Learn Cryptocurrency
6 Dec 2021

What is Bitcoin Cash, and How is it Relevant to Crypto-Space in Years to Come? A Complete Guide

Ananda Banerjee

Dear God, yet another Bitcoin! Well, if this is your initial expression towards Bitcoin Cash, you aren’t alone. 

Yet, unlike other Bitcoin derivatives like WBTC (Wrapped Bitcoin) and tBTC (More like Tethered Bitcoin), where token values are still pegged to Bitcoin’s original price, Bitcoin Cash or BCH is a completely different entity altogether.

Fun Fact: WBTC and tBTC are tokenized Bitcoins used for exploring the Blockchain capabilities of the Ethereum ecosystem without compromising on BTC’s liquidity and value.

Moving on, Bitcoin Cash, in principle, is simply a protocol deviation from the original Bitcoin. But then, in the crypto-world, when does a mere protocol change get accepted as a new standard? This is what triggered the creation of Bitcoin Cash – a more affordable and scalable version of the original Bitcoin Blockchain.

But it cannot be this simple, can it? Not by a long shot as Bitcoin Cash is a philosophical and ideological divide that has developed into a forked Blockchain network. And yes, it is filled with promise.

Important: A forked blockchain network is a new protocol with a change in source code. It can be further segregated into a soft fork where the new modification is compatible with the original blockchain and a hard fork where the change assumes a different network and pathway. 

Well, if you are new to the crypto-space and find the discussion a tad overwhelming, read along to understand Bitcoin Cash or BCH at a basic level.

What is Bitcoin Cash?

Let’s start with an analogy!

Imagine you have a lot of clothes at home, and you want to store them in a wardrobe. You can either stack all the clothes in a single wardrobe by cramming them all at once or add new wardrobes to your home. The first approach doesn’t require a change to the existing setup but ends up wrangling the creases and increasing the time needed to identify the clothes.

The second approach, i.e. adding new wardrobes, ensures timeliness and keeps the sequencing tidier and more organized. 

The second approach to stack clothes in larger spaces is synonymous with Bitcoin Cash. 

Bitcoin, or BTC, despite being the most popular crypto player, takes about 10 minutes to authenticate transactions, which are parts of the 1MB Bitcoin Block. Assuming that each transaction takes up 370kb, the 10-minute limit extends up to 2700 transactions, which then comes down to 4.6 transactions per second.

Benefits of Bitcoin Cash

Important: The concept of authentication in the blockchain is more like waiting in a queue for a bus. Once the conductor verifies the ticket, you can board the bus, similar to how the transaction can enter the block, only if it has been signed using a secure private key. But only when the bus or block reaches the limit, it move out and is followed by yet another bus. Blockchains with bigger block sizes, therefore, have the transactions authenticated faster. 

Well, that is excruciatingly slow and defeats Satoshi’s vision of deploying BTC for P2P transactions. However, not every individual backing Bitcoin was on board with the 1MB block size and subsequent slower transaction times. This is why a specific group proposed an 8MB block size for Bitcoin to speed up transactions and reduce costs. But then, the proposal met a lot of resistance from another group of Bitcoin evangelists. 

Fact Check: Each block concerning the decentralized ledger in Bitcoin has a block size of 1MB, which for Bitcoin Cash was conceptualized at 8MB to start with.

Later, they suggested a compression algorithm called SegWit to keep working with the existing 1MB blockchain. After a tiring Mexican standoff or rather an inconclusive tussle between the groups, the group advocating larger block sizes hard-forked out of the Bitcoin blockchain to form Bitcoin Cash, with BCH being the transactional coin in place.

How Does BCH Work?

With improved transaction speed being the underlying principle of Bitcoin Cash, it is more of a utilitarian crypto-player that focuses more on being spent than being held. BCH focuses on bigger blocks than BTC, which make the transactions move faster and get accepted almost instantaneously.

Bitcoin, as mentioned, faced issues related to scalability as 10 minutes is a long time to wait for transactions to get accepted into the ledger. BCH solves this issue of scalability by packing 8MB of transactional data in a single block (now 32MB), thereby supporting close to 116 transactions each second. 

Roger Ver, the Bitcoin Cash founder and proponent, also believed that with a reduction in transaction time, there wouldn’t be any need to skip the queue and pay exorbitant transaction fees, as was the case with Bitcoin transactions.

Simply put, Bitcoin Cash works by not being a ‘Store of Value’ but by focusing on the ‘Grab-and-Go’ concept associated with the retail industry. As a matter of fact, BCH might just evolve into something like PayPal 2.0. Well, fingers crossed.

History of BCH

Launched way back in 2017, Bitcoin Cash was a hard fork of the original BTC and users holding Bitcoin were rewarded with an equivalent BCH amount. Coming to the historical paradigm, BCH was a term proposed by the Roger Ver-led group of Big Blockers who were distraught by the higher transactional prices to speed up transactions, which even went up to $37 in some cases. 

While the other BTC-adhering, small blocker group proposed the SegWit algorithm to compress the blocks and accommodate more transactions, the process needed to get rid of the signature data, thereby defeating the purpose of transparency.

However, in the end, the two groups decided to part ways with the Big Blockers moving outwards with Bitcoin Cash.

But that was far from what BCH was supposed to evolve into. Coincidentally, BCH experienced a hard fork itself and was segregated into BCH ABC and BCH SV, with the latter taking the block size up to 128MB but without incorporating Smart Contracts.  

How to Mine BCH?

As a Bitcoin Cash miner, you need to understand the ecosystem and the ‘difficulty adjustment’ algorithm better. Miners relevant to the BCH blockchain are needed to solve intricate mathematical problems, present the Proof-of-Work, and in the process verify the transaction. Once the transaction is verified, miners receive their fee. Also, if a complete block is mined, the miner can earn Bitcoin Cash valued at 6.5 BCH. 

Also, the DAA or (Difficulty Adjustment Algorithm) for BCH varies after each block and mining. Therefore, it requires a high-end mining rig with powerful computing resources as only the miner who solves the problem first gets to validate the transaction and receives the reward. 

How does BCH differ from BTC?

Well, Bitcoin and Bitcoin Cash, as mentioned, differ on a philosophical level. But if you are more interested in delving deeper into the disparities, here are the differentiating factors. Before that check, the BTC to INR converts rate. 

Transaction Speed and Costs 

BCH is way faster when it comes to confirming transactions. Plus, as the network size isn’t even close to that of Bitcoin, the ecosystem hasn’t had to experience slowdowns as there is ample space for everybody to get the transactions verified. Also, as there isn’t a queue system as of yet, the transaction fees are way lower than that levied by the BTC Blockchain. 

Hash Rate

When it comes to evaluating the power contributed by the miners to the network for verifying transactions, the Hash Rate comes forth as an important metric. For Bitcoin, it is 164.73M TH/S, whereas for BHC, it is close to 1.29 EH/s, as measured on the 7th of November, 2021. 

Algorithm

BCH deploys a separate hash algorithm to mitigate threats related to transaction replay. This feature takes care of the double-spending issues and kicks it in the crib.  

Liquidity

As far as the pricing is concerned, Bitcoin is quite hard to beat. However, a good counter would be the fact that the Bitcoin Cash network is still in its infancy and has a lot of legroom to grow.l 

Smart Contracts

Bitcoin smart contracts are strictly basic and do not lend support to complex transactions. For BCH, though, the smart contracts are completely stateless and support the independent execution of clauses. Plus, the transactions run on Bitcoin Script as the VM (Virtual Machine) and offer exceptional levels of abstraction. 

To simplify, the Smart Contract ecosystem is growing on the BCH blockchain and might soon pave the way for Defi applications. 

Bitcoin Cash Wallet

The best Bitcoin Cash wallet is the one that offers a great interface, secure key storing mechanism, and secure access to the funds and coins. If you are into specifics, the Bread Wallet seems like a pretty good choice, as it even covers the ERC20 tokens for you, in case you feel like delving into different spaces. 

Bitcoin Cash Future

Despite being faster than BTC and also more affordable when it comes to transaction fees, BCH has had a bumpy ride for the past few years. However, as and when the network grows, we can expect it to gain steam, something similar to what happened immediately after its launch. 

Also, some BTC preachers still believe that Bitcoin Cash, in its quest to keep scalability intact and costs lower, seems to be compromising decentralization as the bigger 32MB blocks might not allow every user to mine. But then, against this thought, several retailers and service providers like GoCoin and BitPay have already opened doors for payments made using BCH.

Therefore, it wouldn’t be wrong to state that even though BCH can be traded and invested in, the future will see it as the truest P2P transaction method and sound money reserves, something that Satoshi envisioned during Bitcoin’s inception. Also, BCH has its eyes on capturing the DeFi space as well. 

Benefits of Bitcoin Cash

Bitcoin Cash aims at moving beyond the ‘Digital Gold’ narrative by offering the following benefits:

  • Lower transaction costs
  • Fast transaction verification
  • Higher Tx/sec limit
  • Technical similarities with Bitcoin
  • Support for smart contracts
  • More like an electronic payment system
  • Secure against double-spending

How to Invest in Bitcoin Cash in India?

Liking Bitcoin Cash already? Well, you can now trade or buy Bitcoin Cash by heading over to CoinSwitch Kuber and starting your crypto journey for as low as Rs.100. And yes, Bitcoin Cash is trading at surprisingly lower levels and at CoinSwitch Kuber, we shall keep bringing the right investment opportunities for you, as recommendations, by studying every aspect of Bitcoin Cash in detail.

Conclusion

To be honest, Bitcoin Cash is as impressive as a Bitcoin fork could get. Larger blocks, dirt-cheap transaction fees, and a pretty loyal user base! Right now, it is picking up all the right vibes and on its way to hitting new highs as experts are predicting a lot of bullishness in the investment counter

FAQs

Q1. Why is the Bitcoin Cash graph termed as a bullish one?

A1. Bitcoin Cash is on its way to getting back to higher levels courtesy of its willingness to adopt smart contracts and a DeFi-friendly perspective in the short run. 

Q2. How much is the total supply of Bitcoin Cash?

A2. The total supply of Bitcoin Cash is 21 million, which is similar to that of Bitcoin.

Q3. Which is the top Bitcoin Cash exchange in India?

A3. If you want to buy and sell the BCH wave, you can consider CoinSwitch Kuber as the leading crypto exchange, best known for transparent pricing and a wide range of selections. 

Q4. Which is the actual Bitcoin Cash- Bitcoin Cash ABC or Bitcoin Cash SV?

A4. As of now, BCH ABC is termed as the real Bitcoin Cash as it still uses the original client despite making several changes to the hard forked blockchain. 

Did Bitcoin Cash sound fun and interesting? Keep reading more at CoinSwitch to learn about new and inventive Crypto concepts.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

writer

Ananda Banerjee

Content Writer

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