Bitcoin Cash is a digital currency that was created in 2017 as a hardfork of Bitcoin. It’s known as an Altcoin (alternative coin) and referred to as BCH or Bcash. In 2018, Bitcoin Cash split into two cryptocurrencies: Bitcoin Cash and Bitcoin SV.
Like its big brother Bitcoin, Bcash is a decentralized peer-to-peer network that uses revolutionary ledger-recording technology known as blockchain. This means transactions are processed, verified and stored in a digital ledger which is impossible to manipulate and close to impossible to hack or attack.
Quick Overview of Bitcoin Cash
- ✔️Quick Overview of Bitcoin Cash
- ✔️Why was Bitcoin Cash created?
- ✔️What are the benefits of Bitcoin Cash?
- What is a block?
- How does the size of Bitcoin Cash’s block make a difference?
- What is the difference between Bitcoin and Bitcoin Cash?
- What is the difference between Bitcoin Cash and Bitcoin SV?
- Why does the size of a block matter?
- Is Bitcoin Cash a safe investment?
- What is Bitcoin Cash used for?
- How do you trade Bitcoin Cash?
Bitcoin Cash was created by ‘rebel’ Bitcoin miners who were concerned about the future of Bitcoin and the scalability of the cryptocurrency. Bitcoin Cash came to the market to address the limitations of Bitcoin where Altcoins such as Litecoin and Ripple threatened its position on the digital currency leaderboard.
Why was Bitcoin Cash created?
Bitcoin Cash was created to increase Bitcoin’s strength in the electronic cash market. It was designed by a peer-to-peer community to increase the block size limit and speed up the transaction processing time.
The aim of Bitcoin Cash is to extend Bitcoin’s positioning into a transaction payment currency to override the market’s perception that Bitcoin is primarily an investment cryptocurrency that’s mainly bought for speculative trading.
Bitcoin Cash competes against a coin like Litecoin that has jumped in popularity because its block generation time is significantly shorter than Bitcoin. Litecoin reduced its block generation time to 2.5 minutes while Bitcoin processing time is about 10 minutes.
The benefit of a faster processing time allows merchants to confirm a transaction in a shorter space of time. A faster transaction time allows Bitcoin Cash to compete against other Altcoins as an electronic coin.
What are the benefits of Bitcoin Cash?
Bitcoin Cash is a hardfork of Bitcoin but they still share the same technological complexities. Both use the same consensus mechanism and supply is capped at 21 million.
Bitcoin Cash solves scalability issues that have plagued Bitcoin which made it an investment currency rather than a transaction currency. Bitcoin could not handle an increase in the number of transactions that were being processed when the blockchain technology surged. This is due mainly to the fact that Bitcoin’s block size is limited to 1MB.
As a result of this limitation, Bitcoin transactions take too long (up to 10 minutes), processing requires expensive equipment and a lot of electricity and the transaction fees are higher. Bitcoin Cash fixed this problem by increasing the size of its blocks to 8MB and, in some cases, up to 32MB.
The larger blocks mean more Bitcoin transactions per minute. The average number of transactions per block on Bitcoin ranges from 1 000 to 1 500. The average number of transactions per block on Bitcoin Cash is up to 25 000 per block.
This increase in block transactions makes Bitcoin Cash far more effective as a payment mechanism for daily transactions. This means Bitcoin can complete with global credit cards such as Visa and Mastercard as well as Altcoins such as Litecoin. The big difference is the fee to transact with Altcoins is significantly cheaper than using Visa which charges high fees for cross-border transactions.
What is a block?
A block is a link in the blockchain technology. It acts as a file where information is permanently recorded and stored securely. A block is a record of some or all of the most recent Bitcoin transactions that have not been recorded in preceding blocks.
In accounting terms, a block is a page in a ledger. As soon as a block is created, it creates an opportunity for the next block in the chain to be created. Once a block is submitted to the blockchain, it cannot be removed or changed in any way.
A blockchain is made up of millions of blocks that are in a constant state of change. A block is virtually impossible to attack or hack. Blocks are created by a peer-to-peer network (nodes) where Bitcoin miners solve complex mathematical equations. They are rewarded in Bitcoins for their effort in solving the maths problem. The same applies to Bitcoin Cash.
How does the size of Bitcoin Cash’s block make a difference?
Bitcoin Cash has larger blocks in its blockchain. This means it has a larger transaction space which very rarely gets congested. At the moment, Bitcoin Cash has fewer users than Bitcoin so the electronic coins can be sent and received faster and for a significantly lower transaction fee.
This makes Bitcoin Cash a simpler alternative to Bitcoin, which was essentially the aim of the hardfork. The creators of Bitcoin Cash wanted to get as many people as possible using the electronic cash as a daily payment mechanism and they will achieve this eventually because the Bcash transaction fees are minimal.
At the same time, the significantly lower transaction fee should not put miners off mining Bitcoin Cash. In fact, they benefit from the software upgrade because they can process more Bcash transactions in the time they would process Bitcoin transactions.
What is the difference between Bitcoin and Bitcoin Cash?
When the software hardfork happened in 2017, anyone in possession of Bitcoin acquired the same number of Bcash. The main difference between Bitcoin and Bitcoin Cash is Bcash allows larger blocks in its blockchain. This improves the transaction processing time per second.
In August 2017 Bitcoin Cash began trading at about USD 240 where Bitcoin traded at about USD2 700. Some would say that Bitcoin Cash is the ‘poor man’s’ Bitcoin but that’s not the case. Bitcoin Cash is like having silver coins in your wallet while your Bitcoin ‘gold’ sits in the vault.
Bitcoin and Bitcoin Cash function as a peer-to-peer cryptocurrency and use open-source software. They both use the same proof-of-work algorithm to timestamp every new block.
One key difference between Bitcoin Cash and Bitcoin is Bcash does not use Segregated Witness (SegWit). SegWit only keeps information or metadata that relates to a transaction in a block. SegWit makes it more expensive to mine Bitcoin because ordering the transactions in the block is time-consuming.
What is the difference between Bitcoin Cash and Bitcoin SV?
Bitcoin Cash created quite a bit of controversy when it came to market in 2017. One faction were adamant Bitcoin should retain small blocks in its blockchain while another faction wanted large blocks. The latter favoured the use of large blocks because it created a more useable virtual currency for daily transactions. The Bitcoin purists were determined to see Bitcoin retain its status as an investment coin.
In November 2018, a hardfork of Bitcoin Cash occurred when two rival factions created Bitcoin Cash ABC and Bitcoin SV. Bitcoin Cash ABC is now referred to as Bitcoin Cash.
The Bitcoin Cash ABC faction was led by entrepreneur Roger Ver and Jihan Wu of Bitmain. The Bitcoin SV faction was led by Craig Steven Write and billionaire Calvin Ayre. The latter created Bitcoin SV (SV is short for Satoshi’s Version) to increase the block size limit to 128MB.
Bcash and Bitcoin SV is both a solution that add a second layer to the cryptocurrency. The split aimed to increase the number of transactions the network ledger could process. Both achieved this by significantly increasing its block size.
The way the cryptocurrency world looks at these semi-hardforks is the same way you’d look at a new version of Microsoft Word. The blockchain technology is consistent but the processing time and add-ons enhance the original product. Bitcoin Cash and Bitcoin SV are a software upgrade rather than a new product.
Why does the size of a block matter?
At the launch stage, the average size of a block in Bitcoin’s blockchain was less than 100KB and the transaction fee was very cheap, only a few cents. This made the blockchain technology weak and vulnerable to attack. To prevent hackers from crippling the Bitcoin network system, the size of a block was limited to 1MB.
When this was implemented, a Bitcoin block was typically generated in 10 minutes. This allowed enough space and time between transactions to maintain the security of the blockchain. Unfortunately, this security measurement became Bitcoin’s Achilles heel because the processing time was slow and the transaction fees increased.
Bitcoin then increased the size of its block to 600K in January 2015. At the same time, the number of Bitcoin transactions surged which caused a traffic jam in the processing pip
eline. It also pushed up the fee for transaction confirmations. The transaction fee is determined by the Bitcoin miners and they typically push transactions with higher fees to the front of the queue to make more money.
The Bitcoin Core team blocked a proposal to increase the block size again. While a debate was raging in the Bitcoin inner circles; a new, more flexible block size was created in the form of Bitcoin Cash.
Bitcoin Cash introduced a larger block into the mainstream. Where Bitcoin blocks are limited to 1MB, Bitcoin Cash is 8MB.
A larger block in the blockchain effectively speeds up the transaction processing time. This means merchants do not have to wait long for a transaction to be processed which allows Bitcoin Cash to compete with credit cards.
Is Bitcoin Cash a safe investment?
Bitcoin Cash is not so much an investment than a daily transaction mechanism. The average size of a block mined on Bitcoin Cash’s blockchain is larger which has two benefits. The transaction processing time is quicker than Bitcoin and the transaction fees are lower.
Bitcoin is the gold standard of cryptocurrencies and Bitcoin Cash is a cheaper alternative for electronic cash. At the moment, Bitcoin Cash is relatively low-profile and not well known but it’s popularity should grow as it takes on its own identity and moves out of the shadow of its big brother.
Unfortunately, the benefits of a larger block and increased transaction speed are the same reasons why investors are slow to take up Bitcoin Cash and are sticking with Bitcoin. The blockchain transaction volume and volume traded through exchanges for Bitcoin Cash does not come close to what Bitcoin is producing.
What is Bitcoin Cash used for?
Electronic cash
Bitcoin Cash is processed through a peer-to-peer network in the same way Bitcoin is processed. However, the processing speed is almost instantaneous and the transaction fee for Bcash is significantly lower. This is the purpose of Bitcoin Cash; to challenge other Altcoins such as Litecoin in the market who are gaining a stronghold as a more productive and usable electronic payment mechanism.
Investment currency
Bitcoin Cash is more or less a software upgrade of Bitcoin and uses the same technology. It’s only the scalability of Bitcoin Cash that sets it apart from Bitcoin. Bitcoin Cash will experience the same volatility in the cryptocurrency market as Bitcoin does and this is were you could get a good return on your investment if you hold onto your Bitcoin Cash for a longer period.
How do you trade Bitcoin Cash?
Bitcoin Cash is traded in the same way as Bitcoin and other Altcoins such as Litecoin. As an Altcoin, it’s a lot easier to trade Bitcoin Cash because you can buy the virtual money using fiat money such as US dollars, Euros, Pound Sterlings and Rands.
What makes trading Bitcoin Cash easy is you can buy it using your credit card or doing an electronic fund payment (EFT). This makes Bitcoin Cash significantly more flexible than Bitcoin.
The first step you take to trade Bitcoin Cash is to get yourself a digital wallet. Once you have a wallet, you can send and receive Bcash almost immediately.
You get a digital wallet through a reputable exchange such as Luno. Register with Luno and open an account. Follow the easy steps to obtain a wallet and transfer funds into it.
There are 3 ways to get Bitcoin Cash:
- Buy Bitcoin through an exchange or a cryptocurrency broker
- Accept Bitcoin Cash in exchange for goods and services
- Mine Bitcoin Cash
Frequently Asked Questions
How do you buy Bitcoin cash?
You can buy Bitcoin cash with your credit card or EFT.
How do you trade Bitcoin cash?
See the ways to trade Bitcoin cash here
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