What is Bitcoin Cash & How Does It Work
The question that people will ask about Bitcoin Cash is how it is different to Bitcoin. There was a lot of controversy regarding the hard fork that took place in August 2017 to create Bitcoin Cash, with a lot of this debate ongoing. The main reason for the beginning of Bitcoin Cash was because a lot of people were not happy with the segregated witness feature that was placed into the original Bitcoin code in mid- 2017. As a result, Bitcoin Cash (BCH) was developed and became the first Bitcoin network hard fork. This hard fork took place in August 2017 and since then, Bitcoin Cash has grown to be the 4th largest cryptocurrency in terms of market capitalisation. In May of 2017, Bitcoin transactions were taking four days to be processed in some cases.
There were also significant fees associated with expediting these transactions. This of course went against the inherent principles that Bitcoin was built upon – namely being a payment method which was ultra-quick and very cheap when compared to the traditional payment systems. The average transaction fee went as high as the $28 mark, sometimes hitting highs of $55. The main issue with the Bitcoin network was and is the scalability. The blockchain block size for Bitcoin had originally been set at 1MB, which offered some benefits, but it also meant that as the network became more popular, there would be rising unconfirmed transactions and fees.
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The pros of the 1MB block size was that it helped to prevent Denial of Service (DoS) attacks which overload the network when an illicit party intentionally spams the network with micro transactions. It helped to limit the size of the blockchain, making everything more manageable. However, there were still rising tensions which saw the community divide. The opposition were traditionalists of Bitcoin who believed that Bitcoin was straying away from what was originally envisioned, which is a transfer of exchange which was seamless, cost effective and trustworthy. Then there were miner and security proponents who wanted the current level of fees and mining procedures to remain and ensure that the high decentralisation level was maintained.
Until the start of 2017, Bitcoin enthusiasts kept aligned under a core set of shared rules. However, once the scalability issues became clearer, it was obvious to a lot of people that the 1MB block size was not going to be able to keep up with transaction volume into the future, especially as the popularity of Bitcoin transactions was growing massively. The solution the traditionalists provided was to increase the size of blocks up to 8MB. The community could not come to agreement on this issue, which is how Bitcoin Cash spawned. This hard fork took place on the 1st of August 2017. It saw current Bitcoin holders awarded Bitcoin Cash tokens at 1:1. On this launch date, Bitcoin was priced at $2,718.26, with Bitcoin Cash launching around the $380.01 mark.
What is Bitcoin Cash?
- Bitcoin Cash is a peer-to-peer structured payment system and it originated from a Bitcoin network hard fork.
- While there are certain similarities between the two networks, there are some integral differences at the root of things.
- Bitcoin Cash aims to fulfil the original promise from the creators of Bitcoin, acting as a peer-to-peer form of electronic cash and was tasked with unrestricted growth, worldwide adoption, innovation that did not need permission and development in a decentralised manner.
- They also aimed to stick to the on-chain scaling roadmap that was laid out in the original Satoshi Nakamoto’s roadmap. This is why the blockchain was increased to 8MB, so it would be able to handle mass adoption.
- Bitcoin Cash is a good option as a digital currency because people across the world can send payments online without having to deal with an intermediary that is heavily centralised, often intrusive and inefficient.
- By getting rid of this 3rd party, the traditional financial system is completely rocked. Those involved in the sending of a payment via Bitcoin Cash knows that the transaction is irreversible, which helps to prevent against fraud.
- While there is a certain level of privacy related to the traditional payment models, Bitcoin Cash completely takes access to information risks out of the equation.
- Using public keys and the public distributed ledger, any user is able to see what a given key is sending to another without knowing any other information that is linked to the transaction.
Is it Popular?
Judging by the market cap, Bitcoin Cash has received a lot of support since the hard fork. More and more major brokers and exchanges are supporting it. In the beginning a lot of wallet providers, exchanges and the best crypto brokers were hesitant about Bitcoin Cash because of all the tension that surrounded the hard fork. Over time with the clear level of consumer demand and rising prices convinced these parties of the value inherent in the cryptocurrency. It is now many platforms’ favourite option. Being listed on Coinbase at the start of 2018 was another big factor in the rise of Bitcoin Cash, because it made it much easier for people to buy using credit/debit cards. There have also been some significant investors who have gotten involved as they are now seen as being a lot more legitimate.
Despite Bitcoin Cash mining being more volatile than its competitors when it first started out, it is still profitable to mine. Towards the end of 2017, there was a new algorithm introduced which allowed them to stabilise the volatility and difficulty of mining. This led to a further influx of miners and therefore led to a better hashrate. There was also another hard fork on the 15th of May. This Bitcoin Cash hard fork saw the block size increase by a multiple of four, up to 32MB from 8MB. The aim was to solidify the position of Bitcoin Cash as being a superb option for peer-to-peer exchange.
Differences between Bitcoin and Bitcoin Cash
While Bitcoin was the original cryptocurrency, there are many people who were not happy with how it developed over time due to a number of key issues. They decided to focus their effort on Bitcoin cash or other digital currencies instead.
- With the faster transaction times and cost-effective fees, you could say that the current version of Bitcoin Cash is very similar to what Bitcoin was before scalability issues first became apparent.
- They are both trying to connect people into a global economy and disrupt the hold the traditional financial institutions and banks have on the monetary payment system across the world.
- They have similar messages, but it the process by which they hope to achieve these goals where they differ.
- Traditionally, Bitcoin cash has led the way in terms of average block time, up until May where Bitcoin managed to catch up, with BCH being at 10.43 minutes, with Bitcoin being 10.36 minutes.
- Bitcoin Cash has much lower transaction fees than those of Bitcoin, with this being one of the core causes of the original hard fork.
- Bitcoin fees have decreased in recent times, but Bitcoin Cash is still a lot cheaper to use.
The main criticism that Bitcoin Cash receives is that it has a higher level of centralisation than Bitcoin. While the greater block size was made with good intentions, there is more computing power required to do this, which means more expensive rigs for mining are needed. Therefore, the mining pool who is working on encryption, storage and transactions on the network is lower. Therefore, there is a certain level of power that this minority has when compared to the massive pool of miners seen with Bitcoin. There have been a few other incidents of note which have shaken some of the confidence in Bitcoin Cash. It was in November 2017 that some believed that there was a potential pump and dump when the price suddenly spiked to the $2,500 mark before sharply falling down to the $1,000 mark, all in the period of 48 hours.
This had come after a number of key cryptocurrency influencers had been heavily praising Bitcoin Cash before this crash came. However, these were mainly advocates of Bitcoin Cash who were happy about it hitting all-time highs. Most of the pump and dump schemes are not going to broadcast how they have made their movements in a public setting. There was also an issue when trading of Bitcoin Cash was temporarily suspended on Coinbase after it was revealed that the authorities believe some utilised insider information that it was going to be added onto the Coinbase offering and subsequently made profitable trades.
Steadily Growing Popularity
Having said all of this, the popularity of Bitcoin Cash has been steadily growing over time. Increased trading activity in South Korea is one of the reasons for this growth. The recent hard fork has also provided investors with a lot of confidence in the future potential of this network, despite the overall cryptocurrency market being in the doldrums. With concerns about Bitcoin’s scalability issues continuing, more and more people may decide to jump over the fence and take their business to Bitcoin Cash. The Bitcoin Cash developers are passionate about their offering and they are hard at work to help it gain mainstream adoption. The main criticism Bitcoin Cash receives is that it has a higher level of centralisation than Bitcoin.
While the greater block size was made with good intentions, more computing power required to do this, which means more expensive rigs for mining are needed. Therefore, the mining pool who is working on encryption, storage and transactions on the network is lower. Therefore, there is a certain level of power that this minority has when compared to the massive pool of miners seen with Bitcoin. Trying to predict the future price of investment is going to be fraught with danger. This is especially the case when you are dealing with a market as volatile as that of the cryptocurrency sector. They are trying to wrestle dominance of the peer-to-peer digital payment world from Bitcoin, but there’s a long way to go to get there.
What is Bitcoin Cash
As the very first cryptocurrency, Bitcoin was of course going to have some issues at some stage. While the idea on paper sounds great, they have been struggling with significant scalability issues since the world of cryptocurrency really started to take off in 2017. The increased congestion led to extremely high fees and slow processing times for transactions. This spawned Bitcoin Cash which is similar to what the early version of Bitcoin was – fast and cheap transactions.
Bitcoin Cash has grown steadily over time in terms of adoption and they are currently the 4th largest cryptocurrency in terms of market capitalisation and are listed on the best crypto brokers and supported by the leading wallets. While there are some concerns about the extent of Bitcoin Cash’s decentralisation, they are committed to pushing forward in the future and taking over from Bitcoin as the number one peer-to-peer payment system that is decentralised and links people across the world with fast and cheap transactions.
This is why many people are implementing Bitcoin Cash into their crypto trading strategies. This is made even easier thanks to the support the best in crypto brokers comparison lists show for this digital currency.