Bitcoin Cash

What is Bitcoin Cash (BCH)?

Just like Bitcoin, Bitcoin Cash is a type of electronic money that exists independently and outside the control of any centralized parties, including states and financial institutions.

It exists to be a global medium of exchange that works in a direct, peer-to-peer manner without the need for any sort of intermediary or facilitator.

Since there is no need for a trusted middleman like a bank or payment processor to facilitate transactions, funds cannot be seized or frozen. What’s more, the ledger of transactions is immutable and cannot be tampered with.

BCH has a fixed maximum supply of 21 million coins, which is the same as that of Bitcoin. This means that scarcity is part of its design, enabling BCH to be a form of money that doesn’t devalue over time due to inflation.

When Was Bitcoin Cash Launched?

Bitcoin, itself, came into being following the release of its whitepaper by the legendary Satoshi Nakamoto. BCH came into being in 2017, following a divide in the Bitcoin community over aspects regarding Bitcoin’s scalability.

The fraction that ended up creating Bitcoin Cash was against the implementation of an upcoming soft fork to Bitcoin known as SegWit2x.

During the crypto bull run of 2017, a lot of attention was focused on Bitcoin. The community was concerned about the emergence of faster, cheaper blockchains.

The Bitcoin Cash developers then modified the Bitcoin code via a hard fork, resulting in the chain’s divergence and the creation of two separate chains.  The "main" chain, with a block size of 1MB, was Bitcoin. The other was Bitcoin Cash, with a block size of 8MB at the time (it has since increased again to 32MB).

What is a Hard Fork?

A hard fork is a change in the protocol of a blockchain network that causes the chain to split into two. This is usually done to upgrade the network, but sometimes happens as a result of a community divide.

Bitcoin holders at the time of the BCH hard fork, block 478,558, automatically became holders of the same amount of BCH.

A soft fork, meanwhile, is a change to a protocol that doesn’t result in the launch of a new cryptocurrency as it is backward compatible.

In the year following its creation, Bitcoin Cash itself saw a hard fork of its own when Bitcoin SV came into being.

Bitcoin Cash then forked again in 2020, when BCH ABC split away from BCH over centralization concerns.

Who Are the Founders of Bitcoin Cash?

As a result of philosophical differences between fractions of the Bitcoin community, Bitcoin Cash must credit the founder of Bitcoin itself, Satoshi Nakamoto, as its creator.

In fact, the developers who forked it away from Bitcoin at the time maintained that BCH was more in line with Satoshi’s vision for the future of the digital currency.

The majority of the community wanted to solve the problem of scalability by enabling the use of Layer 2 solutions on Bitcoin. The BCH fraction, on the other hand, pushed for larger block sizes to solve the problem and keep things on the main chain.

However, they did accept that larger block sizes would require more resources to run nodes. This suggested that nodes would be shifted into the hands of institutions rather than individuals.

How Does Bitcoin Cash Work?

Bitcoin Cash uses cryptography to verify transactions and record them on a public distributed ledger called a blockchain.

These blockchains are made up of blocks that are essentially a set of transactions batched together. On top of that, each block has a SHA-256 cryptographic hash of the previous block, going all the way back to the genesis.

Because each block has a record of the previous block, blockchains are immutable, or cannot be changed. This is because changing one of the previous blocks would make its cryptographic hash different.

What Makes Bitcoin Cash Unique?

The main thing that made Bitcoin Cash distinct from Bitcoin in the beginning, and indeed the primary reason for the community divide, was block size.

As detailed above, a block contains a set of transactions.

A bigger block size, therefore, would be able to contain more transactions. In turn, this allows the network to process more transactions in the same amount of time rather than having to queue them up beyond a certain limit.

Thus, the larger block size makes Bitcoin Cash a faster network for processing transactions than Bitcoin. Not to mention, it is also cheaper since fees for the block can be divided across more transactions.

On the flip side, a larger block size also makes it harder for users to download a whole copy of the blockchain, with cost implications for storage and blockchain auditing as well.

In the time since its hard fork, Bitcoin Cash has incorporated more features to distinguish itself from Bitcoin. One major example is smart contract functionality.

Smart contracts are pieces of code that execute when certain conditions are met. This allows the two parties on opposite sides of a deal to eliminate the need for an (often costly) trusted third party.

How is the Bitcoin Cash Network Secured?

Bitcoin Cash is secured very similarly to Bitcoin in that it uses proof-of-work consensus to validate transactions.

Proof-of-work means that the computers on the network, or miners, leverage their computing power towards solving cryptographic puzzles to arrive at a certain solution. This solution has a certain level of difficulty. Although it is time-consuming to reach, it is very easy to verify.

The miner that successfully solves a puzzle first is given the privilege of creating the next block on the blockchain. Moreover, they receive a certain amount of BCH as a block reward.

Just like with Bitcoin, blocks on the Bitcoin Cash blockchain are confirmed every ten minutes and have a halving schedule that impacts the block reward.

What is Halving?

Halving refers to the reduction of block rewards paid to miners upon the successful creation of a new block.

These halvings bring an element of perfect transparency to the supply of Bitcoin and Bitcoin Cash, allowing metrics to be predicted far into the future.

Currently, BCH has a block reward of 6.25 BCH, which will halve to 3.125 BCH in April 2024.

What is the Use of Bitcoin Cash?

Bitcoin Cash attempts to combine provable scarcity with easy spendability, aiming to create a form of peer-to-peer electronic cash that holds its value over time.

Bitcoin Cash can be transacted across borders using simple consumer electronic devices like smartphones and computers. Thanks to its low fees, Bitcoin Cash can easily enable microtransactions for more use cases.

Who Controls Bitcoin Cash?

Bitcoin Cash is a decentralized project, and thus there is no centralized ownership of the project, intellectual property, or protocol.

Much of the development takes place in an open source manner, and anyone can contribute to its development in forums like this one.

However, when it comes to adoption of proposals, changes in the protocol, and changes in direction, it is the node operators or miners that are in control. This is also how Bitcoin works and is largely true for most PoW cryptocurrency projects.

How Do Bitcoin Cash and Bitcoin Differ?

Bitcoin Cash and Bitcoin share a code base and are both proof-of-work cryptocurrencies with the same maximum supply cap.

However, there are several significant differences between them:

• Block size: This is the starting point of it all. BCH diverged from Bitcoin with a block size increase from 1MB to 8MB. It has since increased its block size to 32MB.
• Layer 2: Bitcoin enabled layer 2 functionality to allow Lightning Network integration, whereas BCH leverages its larger block size as a scaling solution.
• Transaction fees: When comparing BCH to BTC without using the Lightning Network, Bitcoin’s transaction fees are higher than those of BCH.
• Security: Bitcoin is far more resistant to any form of attack, given the sheer quantity and decentralization of miners. It is theoretically far easier and cheaper to carry out a 51% attack on BCH.

How Much BCH Is In Circulation?

Bitcoin Cash has over 19.1 million BCH in circulation out of a total maximum supply of 21 million BCH, the difference being mined at a reducing rate as per the BCH halving schedule.

The maximum figure and the halving schedule via diminishing block rewards are set in stone via the Bitcoin Cash protocol.

How Do You Buy BCH?

Bitcoin Cash is a well-established cryptocurrency that has plenty of fans. It is therefore available on many major exchanges, as well as in peer-to-peer trading.

It can often be traded against fiat currencies, but it is also commonly traded with stablecoin pairs.

Trading against other cryptocurrencies, such as Bitcoin and Ethereum, may also be available depending on the platform.

Is It Possible to Buy BCH Instantly?

Instant purchase of BCH isn’t possible because of the time it takes to mine blocks.

While BCH revolves around scalability, that doesn’t mean that it features instant transactions. They still take up to ten minutes to be batched into blocks and mined before verification begins.

Still, having to wait a matter of minutes for a transaction to be made, confirmed, and settled in an immutable manner is far in advance of the traditional financial system.

TradFi cash transfers can take up to a couple of days to settle, and, unlike in Monopoly, not every bank error is in your favor. Payments can be reversed and canceled by various parties involved in traditional settlement, but that’s not a "feature" of BCH.

How Do You Store BCH?

Like most cryptocurrencies, including its progenitor, BCH is stored using cryptocurrency wallets.

Bitcoin Cash uses public-key cryptography, meaning that a wallet consists of two keys, one public and one private.

Public keys identify wallets on the blockchain and are shared with other parties in order to receive BCH. Meanwhile, private keys enable you to access and send BCH from the wallet.

These wallets come in three main forms:

• Cold wallet: Referring to "cold storage", these wallets keep private keys offline and thus safely out of the reach of hackers. These can come in several forms, from devices not connected to the internet to a paper copy of the private key.
• Hot wallet: Unlike cold wallets, these are connected to the internet. They can come in the form of full clients that download a copy of the blockchain, light clients that interact with full nodes, or online/web wallets that store credentials with the online wallet provider rather than the user’s hardware.
• Exchange wallet: These are forms of online or web wallets, but may differ slightly in that your exchange account isn’t necessarily a wallet in and of itself. Rather, it’s a representation of the trades you make, while all funds, including your deposits and purchases, are in the custody of the platform.

Bitcoin Cash Energy Consumption

Bitcoin Cash is often touted as an eco-friendly or energy-efficient alternative to Bitcoin. Still, it uses the same SHA-256 cryptography-based proof-of-work consensus.

A 2020 study on PoW cryptocurrencies showed that the BCH network certainly consumes less than Bitcoin. Nonetheless, it is also clear that the actual efficiency of the network remains the same since there’s no change in the actual technology.

As such, were Bitcoin Cash to reach the levels of adoption and usage that Bitcoin has, BCH would have to be bolstered by far more miners.

While an argument could be made that BCH would remain the faster, cheaper alternative to Bitcoin in that case, it'll be much harder to suggest that it’ll be less power hungry if it continues to use proof-of-work consensus.

Regardless, this is still favorable thanks to recent research showing that the consumption of the banking system alone far exceeds that of Bitcoin.

Is Bitcoin Cash a Good Investment?

Bitcoin Cash has a lot of good things going for it.

It does what it promises in terms of offering a cheaper payment system with greater throughput than Bitcoin while retaining the ability to store value.

However, the evolution of cryptocurrency has thrown up a slew of alternatives to Bitcoin Cash. Many of these are cheaper, faster, and can store value just as well as BCH. They also offer the promise of lower power draw by using newer, arguably cleaner consensus mechanisms like proof-of-stake.

Ultimately, BCH is meant to be an electronic cash system that disrupts the traditional payment infrastructure. Investing in Bitcoin Cash may well be a bet on its mass adoption as a form of payment that is easy to use, but also holds its value through the passage of time.