Bitcoin Cash (BCH) is a cryptocurrency built on the same blockchain as Bitcoin (BTC), but it has certain distinct features.
Bitcoin Cash was launched on August 1, 2017, via a Bitcoin hard fork, a radical upgrade of the protocol software. The move to create Bitcoin Cash required consensus by Bitcoin participants who felt the blockchain should process more significant volumes of transactions. But, since most nodes on the Bitcoin blockchain voted against changing the rules, a hard fork emerged, creating two new blockchain paths.
Simply put, a fork (hard/soft) is what happens when there’s a change in protocol in a blockchain—creating divergence into two valid paths forward. Thus, while they share the same origins, Bitcoin and Bitcoin Cash are two different cryptocurrencies.
History of Bitcoin Cash
The origins of Bitcoin Cash can be traced to growing concerns that Bitcoin’s mainstream adoption defeated the goals of its proponent Satoshi Nakamoto. In Nakamoto’s vision, Bitcoin was supposed to grow and rival other payment platforms, delivering faster and cheaper peer-to-peer transactions. Though Bitcoin began in earnest, the surging number of transactions hampered its progress, in particular the pioneering crypto’s 1MB block limit that reduced transaction speeds.
To solve the challenge, developers proposed an increase in the average block size to ensure that more transactions were updated in the system. The Bitcoin community became a house divided on the issue and amid a staking war, Bitcoin Cash was launched via a hard fork. During the launch, Bitcoin users who supported the change in protocol received equivalent amounts in Bitcoin Cash (BCH).
Shortly after, in November 2018, Bitcoin Cash underwent a hard fork that created Bitcoin Cash ABC (BCHA) and Bitcoin Cash SV (Satoshi Vision). Supporters of Bitcoin Cash SV (BSV) rejected the inclusion of smart contracts on the Bitcoin Cash platform. Bitcoin Cash ABC was later rebranded into eCash (XEC).
Bitcoin vs. Bitcoin Cash–Hard fork vs. Soft fork
Is Bitcoin Cash the same as Bitcoin? NO. BCH was created from Bitcoin via a hard fork. Is this different from a soft fork? To understand the distinction between the two forks, it’s vital to understand why they are formed.
Public blockchain networks operate via multiple nodes, which means that all participants must agree before any changes can happen. Therefore, to make any changes to a blockchain’s existing code, participants must vote in support or against the proposals.
In a soft fork, a blockchain change becomes valid as all users agree to adopt the new version or update. The soft-fork creates a single blockchain as an outcome. However, a hard fork emerges when there’s a split that creates a new blockchain path from the existing blockchain. After a hard fork, two blockchains emerge, and they operate independently. For a hard fork to occur, a consensus is not required.
When BCH was launched, it was a hard fork since only a section of participants agreed to make the change. While a majority of participants opted to maintain Bitcoin as it was, others felt that the blockchain should head in a different direction.
Differences between BTC and BCH
The major difference between Bitcoin (BTC) and Bitcoin Cash (BCH) is that the latter allows larger block sizes than BTC. While Bitcoin’s blocks are capped at 1 megabyte (MB), BCH expands the size to 8 megabytes (MB) and 32 MBs. On a blockchain, transactions are added to the network in blocks. So, another key distinguishing feature is that BCH processes transactions faster—about 100 transactions per second. Some of the other differences are discussed below.
No ‘replace-by-fee’
On the Bitcoin network, transactions can be canceled or double-spent when they are unconfirmed via the replace-by-fee feature. In Bitcoin, a transaction can be labeled replace-by-fee (RBF), allowing the sender to replace it with another equal transaction that pays higher fees. The RBF was created to allow users to take alternatives when network fees rise unexpectedly because of congestion. BCH eliminates the replace-by-fee, making the BCH protocol more secure. The change makes BCH more efficient as a payment solution, especially when transactions must be processed fast.
Smart contract support
On BCH, developers can use Cashscript, a smart contract language that supports complex functions. This feature makes BCH more advanced compared to Bitcoin, which can’t support decentralized finance (DeFi) applications.
Difficulty adjustment algorithm
Bitcoin Cash utilizes aserti3-2d or ASERT, a difficulty adjustment algorithm that technically ensures that new blocks of data are generated at more stable rates. The algorithm works by ensuring that when blocks are delayed or fall behind schedule, the difficulty for approving those halves.
Consecutively, the algorithm increases the difficulty of approving new blocks two days ahead of schedule two-fold. The dynamic algorithm helps to reduce any lags in the system, helping BCH maintain faster transaction speeds. Since miners push transactions with higher fees to the front of the pile, the ASERT algorithm ensures that the processing of smaller transactions is not delayed.
What is Bitcoin Cash and How does BCH work?
BCH might be different from Bitcoin, but it builds on its strongest features. The core features of BCH include:
- Decentralization: It is powered by a network of participants
- Transparency: All transactions are recorded on the blockchain
- Open source: Accessible to all
- Secure: Uses the PoW to add transactions in blocks, making the chain secure
- Low fees: It’s fast, reliable, and charges low fees—qualities that make it a great option compared to mainstream payment platforms.
Advantages and disadvantages of Bitcoin Cash
| Advantages of BCH | Disadvantages of BCH | |
| 1 | Fast and cheap transactions | Has low adoption rates (compared to Bitcoin) |
| 2 | Operates on a larger scale (allows bigger blocks compared to Bitcoin) | Reduced security (requires less mining power to process transactions) |
| 3 | Decentralized currency | Branding challenges (often confused with Bitcoin) |
| 4 | Accessible on crypto exchanges | Environmental challenges (the blockchain PoW system impacts the environment) |
What is Bitcoin Cash used for?
BCH has many attractive features that make it useful. Some of the ways Bitcoin Cash can be used include:
- Medium of exchange: BCH supports peer-to-peer transactions, making it cheaper and faster than BTC. For people across the globe, BCH is an efficient cryptocurrency for exchanges, remittances, and trade.
- Value storage: The Bitcoin Cash protocol sets a limit on the total number of coins that will ever be generated—21 million coins. This feature transforms BCH into a great option for storing value in the long term. As the supply of BCH reduces, the value of BCH will keep rising to stabilize again as a wealth storage asset.
- Economic utility: Just like Bitcoin, Bitcoin Cash makes it possible for owners to transact economically. Another advantage of BCH is that it is free from the control of governments and central banks.
How can I buy Bitcoin Cash?
BCH can be bought from digital asset exchanges such as Coinbase or Kraken. To purchase Bitcoin Cash, you can choose to trade in other cryptocurrencies, including BTC or ETH, to receive the equivalent value in BCH.
Alternatively, you can use your local currency to buy BCH after depositing cash into your account. Just like other cryptocurrencies, you can hold BCH in crypto wallets.
FAQs
How does the Bitcoin Cash work?
Bitcoin Cash operates similarly to Bitcoin but with larger block sizes, enabling faster transactions and lower fees
Is Bitcoin Cash safe to buy?
Bitcoin Cash, like any cryptocurrency, carries inherent risks due to market volatility and potential security vulnerabilities, so it’s essential to research and invest cautiously.
Is Bitcoin Cash a good investment?
Bitcoin Cash’s investment potential depends on individual risk tolerance and market conditions. It has shown growth and adoption but remains subject to market fluctuations and regulatory changes.
Is Bitcoin Cash real?
Yes, Bitcoin Cash is a legitimate cryptocurrency that emerged from a hard fork of the original Bitcoin blockchain in 2017. It has its own network, community, and market value, making it a real digital asset.
