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Bitcoin Cash (BCH), which is sometimes called Bcash, was created on 1 August 2017 as a fork of Bitcoin (BTC).
It’s similar to Bitcoin in many ways but has some technical differences which also makes it very different.
This guide explains what Bitcoin Cash is, how it works and what makes it different to Bitcoin.
| Icon | Symbol | Initial release date | Algorithm type | Max. supply |
|---|---|---|---|---|
 | BCH, BCC, Ƀ | 1 August 2017 | SHA-256 | 21 million BCH |
Just like Bitcoin (BTC), Bitcoin Cash (BCH) is a peer-to-peer cryptocurrency, which can be sent directly to anyone, anywhere in the world without the use of a third-party intermediary.
There are two differences between Bitcoin Cash and Bitcoin:
Because of these differences, many people think of Bitcoin as a kind of digital gold, and Bitcoin Cash as a kind of digital cash.
Bitcoin Cash has some technical differences which make it cheaper to use than Bitcoin.
Specifically, it has a 32MB (megabyte) block size, while Bitcoin has a 1MB block size. This means the Bitcoin Cash blockchain can carry a lot more transactions, which keeps its fees low even in times of high use.
By contrast, in times of high activity the Bitcoin blockchain fills up and transactions have to start queuing, which slows down transfer times and raises fees.
In a nutshell, BCH is much faster and cheaper than BTC.
The main technical downside of larger blocks is that they’re harder for miners to “digest”, which can lead to problems like unintentionally splitting the blockchain into multiple branches. It also gives an extra advantage to the miners who are able to digest them more easily, which increases the risk of a blockchain centralising around those kinds of miners.
Fortunately, in the case of Bitcoin Cash this is more of a theoretical problem than an actual one, as 32MB is not large enough to cause these kinds of problems.
The main reason BCH is worse than BTC is simply because BTC is worth a lot more, so more people use BTC than BCH.
In fact, Bitcoin Cash has never even come close to fully utilising its large block size.
In cryptocurrencies like Bitcoin and Bitcoin Cash, the value of a coin is also functionally very important because it determines how secure and reliable the network is. This is because the more valuable a coin is, the more miners it can support.
The chart below shows the mining power (known as hashrate) of Bitcoin (blue) vs Bitcoin Cash (red).
As you can see, Bitcoin consistently has a much higher hashrate than Bitcoin Cash, and so is more resistant to certain types of attacks.
Still, despite the huge difference, Bitcoin Cash is still believed to have sufficient hashrate to withstand realistic attacks.
But if Bitcoin Cash is cheaper and faster, why is Bitcoin worth more?
No one knows for sure, but there are two main theories: an economic one and a social one.
One theory holds that frictions, such as higher fees and slower transfers, are actually good for maintaining the value of assets.
This is because it makes it more difficult and expensive to dispose of, either by selling or spending. These high fees and slow transfers subtly encourage people to hold onto their Bitcoin instead of spending it, which reduces the total amount of Bitcoin available on the open market and drives prices upwards.
The social theory is that people are simply more attracted to Bitcoin because it’s worth more, which in turn makes it even more valuable and more attractive.
BTC also bears the original Bitcoin name, which helps increase its brand recognition.
Current development in Bitcoin Cash is largely geared towards utilising its large block size for purposes other than simply carrying BCH transactions.
The large block size creates ample room to carry “smart contract” type programs on the Bitcoin Cash blockchain, although there are some challenges associated with adapting the underlying Bitcoin framework for smart contracts, which other blockchains don’t have to contend with.
Bitcoin Cash functionally performs much better than Bitcoin and its larger block size hasn’t resulted in any significant downsides. But is that enough?
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