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What is Bitcoin Cash? A step-by-step guide to BCH
Bitcoin Cash has rapidly become one of the most valuable cryptocurrencies in the world. Here’s why.
In an effort to improve the efficiency of transactions, Bitcoin Cash broke off from the original bitcoin network on 1 August 2017. Bitcoin Cash aims to take bitcoin in a new direction geared towards faster transaction speeds and lower fees.
What is Bitcoin Cash?
|Icon||Symbol||Initial release date||Algorithm type||Max. supply|
|BCH, BCC, Ƀ||1 August 2017||SHA-256||21 million BCH|
Built upon the bitcoin model, Bitcoin Cash is a digital currency that is:
- Decentralised. The network is spread out across many different computers all over the world.
- Peer-to-Peer. Person A can send Bitcoin Cash directly to Person B from anywhere in the world without needing an intermediary, like a bank.
- Secure. Bitcoin Cash uses strong encryption to prevent hacking, fraud and cyber attacks.
- Open. The history of all Bitcoin Cash transactions is logged on a publicly accessible blockchain that can be viewed and verified by anyone.
How is Bitcoin Cash different from bitcoin?
Bitcoin Cash was created as a result of diverging viewpoints within the bitcoin community about how to scale the network. As more people began to use bitcoin, the network struggled to keep up with the volume of transactions. As a result, many bitcoin users were waiting hours, sometimes days, before seeing their transactions go through.
There was a lot of debate around how to solve this problem and that led to a split between two groups with opposing viewpoints: those in favour of increasing the size of blocks in the blockchain versus those in favour of restructuring the way data was stored in the existing blocks.
The Hard Fork
To make transaction speeds faster, one group within the bitcoin community wanted to increase the size of blocks on the bitcoin blockchain. This group, consisting primarily of bitcoin miners, could not get enough support from the larger bitcoin community to form the consensus needed to move bitcoin in this direction. As a result, this group split off (or “hard-forked”) from the original bitcoin blockchain and formed Bitcoin Cash as a new currency.
Bitcoin Cash recognises the same blockchain as bitcoin up until the time of the fork, 1 August 2017. After the fork, Bitcoin Cash transactions started to be recorded on a new blockchain, specific to Bitcoin Cash, while bitcoin continued to maintain the original bitcoin blockchain.
What does Bitcoin Cash do differently?
The biggest difference between bitcoin and Bitcoin Cash has to do with the size of blocks on the blockchain. By increasing block size from bitcoin’s 1MB up to 8MB, Bitcoin Cash allows many more transactions to be processed in one block. The idea is to process larger transaction volumes faster and for lower fees.
Another significant difference between the two currencies is that the level of difficulty involved in mining Bitcoin Cash varies depending on how many miners are active on the network. Many bitcoin miners have migrated over to Bitcoin Cash for this reason, because it allows them to generate larger profits at a faster rate than mining bitcoin.
Where can I use Bitcoin Cash as payment?
Many cryptocurrency exchanges have taken steps to integrate Bitcoin Cash, and it’s possible that merchants will begin to follow suit as the currency continues to grow. For those looking to use cryptocurrency to buy goods and services, Bitcoin Cash is not currently accepted by most vendors, including many of those that do accept bitcoin.
How to get Bitcoin Cash
There are a few ways to get your hands on some BCH.
- You might already have some. If you owned bitcoin before the 1 August fork, you might already have Bitcoin Cash. Any bitcoin holdings you had prior to the split, unless they were kept on an exchange, can also be claimed as Bitcoin Cash. The same private keys associated with your bitcoin wallet can be used to access equal holdings in Bitcoin Cash.
- Buy from an exchange. Initially, many of the most prominent exchanges in the US were hesitant to support Bitcoin Cash. However, due to an increase in value and consumer demand more and more exchanges are beginning to open their doors to this new currency.
- Mine it. Bitcoin Cash has received a lot of support from miners, many of whom have switched over from mining bitcoin. The opportunity to earn generous amounts of BCH through mining is an incentive for more people to participate in the network.
What should I consider before buying Bitcoin Cash?
Cryptocurrencies are notoriously volatile, and it’s impossible to say for certain whether the value of Bitcoin Cash will go up or down. Since its initial release, BCH has grown to become one of the most valuable cryptocurrencies in the world, but it has also seen major price fluctuation from one day to the next.
From a trader perspective, the stability of Bitcoin Cash needs to be reviewed. Many sceptics believe that it will not be able to replace bitcoin as the leader in this space, and therefore it may not survive in the long term. On the other hand, supporters of BCH believe it offers an improvement over bitcoin and will therefore gain value in the long term and ultimately overtake its predecessor.
What to watch out for
Bitcoin Cash is still very new, and it has seen major price variations in its early days. There’s ongoing debate about the real value of Bitcoin Cash, how much support it has and whether its solution to bitcoin’s scaling problem is ultimately a success.
What’s next for Bitcoin Cash?
The future of Bitcoin Cash remains unclear. Its value has grown substantially despite its comparatively short existence, but Bitcoin Cash faces several challenges and uncertainties moving forward. Bitcoin Cash is hailed by its supporters as a “new and improved” system that will replace the original bitcoin.
At the same time, many prominent voices in the cryptocurrency space have suggested that Bitcoin Cash does not have the same level of support driving bitcoin. As bitcoin moves to implement its own solutions to the scaling issue, we will likely get a much clearer picture of how these two competing currencies will develop into the future.
Image sources: Shutterstock
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