Nowadays, numerous people from all over the world have heard of or even used Bitcoin. It is the beacon of cryptocurrency, and its tremendous bull run in early 2021 has made it shine brighter than ever. Nevertheless, another similar coin appeared next to Bitcoin — Bitcoin Cash. It is the new star of the cryptocurrency market, which opens up many new opportunities, being inspired by the most famous cryptocurrency in the world. Let’s see what is bitcoincash and whether it is a good investment.
What is Bitcoin Cash?
To figure out what is bitcoincash and its subtleties, it is vital to know that Bitcoin Cash (BCH) was launched in August 2017 due to a hard fork of the Bitcoin (BTC) blockchain. Hardfork is a blockchain divided into two parts, each of which becomes its crypto with its unique blockchain.
Unlike a soft fork, which is an update to the blockchain where only one of the split pieces of the blockchain remains valid. When the fork happens, anyone holding BTC will receive the same amount of BCH. The formation of BCH occurred due to disagreements within the BTC community. BTC miner and developer groups were concerned about its scalability, and they were unsure about the BTC blockchain plans to adopt segregated witness (SegWit) technology.
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Features of Bitcoin Cash (BCH)
When changes are made to the blockchain development plan, hard forks can trigger the emergence of new projects. Bitcoin Cash (BCH) was created by developers, investors, entrepreneurs, and miners who were unhappy with the current Bitcoin policy. This project was conceived as a peer-to-peer electronic money system that would focus on increased scalability and low transaction fees. Today it is also known as Bitcoin ABC (Adjustable Blocksize Cap).
Bitcoin Cash is an updated version of the famous Bitcoin, organized through a hard fork of the existing blockchain. The protocols of the brand-new coin exactly duplicate Pow with SHA-256 hashing terminology. As a result, the most significant mark in coin volume may now be 21 million units. Simultaneously, the reward system remained unchanged.
In 2017, the problem of long confirmation of Bitcoin transactions and the growth of fees escalated, which was at odds with the original idea of nearly instant payments with low fees. Before the invention of Bitcoin Cash, there was a heated debate in the community about the consequences of increasing the block size limit.
Because Bitcoin is decentralized, any change to the protocol requires concurrence, meaning all nodes on the network must reach an agreement when making changes to the software.
Bitcoin Cash was introduced as a more scalable cryptocurrency with reduced transaction fees and fast confirmation. The BCH community argues that the project aligns with Satoshi Nakamoto’s idea of a peer-to-peer e-currency. This altcoin offers a quicker and more profitable payment system that outperforms bitcoin in daily use.
Shortly after the fork of Bitcoin Cash, the original Bitcoin blockchain received a long-awaited soft fork to implement a technology called SegWit (Segregated Witness). This update was created in 2015 by Bitcoin developer Peter Wille to address network congestion and scalability problems.
The SegWit soft fork was scheduled before the BCH hard fork, but Bitcoin Cash proponents considered SegWit the worst alternative. Some industry-renowned personalities have backed the Bitcoin Cash fork, including Jihan Wu (co-founder of Bitmain) and Roger Ver (CEO of Bitcoin.com).
Manifestation of BitcoinCash
The grounds for the emergence of Bitcoin Cash is the disagreement in the crypto community. Although most miners (up to 95%) agreed with the proposal to improve the cryptocurrency, part of the community was not satisfied. Users felt that the new protocol was introduced to delay the resolution of the scalability issue. It allowed people who constantly trade and invests not to lose money due to the fall in BTC price amid the news about the upgrade. The answer was a hard fork built by part of the Bitcoin development team and a former chief engineer.
Today, numerous people know what is bitcoincash, and it is no longer a minority solution. Users began to trust the new currency and appreciated the benefits of large block sizes. The network is constantly updated, and the development team is actively correcting the shortcomings of the Bitcoin network.
How Does BCH Work?
Bitcoin Cash split directly from the Bitcoin source code, so they have a lot in common. Both networks use the Proof of Work consensus mechanism and are open to anyone willing to contribute to their development. In addition, all former BTC holders received an equal amount of BCH when switching to Bitcoin Cash (only the network has changed, while user addresses have remained unchanged).
Like Bitcoin, BCH has a block time target of 10 minutes and a maximum circulating supply of 21 million coins. BCH issuance is halved every 210,000 blocks (approximately every four years), and the current block reward is 6.25 BCH.
Key features of BCH
The Bitcoin Cash community claims that the primary purpose of BCH is to be used as money. With this cryptocurrency, you can quickly send and receive funds from any owner of a BCH wallet, whether an individual or a legal entity. Among other features:
- The original Bitcoin protocol served as the foundation for the BCH source code.
- The maximum coin turnover is 21,000,000.
- BCH also employs the Proof of Work (PoW) consensus process to create new currencies as a fork of Bitcoin.
- The full block size has been extended from 1 MB to 32 MB.
- According to the community, BCH is closer to Satoshi’s initial goals.
- The Difficulty Adjustment Algorithm is used to change the difficulty of BCH mining after each block (DAA).
- SegWit has not been implemented in BCH.
- Smart contracts will be included in future releases.
The technology attracted a lot of investors in the market, and the aggressive promotion policy on the part of the founder of the digital currency only further promoted the BCH project. Cryptocurrency won a lot of followers who believed in its success.
Bitcoin Cash Coin Emission
Emission is the process of issuing new BCH coins within the blockchain system. If the cryptocurrency were an independent project, the question of how much Bitcoin Cash in total would be relevant. But in this case, the size of the final number of coins is not the subject of disputes and discussions: like Bitcoin, the emission of Bitcoin Cash is 21 million pieces. Approximately 15 million BCH was created due to the fork, as Bitcoin Cash completely copies the blockchain before the fork.
Now the production of new coins occurs through their mining. The reward for solving a block of transactions is 12.5 new BCH. The block reward decreases similarly to Bitcoin — every four years. Around 2035, BCH emissions will end.
Where to Store Bitcoin Cash Coins?
If you want to buy BCH cryptocurrency, you first need to create a wallet to keep it. There are both online services and versions for installation on a PC. You can also store coins on trading platforms or in hardware wallets. The official website bitcoincash.org provides a list of all services that support cryptocurrency. The following wallets are intended for installation on a computer and desktop applications:
- BU Bitcoin Cash Client is a software version of the wallet, supported on the following operating systems: Linux, Windows, and Mac;
- Bitcoin XT;
- Bitcoin ABC (supports synchronization with the blockchain);
- Bitcoin Classic UAHF.
You can install such BCH storage programs on PCs and mobile devices. The choice of storage method depends entirely on your ideas about security and preferences regarding the use of cryptocurrency. If you plan to store digital money for investment, a hardware wallet will do. Such a gadget is cut off from the Internet, and your BCH is stored on a tangible medium with a pin code, which eliminates the possibility of hacking or hacker theft. The most versatile option is computer programs. You can download Bitcoin Core — the original software from the creators of the first cryptocurrency. Such a program will allow you to store the entire blockchain of a digital asset on your computer, making you an official member of the Bitcoin Cash network.
Advantages of Bitcoin Cash
Creating forks is not only a solution to a problem but also a profitable business. It is not uncommon for developers to chase profit more than they want to solve the real problems of the existing system. In many cases, the rate of new cryptocurrencies jumps after the hard fork, which brings developers a solid income.
Although Bitcoin Cash is one of the most successful forks in this regard, today, no one doubts the seriousness of this project. Occupying a high place in the ranking of cryptocurrencies by capitalization according to CoinMarketCap, the digital currency has every chance of becoming the fastest and most reliable payment system on the blockchain meringue. The apparent advantages of cryptocurrency will play their role here:
- Bitcoin network problem solved. Unlike the first digital currency, BCH solved the scalability problem once and for all. The combination of frequent mining difficulty updates and flexible block size makes it possible to complete transactions in seconds. In this case, the waiting for confirmation, even during busy periods, is less than 2 minutes.
- Meager commissions. In the PoW system, the commission plays a unique role. The more critical the payment is and the faster it needs to be made, the more commission the user specifies. At the same time, the transfer time between users’ wallets will be less than 2 minutes. It is a clear advantage of BCH over most cryptocurrencies.
- No acknowledgement queues. After real problems waiting for a transaction on the Bitcoin network in 2017, many users switched to BCH. Due to the lower cost of the coin, the lack of a mempool, and lower volatility, it is more convenient to pay Bitcoin Cash than the first cryptocurrency.
- System reliability. The first cryptocurrency is considered the most reliable project on the blockchain. It was created and developed by professional cryptographers, mathematicians, and developers.
- Pseudonymity and signatures for the hash sum. The Bitcoin fork is pseudonymous — despite the available information about transactions, it is impossible to track the addresses of senders and recipients accurately. But in technical terms, Bitcoin Cash does not just completely repeat BTC but complements it and considers the negative aspects.
- World perspective. It is not enough to compete with global banking systems to use blockchain technology. Most people are used to paying without privacy and publicity for instant transfers between bank accounts.
In addition to fans of Bitcoin Cash, some people are skeptical about the project. Doubts about the future of cryptocurrencies did not appear by chance — even high positions in the ranking do not guarantee the reliability of digital systems.
Differences between BTC and its BCH hard fork
As was stated before, BCH was created due to some concerns within the BTC community regarding Bitcoin’s scalability issue. The BTC network can solely process seven transactions per second (TPS), while the BCH network can handle significantly more. This fact was designated as one of the main points during the launch. At that time, the BTC block size was limited to 1 MB.
Only at the start the BCH block size was 8 MB. It has since grown to 32 MB.
Larger BCH block sizes mean that they require more processing power to mine, which means more cost. On the other hand, it suggests more possibilities for miners to receive transaction fees. Nevertheless, the massive price gap is perhaps the most significant difference between blockchains.
Another reason for the division within the BTC community was that it was treated more like a store of value than an actual currency. Indeed, even today, it is pretty understandable. Many media outlets still insist that BTC is digital gold with a limited supply. If you’re hoping its price will go up in the future, why would you use it to buy something else? Due to low fees and short processing times, BCH is expected to overtake BTC as an actual currency — in theory, anyway.
On a Bottom Line
Among the thousands of cryptocurrency projects that have descended from Bitcoin, BCH is one of the few that has managed to remain relatively relevant. Although it has not gained the same prominence as Bitcoin itself, some stores continue to accept BCH due to its low fees and faster confirmation.
Nevertheless, the large block sizes raise concerns about the network’s security, which is why Bitcoin is still the leading blockchain network. Its popularity as a cryptocurrency is only growing, so the market liquidity and prevalence of BCH remain low.
In 2022, buying and exchanging BCH is as easy as buying Bitcoin. To place the purchased cryptocurrency somewhere, you need to create a wallet with a bitcoin address. The developers did not make their wallets but offered to use the Bitcoin Core developments as the central storage system. It is convenient for both investors and miners — you can simultaneously store both the first cryptocurrency and its good analog in the same wallet.