When it comes to the world of cryptocurrencies, unless you happen to be somewhat of an expert in the field, you would be forgiven for being slightly bemused at the language being used and types of currency on offer these days.
At one point in recent history, it seemed that Bitcoin was the only cryptocurrency on the market and popular wallets such as Bitamp anonymous bitcoin wallet were preferred by miners as they try to get their hands on bitcoins. Whilst that currency has since been joined by the likes of Ethereum and Ripple to name but a few, it was easy enough to decipher that these were indeed different cryptocurrencies. Fast forward a few years, and the cryptocurrency landscape looks very different, and confusingly includes variants such as Bitcoin Cash and Bitcoin Gold. What exactly are these new cryptocurrencies, and how do they differ from Bitcoin itself?
Firstly, we need to start with the original Bitcoin. Since 2009 when it first appeared on the scene, Bitcoin was lauded as a view into the future of currency, and a brand-new way to trade that relied on a digital ledger known as a blockchain. This shook the industry to the core and gave Bitcoin the label of being a ‘disruptive technology. The reason for this is that blockchain can digitize and decentralize the validation of monetary transactions.
Banks (who have been the gatekeepers to this particular area of business since time immemorial), have obviously been slow on the uptake of cryptocurrencies, but in the online world of stock, share, and currency trading, you can now find plenty of apps that have taken the plunge, and allow the trading of Bitcoin and other cryptocurrencies alongside the more traditional well-known currencies. The reason they have become so popular is mainly that the volatility associated with crypto means that trading it can be extremely lucrative when done correctly.
The main issue with Bitcoin has always been the time it takes to complete a transaction. With the maximum transactions per second that the Bitcoin network can process being 7, it is easy to see why people raise a quizzical eye when they hear it being held aloft as an answer to business transactions in the digital age.
As the Bitcoin network grows, the time taken for these transactions to take place increases, which means that Bitcoin could end up being a victim of its own success. Because of this, scalability, in the world of Bitcoin is a sore subject. While some changes have been made to how bitcoin transactions take place (namely the incorporation of a technology known as SegWit2x), namely the doubling of the block size within the blockchain from 1MB to 2MB, many believe this might not be enough to completely fix the scalability problem.
Enter, Bitcoin Cash (BCH). Originally started by Bitcoin miners and developers who shared a concern about the future of Bitcoin, this ‘hard fork’ away from Bitcoin itself increased the block size to 8MB, and allowed for adjustable levels of complexity for smaller transactions, meaning that transaction times are much quicker, while also addressing the scalability issue that Bitcoin is privy to.
It isn’t all good news though, as some crypto experts will point to Bitcoin Cash as being an inherently less secure network than Bitcoin, mainly due to the speed at which transactions can be processed. Bitcoin Cash, therefore, is a currency to keep an eye on, but equally is still living in the shadow of its big brother, Bitcoin, as real-world uptake is still far smaller.
The inception of Bitcoin Gold is another interesting fork away from Bitcoin. Rather than simply looking to speed up transaction time, Bitcoin Gold had a different intention, that being to democratize the mining process. Bitcoin mining is a notoriously resource-intensive pursuit. So much so, that the majority is now done by ventures that can afford to buy huge mining rigs full of specialized equipment.
This wasn’t always the case, as back at the beginning of the Bitcoin story, you could often hear of individuals dabbling in a little Bitcoin mining and being profitable in the process. Bitcoin Gold is a fork of Bitcoin that changes the algorithm of the mining process itself, to level the playing field. In the most basic terms, this means that specialized equipment would not mine the currency any faster than standard computer systems, thus releasing the stranglehold that some large organizations have on the Bitcoin mining industry.
Which variant of Bitcoin succeeds, in the long run, is difficult to say, as each has its own merits and drawbacks. One thing is for certain, however, and that is that the Bitcoin name, in whichever fork you happen to invest, still holds weight in the cryptocurrency world. As such, Bitcoin, Bitcoin Gold, and Bitcoin Cash are all worth keeping an eye on if you are a keen crypto investor, as well as any new Bitcoin fork that appears (and they most certainly will) in the coming years.