Author: Chris Hoffman / Source: howtogeek.com
Despite their names, Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, Bitcoin Private, and others are the same thing as Bitcoin. They’re based on Bitcoin, and are piggybacking on its name, but they’re different things. Here’s how to know which Bitcoin variant is which.
Bitcoin is a decentralized cryptocurrency based on open source code. Anyone can take the code, modify it, and release their own version. That’s exactly how these other coins were created.
What is a “Hard Fork” of Bitcoin?
In computer software, a “fork” occurs when developers take existing code, modify it, and then use it as the basis for their own project. That’s exactly what other projects with names like Bitcoin Cash (BCH) and Bitcoin Gold (BTG) are. The developers took the main Bitcoin (BTC) code, known as “Bitcoin Core,” and modified it.
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They also chose to fork the Bitcoin blockchain, copying its transaction history and using it as the basis for their own blockchain. In other words, if you owned 10 Bitcoin at the time Bitcoin Cash was released, you’d end up with 10 Bitcoin and 10 Bitcoin Cash. However, that’s a one-way, one-time event. You can’t convert any Bitcoin Cash you own back to Bitcoin—not without selling your Bitcoin Cash at the market rate and then buying Bitcoin at its market rate. And, if you buy Bitcoin after the fork, you don’t get any free Bitcoin Cash.
Coins like Bitcoin Cash and Bitcoin Gold are known as “hard forks” because they create a permanent split in the block chain, as opposed to “soft forks” that only create a temporary split.
People often disagree on the design decisions made in the Bitcoin project, and these hard forks allow developers who disagree to modify Bitcoin in their preferred ways. They can bypass the usual process of gaining consensus in Bitcoin Core and implement their own ideas. These Bitcoin forks are altcoins—that is, non-Bitcoin cryptocurrencies—based on the Bitcoin code.
Critics argue that these coins are piggybacking on Bitcoin’s name and that many are launched just to make a nice profit for the developers and early adopters. Supporters argue that they can improve on Bitcoin’s weaknesses.
What Makes These Forks Have Any Value?
Like Bitcoin itself, these forks have value (or no value) based entirely on perception—they are worth however much people value them. Some Bitcoin purists believe that these forks have no value and are a distraction from Bitcoin, just as they believe altcoins are largely pointless. Other people believe that Bitcoin has too many problems and that these Bitcoin forks could be the future, just as some people believe that one or more altcoins will supplant Bitcoin as the premier cryptocurrency in the future.
In the end, Bitcoin and all its forks are priced by the market—in other words, what people are willing to pay for them. You can see how valuable people think these coins are at the moment by looking at a website like Coinranking.com.
Bitcoin Cash (BCH)
Bitcoin Cash was designed for low fees and quick transaction times. The name pitches it as a sort of “electronic cash” thanks to these features. Bitcoin Cash embraces a larger block size, which means the network can…
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