Bitcoin has grabbed the attention of the public in the last twelve months. It seems that every week there is a new story relating to the world’s premier decentralized currency. First there were endless articles about new all-time highs in the Bitcoin price, along with central bankers, terrified about the implications of a currency they have no control over taking off, declaring it as a “fraud” and a dangerous investment. Then came the recent price correction and suddenly the media were full of stories about the end of Bitcoin. The price isn’t important, however. It’s a revolutionary technology, and it takes time for people to come to terms with that. With increased acceptance, the volatility will reduce. Remember the early days of the internet? Those who were opposed to the technology repeatedly stated that it was only fit to serve the needs of criminals. Probably sounds familiar, right?

Bitcoin: Obstacles to Overcome

There are however several obstacles that Bitcoin (or any other cryptocurrency for that matter) needs to overcome to get the mainstream acceptance to fully transform society and finance in the way it can do. The main one is scalability.

All blockchains suffer from the issue of scalability. The fact is that the underlying technology – the blockchain – can store data in each of its blocks. Once the network gets so popular that the blocks end up full, users are incentivised to set higher transaction fees to get their transactions included on the network. This issue has afflicted Bitcoin in the past. At one point, fees ended up so high that the network was barely usable for payments of any kind. There are many who feel that this is a problem.

Various efforts were proposed to scale Bitcoin. The two most popular are Segregated Witness (a method of storing some transaction data off the blockchain and thus freeing up space in each block) and simply increasing the block size. During the summer of 2017, both techniques were deployed. This resulted in two versions of Bitcoin: the version with SegWit (BTC) and the version with larger blocks (Bitcoin Cash, or BCH).

This split in the network also split the community. The big blockers followed Bitcoin Cash’s biggest proponent, Roger Ver. Meanwhile, those who favoured SegWit and the additional second layer possibilities that came with it stayed with the Core team.

Can Bitcoin Cash Really Beat Bitcoin?

Bitcoin Cash promised faster, cheaper, and more reliable transactions. It succeeds with two out of three of these promises, for now. However, if it was to experience the kind of global demand that any cryptocurrency advocate hopes to see for their chosen coin, it would also grind to a halt like Bitcoin did earlier in 2017. The fees would skyrocket, and additional scaling would be needed. Roger Ver and proponents of BCH would then argue that an additional block size increase would be necessary, and this would likely succeed in temporarily creating fast and cheap transactions once again.

The issue here is reliability and security. Bitcoin is supposed to be truly decentralized. It relies on many computer systems around the world “mining” and validating the network. These miners and nodes validate transactions and do the job of securing the network. The more participants there are, the more secure the network is.

The problem with Bitcoin Cash’s approach is that it promotes greater centralization. As the size of the blocks increases, so do the storage demands for computers wishing to run their own node and validate transactions themselves. At present, most modern computer systems have the necessary storage space required to store the Bitcoin blockchain. This is because the blocks remain small. However, if a blockchain has larger blocks, the space required to store the entire blockchain increases. Computer storage isn’t cheap. Eventually, at global scale, there would be very few users who could afford the huge amount of storage space required to run a full node. This would result in fewer computers validating transactions and thus, a less secure network.

A recent study by Microsoft supports this idea. They instead propose “Layer 2 protocols” (like Segregated Witness) to achieve global scale whilst preserving the properties of decentralization that makes Bitcoin attractive in the first place.

Bitcoin (BTC) Scaling is Finally Proving Itself

Whilst Bitcoin Cash undoubtedly has cheaper fees and faster transactions, it is already much more centralized than BTC. This is because there are considerably fewer network participants (miners and those running full nodes). If a plan of BCH becoming a globally used currency comes to fruition, additional on-chain scaling would eventually be required on the BCH network, and thus the number of nodes securing the network will only decrease.

Meanwhile, the original Bitcoin is proving that scaling is possible using second layer protocols. The announcements from large industry players that they are integrating full SegWit support have accompanied a general falling of fees on the network. At present (February 27, 2018), the transactions fees on the BTC network are the lowest they’ve ever been. Whilst this still makes the network more expensive to transact on than Bitcoin Cash.

Certainly, there are both proponents and opponents to each of these coins. We live in a consumer society where everyone is entitled to their own opinion and choice. The multiplicity of cryptocurrencies present at the market makes it possible for investors to go with a coin that best corresponds with their needs and purposes – security, anonymity, everyday use, store of value… As long as the market expands and evolves, the competition among cryptocurrencies will be stiffer, which will motivate more people to wonder, who will be the eventual winner.