Bitcoin Cash (BCH) is a digital currency born out of a Bitcoin hard fork in August 2017. It’s the 4th largest digital currency in the world, with a market cap of more than $14 billion USD. This beginner’s guide gives you an easy way to understand BCH and its origins
WHAT IS BITCOIN CASH?
The Bitcoin Cash website defines itself as “peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate.”
You may recognize the phrase “peer-to-peer electronic cash” from the title of Satoshi Nakamoto’s whitepaper. According to the BCH community, they aim to continue Nakamoto’s original version of Bitcoin as an inexpensive peer-to-peer online payment system.
BCH supporters claim that Bitcoin’s growth and utility as a currency has stagnated due to higher transaction fees and long confirmation times. Their solution was to increase the size of each block in their blockchain, in an effort to lower fees and speed up confirmation times.
However, this solution was not readily accepted by the rest of the Bitcoin (BTC) community, resulting in a lot of political and ideological debate. After months of unresolved discussion, the bitcoin community split in August 1, 2017, and BCH was born.
THE BIRTH OF BITCOIN CASH
When bitcoin went through a hard fork in August 1, 2017, it resulted in the creation of a second digital currency. We won’t get into too much detail about hard forks today, but suffice to say that it is a permanent split in the Bitcoin community caused by a difference in scaling perspectives.
Since there are no central authorities controlling digital currencies, changes in the blockchain are decided by consensus. If enough people in the community disagree with a change, they can create a similar but distinct coin and proceed with their solutions.
The BCH fork happened because the transactions per second for Bitcoin was nearing its limit. When Satoshi Nakamoto created Bitcoin back in 2009, he envisioned an online payment system that allowed its users to transact directly. As interest towards Bitcoin picked up in 2017, more and more people started using it. This made the blockchain more congested.
This means that, prior to the Bitcoin blockchain making additional technical changes, fees kept increasing and processing times became longer. Obviously, this was not good for a digital currency trying to be a mode of payment.
BCH supporters claim that the solution would be to increase the block size from 1MB to 8MB, whereas BTC supporters pushed forward with their plan to improve scalability with Segregated Witness (SegWit). BCH supporters believe that their solution will allow the network to handle more transactions per second. Faster confirmations also mean that users do not have to pay high fees for their payments to be successful.
BITCOIN CASH FEATURES
Increased block size: Each block can now handle 32MB (already upgraded from 8MB) worth of transactions.
Cheaper fees: With the added capacity in the network, BCH could handle around 2 million transactions per day at a lower cost.
Difficulty Adjustment Algorithm: Modifications made in the algorithm to confirm blocks have been made to ensure that it is not too easy or too difficult.
The scalability of BCH allows it to serve as electronic cash that is used over the Internet. When merchants and customers use BCH, they can rely on the network to confirm their transactions quickly. With this solution, the BCH community hopes to fulfill the vision of Satoshi Nakamoto.
While BCH scaled through increasing the block size, Bitcoin has also implemented its own upgrade to confirm more transactions and lower costs. They’ve released an change called Segwit which frees up space in the network and allows for further upgrades.
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