Bitcoin Cash

Bitcoin Cash (BHC) is the internet’s peer-to-peer electronic cash. It is completely decentralized, has no central bank and does not require a trusted third party to operate. The original Bitcoin used a 1 MB block size, but Bitcoin Cash supporters believe that a larger block size can better serve the currency as it scales. So on August 1, 2017, the Bitcoin blockchain forked into two different chains. Bitcoin still uses 1 MB blocks, while the newly formed Bitcoin Cash uses an 8 MB block size. Bitcoin Cash is essentially a clone of the original Bitcoin blockchain, but with increased block capacity, thus increasing its ability to grow and scale.

Bitcoin Cash is intended to be used as a cheap payment system, much like how Bitcoin was originally designed. Transaction fees are typically less than $0.01, and transaction confirmation times are significantly less than Bitcoin, often taking just a few seconds. Bitcoin Cash is created and maintained by an active community of developers. These developers see Bitcoin Cash as a necessary alternative to Bitcoin, since in their view Bitcoin is more of an investment tool than a payment system. It is designed as a peer-to-peer payment system, removing regulators and other third parties from financial transactions.

History of Bitcoin Cash

The first Bitcoin block was officially mined on January 3, 2009. Since then, the property has exploded in pop culture. However, Bitcoin - the world's first cryptocurrency - still suffers from scalability issues and long transaction times. This is where Bitcoin Cash comes into play.

The idea of Bitcoin Cash was proposed in 2017 to solve Bitcoin’s transaction speed issues. It is a hard fork of the Bitcoin blockchain, meaning the network "splits" into two parts at a certain block. The block contains a fundamental protocol change that invalidates all previous blocks, forcing nodes to "upgrade" to the new chain to continue using it.

Bitcoin Cash is essentially a giant software update through which the old network operates in a different direction than the new network. In this case, the previous network was Bitcoin, and the Bitcoin Cash fork forged its own future. Forks were decided by various miners and developers in the Bitcoin network who wanted to escape from its limitations. After all, many people believe that Bitcoin is for digital transactions, not as a store of value. How can Bitcoin appeal to the mainstream if the above transactions take minutes or even hours at a time? Not to mention the high transaction fees.

However, those who oppose the hard fork have several reasons. For example, Bitcoin Cash has larger blocks, which require a more complex mining process, which may eliminate many miners without computer power. In a way, this concentrates the platform among the most prominent miners, those who can afford the most power, such as companies.

Then comes the forking process. Those who held Bitcoin at the time of the fork also received the same amount of Bitcoin Cash. This is common with hard forks, but some claim it’s a “get-rich-quick” scheme. Bitcoin Cash supporter Roger Ver refuted this statement. An early investor in Bitcoin, Ver is a fan of cryptocurrencies and other futuristic concepts. In 2011, his company MemoryDealers.com became one of the first websites to accept Bitcoin as a payment method, and he has since organized conferences around the technology. Ver has also invested millions of dollars in various crypto projects and is a strong advocate of Bitcoin Cash and its technological upgrades to Bitcoin. He claims it is more "usable" than Bitcoin due to increased transaction sizes. Ver is also known as “Bitcoin Jesus” by many crypto enthusiasts.

Interestingly, Bitcoin Cash eventually had its own forks: Bitcoin Cash ABC (BCHA) and Bitcoin SV (BSV). The former is similar to the original Bitcoin Cash, with a few differences. It reinvests 8% of each block reward into network innovation as a kind of salary for open source developers. Bitcoin Cash only accepts donations, so in a way, Bitcoin Cash ABC is more developer-centric.

Bitcoin SV, also known as Bitcoin Satoshi Vision, has some differences. The nickname "Satoshi Vision" is a callback to the original Bitcoin white paper, which did not call for a second-layer off-chain solution like the Lightning Network. Bitcoin SV focuses on ensuring stability by offering a larger block size than Bitcoin Cash, with a huge jump proposed to 128 megabytes. However, it was ultimately decided that there should be no cap until billions of transactions have been completed. At this point, the community can see what is stressing the network and what is not, possibly voting on a final block size cap.

Leading the BSV push is Australian scientist Craig Wright, who also claims to be the pseudonym of Bitcoin creator Satoshi Nakamoto. While some in the cryptocurrency community question its value, the Bitcoin Cash network has achieved several notable milestones. For example, it processes over 9,000 transactions per second and even put a purported 16.4 million transactions into a block on the platform’s expanded testnet in early 2021. 

How Does Bitcoin Cash Work

On a technical level, Bitcoin Cash works exactly like Bitcoin. Both Bitcoin Cash and Bitcoin have a hard cap of 21 million assets, use nodes to verify transactions, and use a PoW consensus algorithm. PoW means that miners use computer power to verify transactions and are rewarded in BCH for their contributions. However, due to larger blocks, Bitcoin Cash runs faster and has lower transaction fees than its predecessor. It is better suited for small transactions, such as buying a cup of coffee with cryptocurrency.

In addition to this, Bitcoin Cash also supports smart contracts and applications such as CashShuffle and CashFusion. BCH holders using certain wallets can enjoy CashShuffle - a coin mixing protocol that shuffles your Bitcoin Cash with other holders before trading. Therefore, given that Bitcoin Cash is a public ledger, your transactions will be private and harder to trace. Rather than mixing transactions with other transactions, CashFusion places your BCH in one large transaction filled with other CashFusion users. It will then send Bitcoin Cash back to your wallet—unless your transaction has been obfuscated and combined with so many other transactions that virtually no one can trace the path of your holdings.

These are two popular applications in the Bitcoin Cash ecosystem, although they are just the tip of the iceberg. The popularity of Bitcoin Cash has sparked dozens of protocols and other projects to expand the technology and make it more accessible to everyone.

Uses of Bitcoin Cash

Long-term Value Preservation

The total supply of Bitcoin Cash will never exceed 21 million coins, and this is written into the code that defines the Bitcoin Cash protocol. As a decentralized network, Bitcoin Cash users ultimately decide how the protocol evolves — and since it’s not in the interest of participants to dilute their holdings through changes to the protocol, the 21 million Bitcoin limit will almost certainly remain in place forever.

The rate at which new tokens are added to the circulating supply gradually decreases according to a defined schedule, which is also built into the code. The issuance rate halves approximately every four years. This makes Bitcoin Cash an “inflation-resistant” asset.

In April 2020, the third “halving” reduced the issuance of Bitcoin Cash per block from 12.5 to 6.25. By that time, 18,375,000 of the 21 million coins (87.5% of the total) had been distributed. The fourth halving, in 2024, will reduce the issuance to 3.125 BCH, and so on until approximately 2136, when the last halving will reduce the block reward to just 0.00000168 BCH.

Bitcoin Cash’s “set in stone” supply schedule makes it unique among hard assets. In contrast, the supply of gold, although limited, is still affected by supply and demand. As the price of gold rises, more gold miners are incentivized to search for gold. This results in an increase in gold supply, which puts downward pressure on prices.

Efficient Medium of Exchange

Bitcoin Cash enables peer-to-peer payments between individuals — just like cash, but in the digital realm. Crucially, the fee to send Bitcoin Cash is typically less than a cent per transaction, and settlement is nearly instant regardless of the location of the participants. This allows Bitcoin Cash to be used not only for remittances and cross-border trade, but also for everyday transactions such as buying groceries. With fees and transaction times so low, Bitcoin Cash is also great for microtransaction use cases like tipping content creators and rewarding app users.

Investment Profit

Economic freedom refers to the ability of individuals to freely acquire and use personal resources in the manner of their choosing, either independently or in collaboration with others. It is an essential component of human dignity and basic human rights. Money—as an instrument that can be used to store and exchange value—is a central tool for achieving economic freedom.

Bitcoin Cash offers an alternative form of currency that supports economic freedom on an opt-in basis. Unlike national currencies, Bitcoin Cash integrates strong protections against currency confiscation, censorship, and devaluation through uncapped inflation.

What is the Difference Between Bitcoin Cash and Bitcoin?

Although Bitcoin Cash is based on the Bitcoin blockchain, there are key differences between the two cryptocurrencies. With a block size of 1 MB, Bitcoin can only process about 7 transactions per second. One of the main reasons for the hard fork was that Bitcoin Cash supporters wanted larger block sizes to expand transaction volume and speed. As a result, Bitcoin Cash started with a block size of 8MB and later increased it to 32MB, meaning it is now capable of processing over 100 transactions per second.

Another difference between the two is transaction fees. Bitcoin Cash network fees are lower than Bitcoin, averaging between $0.20 and $0.25 per transaction. Meanwhile, Bitcoin charges an average of $0.40 and $2 per transaction. This figure does not include the creation of Bitcoin Cash between 2017 and 2018 and the period when Bitcoin transaction fees briefly rose to $55 at their peak.

A further difference between Bitcoin and Bitcoin Cash is that Bitcoin Cash does not rely on the Segregated Witness consensus layer (SegWit) scaling solution used by Bitcoin and Litecoin (another forked Bitcoin altcoin) to optimize transactions.

Future of Bitcoin Cash

When it comes to the future of cryptocurrencies, Bitcoin Cash will definitely have its place in the market. While Bitcoin dominates, as more merchants accept this asset, a large portion of the population will surely move to Bitcoin Cash. After all, there’s no denying that BCH is a faster and cheaper network.

However, Bitcoin Cash is competing with similar projects, chief among them Litecoin (LTC). Litecoin’s characteristics are different from Bitcoin Cash in terms of market capitalization. It really depends on which platform meets the needs of specific users and which platform brings features that the public needs more.