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All you need to know about Bitcoin Cash cryptocurrency

For a crypto novice, it can be confusing why there are different types of Bitcoin in an exchange site. From Bitcoin SV to Bitcoin Gold, more than one Bitcoin exists. But among this array of Bitcoin alternatives, one reigns as the first and most popular one: Bitcoin Cash.

Bitcoin Cash was the first of its kind but what makes it different from its predecessor and what separates it from the rest? Should you favour one Bitcoin altcoin above another? Find the answers to all of your Bitcoin Cash cryptocurrency related questions here at CryptoShimbun.

What is Bitcoin Cash?

Bitcoin Cash (BCH) was developed with the intention of using Bitcoin as ‘cash for the world’ instead of a store of value the way it is mainly used today. Created in August 2017, Bitcoin Cash was brought into existence when a group of network users broke off from the Bitcoin blockchain and created their own with bigger blocks compared to Bitcoin’s. 

By increasing the block size, the hard fork presented a solution to Bitcoin’s long-time problem in scalability. The block size upgrade from Bitcoin’s 1MB to 32 MB allowed for more transactions to be included in a block before they are uploaded to the blockchain. As a result, transactions are processed at a much faster rate and transaction fees remain low.

During the forking on August 1 2017, many transactions got delayed since the mining power in the Bitcoin blockchain got divided into two systems. Consequently, transaction fees skyrocketed to an average of US$37 per transaction because of users outbidding each other to have their transactions processed first.

What is a fork?

Forking happens when different groups of people in a decentralized network agree to disagree and decide to take things in a different direction. It’s a demonstration of democracy in the crypto world, which only shows that no one person decides for the entire network. 

Unless all members are in agreement, no further action will be taken and in case of disagreement, the parties can do whatever they want as long as they are backed by a significant number of people. 

Brief history of Bitcoin Cash

In Bitcoin’s case, two groups provided two different solutions to the protocol’s scalability problem and failed to reach a consensus. Proponents of Bitcoin Cash belonged in the first group. 

After agreeing to disagree, the two groups decided to split and do things their own way, resulting in two blockchains: the original Bitcoin blockchain and the new fork Bitcoin Cash. However, even with this separation, the Bitcoin Cash team still utilizes Bitcoin’s protocol after making a few major changes.

The first group called ‘big blockers’ believed that the solution is to increase the block size limit, allowing more transactions to be verified at once. 

On the other hand, the second group called ‘small blockers’ or ‘decentralists’, believe that the key to improving scalability lies in Segregated Witness or SegWit which limits the information stored in blocks. With fewer data needed to be packed in a block, the transaction time can be cut in half.

After the heated debate over which solution will be carried out, the hard fork occurred. The original Bitcoin network adapted SegWit which is still used today while big blockers created Bitcoin Cash cryptocurrency, creating a blockchain with blocks the size of 32MB.

Bitcoin Cash underwent its own forking in November 2018, giving birth to Bitcoin SV which stands for Satoshi’s Vision. Bitcoin SV wanted to further increase the block size from 32MB to 128 MB so its main proponents broke free from Bitcoin Cash’s blockchain and created their own.

Why was Bitcoin Cash created?

Bitcoin blocks are uploaded every 10 minutes which translates to only 4.6 transactions validated per second. Compared to financial services giant VISA’s 1,700 transactions per second, it is not an ideal rate for a payment system intended to be a daily medium of exchange.

Because of the slow transaction speed, users increase their fees as a way to ‘cut in line’ and have their transactions verified first. The high demand in verification led to a massive increase in transaction fees, creating another problem for the Bitcoin network.

Proponents of the hard fork recall the vision of Bitcoin’s creator, Satoshi Nakamoto, for a peer-to-peer cashless payment system. With Bitcoin’s restrictions in scalability and transaction time, this vision has become hard to reach. Instead of being used as a medium of everyday exchanges as Nakamoto intended, Bitcoin has become more of a store of value like gold.

Roger Ver is one of the most prominent network users who pushed for the Bitcoin Cash hard fork. He believes that with a larger block size limit, Bitcoin Cash becomes more ideal for day-to-day transactions. Since there’s a larger vessel for transactions, people won’t have to outbid each other and transaction fees will remain low.

The difference between Bitcoin and Bitcoin Cash

So what differentiates Bitcoin from Bitcoin Cash? Firstly, Bitcoin Cash has a bigger block size compared to Bitcoin’s small limit of 1MB. When it was first introduced, Bitcoin Cash’s block size was only 8MB. It was later upgraded to 32MB to accommodate more transactions.

Another major difference between the two is SegWit. After the hard fork, the Bitcoin protocol adapted SegWit which only retains essential metadata in the block, effectively reducing transaction size by 75%. With this new implementation, more transactions can be included in a block and verified at a faster rate.

Using Bitcoin Cash today

Compared to its predecessor, Bitcoin Cash is more ideal when making everyday transactions. Though the transaction rate still can’t compare to traditional financial companies such as VISA, it’s the best the crypto sphere has to offer. With smaller fees and a faster transaction rate, it’s worth experiencing for yourself what BCH can do.

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