needed a hole dug in your backyard, there are millions of people that can do that job within a time limit, increase the job to digging a lake or the grand canyon and far fewer people are even capable of doing this job.
Bitcoin cash increases their blocksize to as much as 8mb with the plan of just increasing it even more if they max that out where as the more valuable Bitcoin has a fixed max block size of 1mb meaning that if you want to ensure your transaction is processed at a fast speed you need to pay a higher fee otherwise you might not get a slot and skip getting your transaction added to the block chain at all.
Basically if you make a huge block size the number of people who can participate goes down and the risks of the entire coin go up.
Again this is where Bitcoin’s lightning network is designed to help but until it goes live Bitcoin will continue to struggle with its scaling crisis.