This is how Bitcoin Cash project website is defining itself: “Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate.” Did you notice the emphasis on the words “peer-to-peer electronic cash”? It is done by design because the primary motivation of bitcoin cash’s existence depends solely on carrying out more transactions as Jimmy Song points out in his Medium article.
Bitcoin Cash (BCH) is a lot like Bitcoin but has some very noticeable differences:
The blocksize is 8 mb.
It won’t have segwit.
It won’t have the “replace by fee” feature.
It will have replay and wipeout protection.
It offers a way to adjust the proof-of-work difficulty quicker than the normal 2016 block difficulty adjustment interval found in Bitcoin.
Since BCH is a result of a hardfork, anyone who possessed BTC got the equal amount of coins in BCH PROVIDED they didn’t have their BTC in exchanges and were in possession of their private keys at the time of the hardfork. So now let’s go through certain interesting features of Bitcoin Cash.
How Bitcoin Cash prevents replay attacks?
One of the best features of Bitcoin Cash is how it circumnavigates one of the biggest problems that any cryptocurrency can face post-forking, the replay attack.
What is a replay attack?
A replay attack is data transmission that is maliciously repeated or delayed. In the context of a blockchain, it is taking a transaction that happens in one blockchain and maliciously repeating it in another blockchain. Eg. Alice is sending 5 BTC to Bob, under a replay attack she will send him 5 BCH as well, even though she never meant to do that.
So, how does bitcoin cash prevent replay attacks? (data taken from Andre Chow’s answer in stack exchange)
Using a redefined sighash algorithm. This sighash algorithm is only used when the sighash flag has bit 6 set. These transactions would be invalid on the non-UAHF chain as the different sighashing algorithm will result in invalid transactions.
Using OP_RETURN output which has the string “Bitcoin: A Peer-to-Peer Electronic Cash System” as data. Any transaction which contains this string will be considered invalid by bitcoin cash nodes until the 530,000th block. Basically, before that block you can split your coins by transacting on the non-UAHF chain first with the OP_RETURN output, and then transacting on the UAHF chain second.
How does Bitcoin Cash attract miners?
Any cryptocurrency depends heavily on its miners to run smoothly. Lately, bitcoin cash has attracted a lot of miners which has significantly improved its hash rate. Here is how they did that. For this, we will take the brilliant Jimmy Song’s help again.
Bitcoin cash has a set rule as to when it decreases its difficulty. Before we see the rule it is important to understand what Median Time Past (MTP) is. It is the median of the last 11 blocks that have been mined in a blockchain. Basically, line up the last 11 blocks one after another and the time at which the middle block is mined is the median time past of the set. The MTP helps us determine the time at which future blocks can be mined as well. Here is a chart of the MTP of various blocks:
Image courtesy: Jimmy Song Medium article.
So, this is the rule for difficulty adjustment in bitcoin cash: If the Median Time Past of the current block and the Median Time Past of 6 blocks before is greater than 12 hours then the difficulty reduces by 20% i.e. it becomes 20% easier for miners to find newer blocks. This gives the miners some power to adjust difficulty, eg. checkout the 13-hour gap between blocks 478570 and 478571. The miners may have simply been doing this to make the blocks easier to mine.
Another interesting thing to note is how and when the difficulty rate can adjust in a cryptocurrency. This is a graph which tracks the difficulty rate of BCH:
Image courtesy: Bitinfocharts.com
The difficulty rate adjusts according to the amount of miners in the system. If there are less miners, then the difficulty rate goes down because the overall hashing power of the system goes down. When bitcoin cash first started it was struggling a bit to get miners, as a result its difficulty dropped down drastically. This in turn attracted a lot of miners who found the opportunity to be very lucrative. This caused an exodus of miners from BTC so much so that the hashing power of BTC halved, decreasing the transaction time and increasing the fees. Reports on social media stated that BTC transaction were taking hours and even days to complete. Here is the graph that shows the drop in hash rate of BTC:
Image courtesy: Investopedia