Bitcoin Cash (BCH) is a cryptocurrency forked from Bitcoin. It was formed in 2017 following a significant disagreement in the Bitcoin community.
The dispute was regarding the treatment of more transactions with Bitcoin. As Bitcoin gained in popularity, its network’s need escalated. Confirmations on transactions may be delayed. Additional fees may be charged during peak hours.
There were members of the community who felt Bitcoin required bigger blocks. They said this would enable a higher number of transactions to be completed straight on the blockchain. Others were interested in other scaling options.
This difference eventually resulted in a hard fork. This resulted in the creation of Bitcoin Cash as a distinct cryptocurrencies.
Why Was Bitcoin Cash Created?
The initial size of the Bitcoin blocks was 1 MB. There was a limit to the number of transactions that could be placed on each block. The more people began to use Bitcoin, the busier the network became.
If the blocks are full, users may experience delays. They might also contend by charging higher fees for their transactions to be processed.
This posed an important question. Does it make sense to expand Bitcoin’s blocks?
Others were in favor of bigger blocks, some developers, some miners, some users. They thought that Bitcoin should be a viable option for daily transactions. They wanted to increase the number of transactions per block.
There were other concerns among the rest of the community. They feared that larger blocks might lead to the running of a full node becoming more costly. This may make it more difficult for some to be involved in sustaining the network.
The 2017 Bitcoin Cash Hard Fork
Bitcoin Cash is a fork of Bitcoin that occurred on August 1, 2017. It was created from a hard fork of Bitcoin’s blockchain.
A hard fork is a change in the blockchain rules that causes them to be incompatible with the previous rules. In this case, the change resulted in a new network having its own rules.
Bitcoin Cash raised the size of the blocks. This provided more space for transactions in the network.
The goal was simple. There was a need for a cryptocurrency that would be able to process more transactions on the main blockchain. They also wanted it to be low-cost, as well.
Bitcoin has been maturing on its own. Bitcoin Cash also started developing their own community and network.
Since then, Bitcoin and Bitcoin Cash have been two distinct cryptocurrencies.
How Does Bitcoin Cash Work?
Bitcoin Cash is based on blockchain to store transactions. It also employs the proof of work system.
Miners are vital parts of the network. They are responsible for verifying transactions and adding new blocks to the blockchain, using computing power to carry out these tasks.
The transaction is sent to the network when someone sends BCH. Miners gather transactions and form them into blocks.
Then they will compete to add a valid block by doing the proof of work. The more confirmations a transaction has, the harder it will be to reverse.
The BCH is not dependent on any bank for authorizing all transactions. Instead, it’s continuously dependent upon distributed participants.
The user interface to the network is realized by cryptocurrency wallets. They can hold BCH and transfer it to other wallet addresses using a wallet.
Users should also ensure that they have the security of their private keys and recovery data. Losing access to a wallet can lead to loss of access to the BCH stored in the wallet.
Bitcoin Cash vs. Bitcoin
Bitcoin and Bitcoin Cash have the same beginning. They’re now separate networks, though.
The major difference between them is their perspective on scaling.
Bitcoin Cash went with bigger blocks. It has increased its block size from the Bitcoin’s original limit of 1 MB. Later, it grew to 32 MB.
Bitcoin did not. It implemented new technologies including Segregated Witness (SegWit). It also created other scaling solutions, such as the Lightning Network.
The two networks had also become distinct as well.
Bitcoin is considered as a store of value and digital currency. Bitcoin Cash is more about daily transactions.
The fees and confirmation times may also vary. These costs are impacted by network activity, transaction size and more.
What Can Bitcoin Cash Be Used For?
Bitcoin Cash’s primary objective is to facilitate digital payments. Users can transfer BCH instantly to other users. They need not deal with a traditional bank to execute the transaction.
Businesses may also accept BCH as a payment option if they wish to do so. This can provide a means for customers to pay, as well.
BCH can also be transferred between cryptocurrency platforms. Some people view it as a digital asset. But, it is not accepted everywhere. Not all merchants or platforms accept Bitcoin Cash.
Bitcoin Cash and Transaction Fees
Transaction fees are also a crucial component of Bitcoin Cash. Typically users will have to pay a fee for sending the cryptocurrency. These fees serve to reward the miners and to prevent spam.
The amounts of fees may fluctuate depending on network demand. Bitcoin Cash backers thought that larger blocks would offer more transaction capacity. There would be less competition for block space when demand is high with more space.
The fee for each block reward in the BCH network, however, is not set. Transaction costs can vary depending on the activity on the network, the size of the transactions, market conditions, and the actions of miners.
Bitcoin Cash faces several challenges.
Competition is among them. There are thousands of crypto-currencies in the market. Many networks now have fast and low cost transactions.
Bitcoin has also evolved other scaling solutions.
Adoption is another challenge. The more people and businesses that use a payment network, the more valuable it will be. If merchants aren’t accepting BCH, its value is affected as a payment option.
There is a need for ongoing development and infrastructure of the network. It has a complex ecosystem with wallets, exchanges, payment processors, developers, miners, and merchants.
Final Thoughts
The disagreement over what Bitcoin is going to be, was the cause of Bitcoin Cash.
Some residents of the community wanted more land. This was believed to boost the volume of transactions and facilitate normal transactions.
This disagreement later led to the formation of BCH in August of 2017. Since then, Bitcoin and Bitcoin Cash have developed independently. Bitcoin Cash is still very much about P2P payments. It’s proof of work-based and enables users to directly transfer value.