Diverging Cryptocurrencies – The future of Bitcoin Cash

Bitcoin and Bitcoin Cash are on two different paths for now. You might not expect miners to leave “cash” on the table, but according to estimates, they are leaving lots of it.

Rather than mining the original BTC blockchain and make money from it, many miners choose to earn less by directing computing power toward Bitcoin Cash (BCH or BCC), a version of blockchain created in a fork earlier this year. While many investors are dazed by the stellar performance of Bitcoin, the million rather multi-million dollar question is whether Bitcoin Cash will go down the same path.

In 2014, Bank of England (BoE) suggested the potential death of cryptocurrency in the future. Miners must compete to verify the next block of transactions and earn fees if they are successful. Their revenue depending upon their mining power, or “hash rate”. However, the problem is that with the increase in the computational power, a proportionate increase in mining revenue cannot be derived. Meaning to say, miners increasing their computing power cannot increase their revenue if all other miners too increase their computing power. In a long enough timeline, the resultant marginal revenue from increased computing power would not cover the cost of investment. Thus miners would stop working and Bitcoin would fail.

Bitcoin versus Bitcoin Cash

If BoE sounded far-fetched and a bit dismal, it’s important to take cognizance of the number of miners who have quit Bitcoin in favour of Bitcoin Cash. Also, it has been seen in the recent few years, the inability of exponential growth in computing power. This is a fundamental requirement for the BoE’s prediction to come true.

However, if BoE’s prediction does spell the end of Bitcoin, then the question is whether Bitcoin and Bitcoin Cash would differ in the interim period. Bitcoin still has the largest market share after Ethereum.

Currently, there are a few mining operations on Bitcoin Cash, the largest an unknown actor or pool of actors controlling roughly 90% of the hash power on Bitcoin Cash. Bitcoin Cash is more efficient than Bitcoin as it allows more transactions per block than the original Bitcoin.

A mix of pragmatic as well as personal reasons currently drives Bitcoin Cash. ViaBTC, the first mining pool to enable its miners to support Bitcoin Cash has called for the retrenchment of the developers behind Bitcoin Core.

With respect to mining Bitcoin Cash, it is taking longer for Bitcoin cash miners to mine blocks and coupled with the low price, 6% of Bitcoin’s price, Bitcoin Cash doesn’t seem to find too many takers. However, this creates the classic chicken and egg story which the creators of Bitcoin Cash seem to be aware of and are trying to mitigate. These changes however will take time to enact.

Eventual profit

Even if Bitcoin Cash reaches a point where it becomes as profitable or more profitable than Bitcoin, it’s unclear what will be the outcome. Scott Morgan, co-founder of bitcoin wallet Airbitz and Chief Crypto Officer of Nanome, which develops the decentralized research platform Matryx.ai, expects some miners, serving their profit motives, to move over to bitcoin cash.

The profit could be even greater seeing that miners of bitcoin cash can use older, less-expensive mining rigs. Moreover, at this point, mining pools, which provide the software for many smaller miners, could be tempted to enable the option.

China-based BTC.TOP, for example, plans to let miners in its pool mine the cryptocurrency once it becomes profitable. It is possible that even mining pools that are ideologically opposed to bitcoin cash and its scaling goals will do so for the profit.

However, we might not have to wait and see for long.