There has been a blockchain split on august 1st which separated Bitcoin in both Bitcoin and a new cryptocurrency called Bitcoin Cash. The reason for this chain split in Bitcoin and Bitcoin cash is a disagreement about the scaling issues Bitcoin currently faces. In the beginning period of Bitcoin a block size of 1mb was set by the developer(s) to minimize the amount of spam orders. With a block size of 1mb 4.4 transactions per second are possible.

Bitcoin has gained a great lot of popularity in the past few years, this caused a big increase in the amount of transactions on the Bitcoin-network. In most cases this causes a huge backlog of unconfirmed transactions when there is a lot of volatility. Only Bitcoin transactions with a lot of miners fee will be executed in a fairly quick matter, yet transaction with very little to none miners fee will take very long to be picked up on the blockchain.

To counter this inconvenience the ”replace-by-fee-system” was developed. When a Bitcoin transaction with little to no fee is not executed in time it cannot be canceled. But it is possible to do another transaction to the same coin-address with the same amount of Bitcoin which contains enough miners fee. When this transaction is executed in a block by the miners the previous transaction will be nullified.

For miners this system is profitable but not for all people that use Bitcoin. Because it can take very long for an order to be executed if very little to none miners fee is included. A solution for this problem that was offered by a part of the community was to increase the block size of Bitcoin from 1mb to 2mb. But there wasn’t full agreement for this proposal by the entire community.

To fix the scaling issues of Bitcoin’s block size two other proposals were offered; a soft fork and a hard fork. A soft fork is backward compatible, what this means can be explained through an example; when you use the 2007 version of MS Word it is still possible to open Word files that were made with MS Word 2010. But updates in MS Word 2010 cannot be used in MS Word 2007. A hard fork is not backward compatible, this means that changes will overwrite the previous version after which the previous version cannot be used any longer. This can be seen as a new generation PC on which no CD-ROMs’ can be played, it is also not possible to play PC-games on an older generation PC. Eventually the old generation PC will lose its functionality (to play games that is) because no new games will be released for it.

The soft fork solution would be realized through Segregated Witness. Segwit offers a solution for the limited block size of 1mb by sending a part of the transaction data in a separate block. A Bitcoin-transaction consists of 3 elements; the sender details (the input), the receiver details (the output) and the digital signature. The digital signature verifies if the sender owns enough Bitcoin to fulfill a transaction. But the digital signature takes 65% of the space of the data from a Bitcoin transaction. With the limited block size of 1MB this can be seen as a large amount of data. Dr. Peter Wuille thought of a solution fort his problem on which the sender and receiver details are sent in the ”main block” and the digital signatures are sent in the ”extended block”. The developers have implemented a function that the Segwit soft fork needs at least 95% approval by the users to be implemented. A part of the miners did not agree with the implementation of Segwit because they feared a great reduction of the miners fee.

Eventually the idea was made of a user activated soft fork called BIP 148. BIP stands for Bitcoin Improvement Proposals and is a document with proposals that are made to realize an improvement of the Bitcoin Network. BIP 148 is a soft fork that would repel all blocks without Segwit. If more than 51% of all miners chose the BIP 148 side there will be a split of the original blockchain of Bitcoin.

A large part of the Bitcoin community had its doubts about BIP 148. They feared that the chain split would also bring in problems. This resulted in a contingency plan proposed by the mining company Bitmain. They proposed a hard fork into a whole new form of Bitcoin called Bitcoin Cash on which larger blocks could be mined. All miners that had their doubts about BIP 148 could choose to mine Bitcoin Cash blocks instead.

BIP 148 was implemented on august 1st 2017, because a small amount of the miners decided to mine Bitcoin Cash blocks a blockchain split took place on which both Bitcoin was mined with Segwit implemented and Bitcoin Cash was mined. Everyone that owned Bitcoin before august 1st would have both 1 Bitcoin and 1 Bitcoin cash if they owned their private key or if their exchange/wallet supported Bitcoin Cash.

Bitcoin Cash has a couple of significant differences with Bitcoin; first of all the block size of Bitcoin Cash is 8mb instead of 1mb, Bitcoin Cash has no Segwit implemented, Bitcoin Cash doesn’t support the ”replace-by-fee-system”, Bitcoin Cash has a different rewarding system for miners and Bitcoin Cash has replay and wipeout protection. Replay and wipeout protection with Bitcoin Cash protects a user against ”replay attacks”. This means that someone who sends Bitcoin Cash doesn’t have the risk of accidently sending Bitcoin as well. This was an issue that occurred after the fork because someone with Bitcoin on his private key both had access to 1 Bitcoin and 1 Bitcoin Cash. The rewarding system of miners from Bitcoin Cash differs with the one that Bitcoin has by their MTP-system. MTP stands for Medium Past Time; when the median time of the past 6 mined blocks is higher than 12 hours the difficulty will be decreased with 20%. So it will be 20% more easy to mine new blocks. When there are less miners the difficulty rate will be lowered, because mining blocks will then take longer. The MTP-system attracts new miners to mine Bitcoin Cash by adjusting the difficulty rate when there is little mining support.

Bitcoin Cash has a market cap of 21 million and is currently supported by the following wallets; Bitcoin ABC, Bitcoin Classic, Bitcoin Unlimited, Ledger, Trezor, Electron Cash and The current amount of circulating Bitcoin Cash is 16,750,413 BCH (on 30-10-17). Further it is important to make sure that you don’t send Bitcoin Cash to a regular Bitcoin address and vice versa. Bitcoin and Bitcoin Cash have the same private key, but they are two totally different cryptocurrencies. Luckily most of the times it is still possible to export your Bitcoin Cash to another wallet by exporting the private key when you’ve accidently sent Bitcoin Cash to a wallet that only supports Bitcoin.

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