What Is Bitcoin Cash (BCH), and How Does It Work?
Since Satoshi Nakamoto launched the first cryptocurrency in 2009, the Bitcoin community has made a lot of contributions to refine the network – that’s how Bitcoin Cash appeared. The difference between these cryptocurrencies is fundamental, because they represent two independent blockchains, each with its own technical peculiarities. BCH is a significant improvement of the Bitcoin Satoshi vision, which is why it has also become a widespread crypto currency and continues gaining traction. So, what makes Bitcoin Cash protocol better than traditional payment systems in many ways, and how can it be useful for regular crypto owners?
What Is Bitcoin Cash (BCH)?Bitcoin Cash is a hard fork from Bitcoin that resulted in the production of BCH cryptocurrency in 2017. It happened when the original blockchain split: two incompatible networks appeared (they are known as hard forks). A hard fork is a fundamental modification to a protocol that makes old transactions and blocks valid. Every node or user must update to the most recent protocol version after a hard fork.
Much like how Bitcoin was intended to be used initially, BCH serves as a cheaper payment mechanism. Transaction processing takes much less time than for BTC (as a rule, a couple of seconds), and commissions rarely exceed one cent.
The Bitcoin Cash community has created and is responsible for maintaining BCH. The community considers Bitcoin Cash as a vital complement to Bitcoin because, in their eyes, the original token is now more of an investment tool than a means of exchange. In order to eliminate central authorities’ agencies and all the middlemen from financial operations, they invented Bitcoin Cash as a P2P payment platform.
The blockchain that enables BCH transactions is called the Bitcoin Cash Node. It may be compared to a virtual machine that powers operations within a network.
Bitcoin Cash's Core FeaturesAs a decentralized P2P system, the Bitcoin Cash protocol does not depend on any centralized entities like banks or governments. Hence, it represents a deep reinvention of digital finance and national currencies. Bitcoin Cash's major features include:
- 100% accessibility. Like any cryptocurrency, it is not regulated by a single entity, so you don’t have to seek anyone’s approval before using it.
- Anonymity. Transaction performers cannot be tracked, so anyone can handle BCH without legal restrictions.
- Transparency. Data related to every transaction is written in blocks that are linked together upon generation to form a chain, and the ledger is updated regularly. This information cannot be faked or deleted, and the history of transactions and asset ownership (wallet addresses) can be viewed by anyone.
- Decentralization. People and organizations that provide computational power and store the public ledger data (block information) are called "nodes". This is what makes information permanently available (even if it gets deleted on one node, there are many others with the same datasets).
- Strict rules. To reach consensus on the recent changes to the ledger, nodes operate according to a set of particular rules. Written transaction data can be modified only if the majority of nodes reach a new consensus, which is nearly impossible. For these reasons, hacker attacks are very hard to perform.
- Immutability. Once they get recorded in the blockchain, transactions cannot be reversed or somehow modified – this rule lies at the core of the code.
- Security. Miners compete to generate blocks and send them to the ledger through an algorithm known as Proof of Work (PoW). The hardware and energy requirements of PoW mining make network breaches too expensive because attackers would need to possess at least 51% of the coins.
- Fixed supply. The BCH supply will never exceed 21 mln coins. This makes it a reliable and limited asset, allowing owners to store value in a digital format.
- Low commissions. Transactions of any value, regardless of location (including cross-border transactions) can be completed with BCH in a dependable, quick, and cheap way.
How Does Bitcoin Cash Work?Technically speaking, the Bitcoin Cash protocol functions much like its parent blockchain. Both Bitcoin networks use nodes to verify operations, have a hard ceiling of 21 mln coins, and employ the PoW algorithm (in which miners contribute computational resources to validate operations and are compensated in BCH).
Thanks to the higher block size, BCH runs faster and charges less for transactions than its predecessor. It is considerably more appropriate for minor purchases, like groceries.
Moreover, Bitcoin Cash enables smart contracts and various apps. For example, CashShuffle enables a coin mixing technique that shuffles your Bitcoin Cash with other owners prior to a transaction (it is available to BCH holders using particular wallets). As a result, despite Bitcoin Cash being a public ledger, your transactions are private and considerably more difficult to track.
CashFusion packs BCH into a single transaction with other users rather than mixing it with different transactions. Then, it returns that BCH to your wallet, but your transaction has been mixed up and added to so many other transactions that (hopefully) no one can determine how it got into your hands.
How Is Bitcoin Cash Different From Bitcoin?By boosting the block size to 32 MB, BCH offers a solution that enables packing more transactions into a single block. When the original Bitcoin Cash was first invented, there were often 1-1.5k transactions in each block on the Bitcoin network.
Segregated Witness, a different approach to block generation, is meant to group together even more transactions. As a rule, a block contains all transaction-related details, while SegWit allows adding only metadata.
Is BCH Still Available?
Yes, it is possible to hold and trade BCH. At the moment of writing this article, there were over 19.4 mln BCH in circulation and it was ranked number 18 in terms of the market capitalization of all cryptocurrencies with $4 billion. At that time, it was trading for about $204.
Has Bitcoin Cash Been Successful?The major goal of Bitcoin’s alternative was to provide affordable and non-regulated transactions, so Bitcoin would become the most convenient means of payment. A fast, dependable, low-cost network has been the main priority in the short term, along with "leveraring an advanced mining node that reacts to feedback and comes with visible improvements."
Despite being designed as a coin for minor daily transactions, Bitcoin Cash's larger block size and throughput have not yet led to widespread adoption among the community. Instead, the cryptocurrency has faced volatility. However, it appeared to be more successful than Bitcoin ABC and Bitcoin SV cryptocurrencies.
What Is Bitcoin Cash Used For?Appearing as a more convenient and agile version of the original Bitcoin, BCH proves to be useful for different purposes. Here are a few use cases where it can be successfully applied.
Long-term store of valueSince there won’t be more than 21 mln BCH coins in circulation, the asset is more likely to resist inflation. Hence, its price stands a higher chance of growing in the long run. Furthermore, Bitcoin Cash users maintain ultimate control over the protocol, so they can rest assured no one will steal or freeze their funds.
Medium of exchangeBitcoin Cash works as a P2P payment system. Regardless of senders' physical locations, Bitcoin Cash payments come with a minor fee (a few cents), and it takes mere seconds to confirm transactions. This makes BCH suitable for minor purchases, not to mention large-scale transactions and cryptocurrency swaps.
Economic independenceLike its parent coin, BCH was designed with owners’ independence in mind. In contrast to fiat money, it establishes protection against:
- Confiscacion of money
How to Buy and Use Bitcoin CashYou can buy Bitcoin Cash and trade it on several well-known exchanges, but it may not be possible to do so anonymously, as the majority of significant exchanges demand KYC and AML.
If you have a Bitcoin Cash wallet, you can transfer the assets to other network peers. If you want to cash it out, note that a few Bitcoin ATMs support this coin. PayPal also processes BCH payments, depending on your country of residency.
Bitcoin Cash and other cryptocurrencies are accepted as payment by many different businesses worldwide. Additionally, there are websites for e-commerce, travel, commodities, services, and other things that may support the asset.
The Future of Bitcoin CashThe Bitcoin Cash blockchain is undoubtedly carving out a niche for itself in the cryptocurrency industry as it relates to the future. Even if the Bitcoin network currently enjoys the greatest popularity, BCH will undoubtedly get a lot of attention as more businesses start to embrace it. After all, BCH offers a higher transaction speed and is a more affordable network.
ConclusionDespite its similar name, Bitcoin Cash significantly differs from BTC due to the refined blockchain technologies at its core. It turned out to be one of the most successful hard forks, unlike Bitcoin Cash ABC and Bitcoin Gold, and continues to be widely used by the crypto community. Although it is not likely that BCH will outperform BTC in terms of adoption and price, it can serve as a convenient and reliable payment method for fast and frequent transactions.
Is Bitcoin Cash better than the Bitcoin ecosystem?From a technical standpoint, the Bitcoin Cash fork is a better solution because it allows for faster and cheaper transactions. Hence, BCH is recommended when you need to send cryptocurrency quickly and frequently. Unlike Bitcoin Cash ABC and other hard forks, this cryptocurrency proved to be viable.
Is Bitcoin Cash a good idea?The Bitcoin Cash network is a technical improvement of the Bitcoin blockchain, so it is highly valued by the community. The cryptocurrency proves to be efficient in various use cases, so it’s a nice alternative to BTC.
Is Bitcoin Cash risky?It might not be as secure as Bitcoin because fewer miners are required to process and confirm Bitcoin Cash transactions, which might make it easier to breach the network.
Why is Bitcoin Cash so cheap?Despite being a hard fork of Bitcoin, BCH is still not as widely used as its parent cryptocurrency. The unfavorable circumstances for miners are another factor contributing to the low price of Bitcoin Cash (BCH) – it has a poor economic throughput.
Can Bitcoin Cash reach 1 million?This might happen if the BTC price surpasses $1 million, because altcoins follow its lead. Taking into account the fact that there are supposed to be 21 mln BCH coins in circulation, it would need to gain immense capitalization.
DISCLAIMER: None of the authors, contributors, administrators, or editors connected to OWNR Wallet encourage readers to invest in Bitcoin Cash without doing proper research on their own. This article is purely for educational purposes only.