A beginner's guide to Bitcoin Cash (BCH), the most popular fork of Bitcoin featuring an increased 8MB block size limit, allowing for more transactions to be processed per block.
Bitcoin Cash is a cryptocurrency that was created in 2017 as a result of a hard fork from the original Bitcoin (BTC) blockchain.
The main purpose of creating Bitcoin Cash was to address some of the limitations of Bitcoin, such as slow transaction processing times and high fees.
Bitcoin Cash aims to be a peer-to-peer electronic cash system that enables fast, cheap, and reliable transactions without the need for intermediaries like banks.
Something that Bitcoin in its purest form will never be.
Bitcoin Cash also uses a different mining algorithm than Bitcoin, which makes it more accessible to small-scale miners and reduces the risk of centralised control.
Overall, Bitcoin Cash is a cryptocurrency that aims to improve upon the original Bitcoin blockchain by offering faster and cheaper transactions.
Our Bitcoin Cash guide will first go over the basics of BCH and culminate in a final verdict on whether the project achieved its goal and you should be a buyer.
Introduction to Bitcoin Cash
The main way that Bitcoin Cash addressed the limitations of Bitcoin was by increasing the block size limit.
In the original Bitcoin blockchain, the block size limit was set at 1 megabyte (MB), which meant that only a limited number of transactions could be processed in each block.
This resulted in slow transaction processing times and high fees during periods of high demand.
Bitcoin Cash increased the block size limit from 1MB to 8MB, which allows for more transactions to be processed per block.
This has enabled faster and cheaper transactions compared to Bitcoin, especially during times of high demand.
Additionally, Bitcoin Cash implemented a new transaction signature algorithm called SigHash, which has further improved the speed and efficiency of transactions.
It's worth noting that the decision to increase the block size limit was always a contentious issue within the Bitcoin community and ultimately led to the hard fork that created Bitcoin Cash.
Some prominent members of the Bitcoin community, such as Roger Ver, believed that increasing the block size limit was a necessary step to address the scalability issues of Bitcoin.
While others believed that it would compromise the decentralisation and security of the network.
Did Roger Ver create Bitcoin?
No, Roger Ver did not invent Bitcoin.
Bitcoin was created by an anonymous person or group of people using the pseudonym Satoshi Nakamoto in 2009.
However, Roger Ver was one of the early investors and adopters of Bitcoin and he played a significant role in promoting and advocating for the cryptocurrency in its early days.
Ver was an early proponent of the idea that Bitcoin could revolutionise the way we use and think about money.
Moreso, he saw the potential for Bitcoin to become a global currency that could bypass traditional financial institutions.
He was also one of the first people to invest in Bitcoin startups and was a key figure in the Bitcoin community, especially in the early years.
While Ver did not invent Bitcoin, his contributions to the growth and development of the cryptocurrency ecosystem have been significant.
His advocacy for Bitcoin and his support for increasing the block size limit ultimately led to the creation of Bitcoin Cash, which is a significant alternative to Bitcoin in the cryptocurrency market today.
In saying that he supported the idea behind Bitcoin Cash, Roger Ver also did not create Bitcoin Cash.
He was simply a prominent early supporter, playing a significant role in its development and promotion.
The Bitcoin Cash hard fork was ultimately initiated by a group of faceless Bitcoin developers and miners, not Roger Ver..
Bitcoin Cash airdrop in August 2017
After Bitcoin Cash was created as a fork of the original Bitcoin blockchain in 2017, many Bitcoin holders were eligible to receive an airdrop of Bitcoin Cash tokens.
This airdrop was made possible because anyone who held Bitcoin at the time of the fork automatically received an equal amount of Bitcoin Cash tokens.
This meant that if you held 10 Bitcoin at the time of the fork, you also received 10 Bitcoin Cash tokens.
The Bitcoin Cash airdrop was significant because it allowed many people to gain access to a new cryptocurrency without having to purchase it on an exchange.
This was particularly appealing for those who had already invested in Bitcoin and were interested in diversifying their portfolio or exploring new opportunities within the cryptocurrency space.
However, it is important to note that not all Bitcoin holders received the airdrop.
Some exchanges and wallets did not support the distribution of Bitcoin Cash tokens, and some users may have lost access to their Bitcoin private keys or otherwise missed out on the airdrop.
Additionally, the value of Bitcoin Cash tokens fluctuated significantly in the months following the airdrop, which means that not all investors may have benefited from the new cryptocurrency in the way they had hoped.
Despite these challenges, the Bitcoin Cash airdrop remains an important moment in the history of the cryptocurrency space and it highlights the potential for new cryptocurrencies to emerge through forks and other blockchain-based innovations.
How does Bitcoin Cash work?
Like Bitcoin, Bitcoin Cash works by using a proof-of-work consensus mechanism to verify transactions and maintain the security of the network.
In the Bitcoin Cash network, miners compete to solve complex mathematical puzzles in order to add new blocks to the blockchain.
The first miner to solve the puzzle and add a block to the chain receives a reward in Bitcoin Cash.
To prevent spam and ensure the stability of the network, Bitcoin Cash implements a block size limit of 32 MB.
A block size limit that is much larger than Bitcoin's 1 MB own.
This allows for more transactions to be processed per block, which helps to keep transaction fees low and processing times fast.
Bitcoin Cash also uses a modified version of the original Bitcoin protocol, with some changes to the consensus rules and block validation process.
For example, Bitcoin Cash includes a "replay protection" feature that helps to prevent accidental transaction duplication during the hard fork process.
What is BCH crypto used for?
Bitcoin Cash (BCH) was created with the primary goal of being a peer-to-peer electronic cash system, suitable for everyday use as a means of payment.
One of the main problems with BTC, the original cryptocurrency, is that it has become less practical as a means of payment due to high fees and slow transaction processing times.
As we’ve already discussed in this guide, BCH addresses these limitations, now allowing for faster transaction processing times and lower fees.
This means that BCH can be used for everyday transactions such as buying goods and services online or transferring money, without incurring high fees or long waiting times.
This focus on being a fast and reliable payment system makes BCH a promising alternative to BTC, which has struggled to maintain its position as a viable digital currency for everyday use.
When considering whether to use BCH or BTC as a means of payment, it's important to consider the fees and transaction processing times associated with each cryptocurrency.
While BTC may have been the first and most well-known cryptocurrency, its limitations as a means of payment mean that it may not be the best choice for those looking to use digital currency as 'money.'
BCH's focus on being a fast and reliable payment system is what sets it apart as a cryptocurrency.
Bitcoin Cash pros and cons
Here are the major pros and cons of Bitcoin Cash:
Pros:
- Faster Transaction Speeds: Bitcoin Cash's larger block size limit allows for faster transaction processing times compared to Bitcoin.
- Lower Transaction Fees: The larger block size limit also means that Bitcoin Cash transactions are generally cheaper than Bitcoin transactions.
- Increased Scalability: Bitcoin Cash's larger block size limit also makes it more scalable and able to handle a larger number of transactions.
- User-Friendly: Bitcoin Cash is designed to be user-friendly and accessible, making it a good choice for those new to cryptocurrency.
Cons:
- Centralisation: There are concerns that mining pools and larger miners may have too much influence over the Bitcoin Cash network, leading to centralisation.
- Lack of Adoption: While Bitcoin Cash has seen some adoption, it still lags behind Bitcoin in terms of mainstream acceptance and adoption.
- Security Concerns: Any cryptocurrency is vulnerable to security threats, and Bitcoin Cash is no exception. Hackers could potentially exploit vulnerabilities in the network to steal funds.
- Limited Use Cases: While Bitcoin Cash is designed to be used as a means of payment, it may not be suitable for other use cases such as smart contracts and decentralised applications.
- Controversial History: The hard fork that created Bitcoin Cash was controversial and caused a split in the Bitcoin community, leading some to view Bitcoin Cash and its proponents with suspicion.
While Bitcoin Cash offers faster transaction speeds, lower fees, increased scalability, and user-friendliness, there are also concerns around centralisation, lack of adoption, security and limited use cases.
Of particular concern for us, is the centralisation of mining power within the Bitcoin Cash network.
With larger miners and mining pools having a significant influence over the network, there is a massive risk of centralisation and loss of decentralisation.
This is a significant drawback for those who value the decentralised nature of cryptocurrency as a whole.
Bitcoin (BTC) vs Bitcoin Cash (BCH)
Next up, we’ve compiled a handy table that compares the major attributes of Bitcoin (BTC) with Bitcoin Cash (BCH.
| Attribute | Bitcoin | Bitcoin Cash |
|---|---|---|
| Creation | Created in 2009 by an unknown person or group using the pseudonym Satoshi Nakamoto | Created in 2017 as a fork of Bitcoin |
| Block Size Limit | 1 MB | 32 MB |
| Consensus Mechanism | Proof of Work | Proof of Work |
| Transaction Speed | Slow - around 7 transactions per second | Faster than Bitcoin - up to 116 transactions per second |
| Transaction Fees | High - fees can be several dollars per transaction | Lower than Bitcoin - fees can be just a few cents per transaction |
| Adoption | Widely adopted and accepted by merchants and individuals around the world | Less widely adopted and accepted than Bitcoin |
| Security | Generally considered to be secure, with no successful attacks on the underlying protocol | Generally considered to be secure, but there have been some concerns around centralization and security |
| Decentralisation | Decentralised and operates on a peer-to-peer network | Decentralised, but there are concerns around centralization due to the influence large miners wield over the network |
| Use Cases | Used primarily as a store of value, but can also be used as a means of payment in some cases | Designed specifically to be used as a means of payment |
| Community | Large and active community with many supporters and detractors | Smaller and more divided community with some controversy surrounding its creation |
When it comes to being used as money, Bitcoin Cash does seem to have an advantage over Bitcoin due to its lower fees and faster transaction times.
However, this is not necessarily a fair comparison since Bitcoin was not specifically designed to be used as a means of payment.
Bitcoin's primary use case is as a store of value and a hedge against inflation, which it fulfils quite effectively.
So while Bitcoin Cash may be better than Bitcoin for certain specific use cases, it is not accurate to say that it is overall "better" than Bitcoin.
It simply serves a different purpose, and the two cryptocurrencies can coexist.
Should I buy Bitcoin Cash (BCH) crypto in 2023?
The question of whether or not to buy Bitcoin Cash in 2023 is a complex one that ultimately depends on your personal investment strategy and goals.
However, it is important to consider the potential risks and drawbacks of investing in BCH.
One factor to consider is the increasing competition in the cryptocurrency space.
As time goes on, more and more decentralised cryptocurrencies are being developed that may be better suited for the use case of money.
This means that Bitcoin Cash may face increased competition and could become less relevant over time.
Additionally, concerns around centralisation and the influence of large miners on the Bitcoin Cash network may also be a cause for concern.
The ball is ultimately in your court.
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