Bitcoin Cash (BCH) is a coin created on August 1, 2017, a fork of the Bitcoin blockchain. BCH has many similarities to Bitcoin but there are also some fundamental technical differences. These technical differences are what make BCH a better coin for the future of the digital economy.
Why Was Bitcoin Cash Invented?
As Bitcoin grew in popularity, its price also grew. However, it also became highly volatile. The result is that many people who hold Bitcoin view it as an asset class instead of an alternative to fiat currencies. Bitcoin’s blockchain thus failed to scale effectively as the number of network users grew.
It led to huge delays in processing transactions as well as high fees. A major cause of these problems is the Bitcoin block size, which is capped at 1MB. Consequently, transactions have to wait in line for miners to verify them. The reason for this is that the small blocks were unable to handle the growing number of transactions while keeping up with the higher processing speed.
Bitcoin Cash was invented in an attempt to solve the slow transaction speed by increasing the block size to between 8MB and 32MB. With bigger blocks, more transactions can be accommodated, which allows miners to verity more transactions.
After the hard fork, comparisons showed that while blocks of the Bitcoin network contained 1000 to 1500 transactions per block, the BCH network could hand 25,000 transactions per block. As a result, BCH is a closer representation of Satoshi Nakamoto’s vision, which aimed to replace fiat currencies with cryptocurrencies. In the original vision, Bitcoin was not intended to be an investment asset but a means of exchanging value in daily transactions.
What Technology Does Bitcoin Cash Use?
Besides the philosophy between Bitcoin and Bitcoin Cash, the two coins are quite similar in how the function. Both BTC and BCH run on P2P networks of computers. Miners located throughout the world maintain the network via the Proof of Work consensus. Once a miner mines a block, they are rewarded. Besides that, both coins have a supply limit of 21 million.
Bitcoin Cash Does Not Have Second Layer Solutions
One of the main differences between Bitcoin Cash and Bitcoin is the implementation of second-layer solutions. A second layer solution means that a new layer is added on top of the blockchain where settlements can be made before being permanently sent to the blockchain.
However, this presents a problem with the original vision of Bitcoin. The main reason for creating Bitcoin was to ensure simplicity, transparency, and trustlessness. A second layer would make things more complex, which would only make crypto adoption more difficult for the masses.
Second layer solutions such as the Lightning Network are touted as the solution to the scaling and congestion issues of Bitcoin. However, they also present many potential problems. One immediate problem is that the necessitate trust between two anonymous parties. Such a move is in direct contrast to the vision of Satoshi Nakamoto.
The proponents of Bitcoin Cash are in full opposition to such a move. As a result, the BCH network does not plan to implement any second-layer solutions. Those who support BCH believe that such a move would only add to the complexity of using crypto, which creates more potential problems in the future. It is part of the reason why BCH is a much better coin for those in need of safe, secure, and simple crypto-based transactions.
Growing Merchant Adoption
Most people who use Bitcoin today use it for speculative purposes and as an asset for long-term storage of value. However, the BCH team has been working on improving the real-world use cases for the coin. Today, BCH is accepted at over 5000 physical locations globally as payment for goods and services.
You can also use it to shop online and pay for meals at select restaurants and cafes. BCH also supports various third-party gateways. Additionally, the BCH developer community has work to enable BCH donations for WordPress and non-profits. The team has also worked to bring PoS solutions for businesses both offline and online.
Most of the merchant solutions developed by BCH developers are yet to gain traction. Despite this, the coin is still quite young at around three years old. In that short period, the team has worked to promote the coin globally and it has found willing adopters throughout the world. It is expected that the numerous benefits inherent to its design will make it a favorite of merchants throughout the world.
The Transaction Fees
The average transaction fee is in the fractions of a dollar. At its peak, the price of a BCH transaction was $0.90. Since then, the Bitcoin transaction fee has fallen to decimals. There is no indication that the BCH transaction fee will rise anytime soon since the network has never been pushed to its limits.
The average transaction fee is determined by evaluating the fee at the time when the transaction was verified by the miners. Several factors affect this fee, including the network traffic. Activities at wallets, crypto exchanges, and other trading platforms also charge a fee. However, the fee is expected to remain low due to the high flexibility of the BCH network.
The Benefits of Bitcoin Cash in Payments
BCH, like most other crypto coins, often experiences price swings. The natural forces of demand and supply drive the price changes. Value stability is still an issue in the crypto world. A major driving force is that the crypto market is a 24/7 market, unlike transition stock markets.
Besides that, the market cap of the entire crypto market is still small. As a result, one purchase by a whale can have a huge impact on price stability. However, it is still possible to use BCH in payments. The developers of BCH have been working with payment providers to create merchant solutions.
In this setup, when a person pays in BCH, the merchant receives payments in fiat. One benefit of using BCH is its payment attribute due to the high throughput. For instance, if a person purchases a new TV using BCH but the transaction takes a whole day to complete, the price fluctuation means that they may have bought the TV for much more than it is worth.
That is why the high throughput of the BCH network is so important. On the Bitcoin network, the lack of scalability has led to network congestion and high fees that can sometimes exceed $20 per transaction. In some cases, a transaction can take a week to complete. In that period, the price of BTC could have changed a lot.
The slow speed of transaction completion is why many people no longer feel comfortable paying for goods and services in BTC. Using BCH is a more convenient option. Even in stress tests, BCH has been shown to comfortably handle over 2 million transactions per day. Even with such a huge volume of transactions, the fees remain low.
In cases where small transactions using crypto are made, using BCH makes a lot of sense. It ensures that what a person pays right now will be the correct value. They do not have to wait days for a transaction to be confirmed. During that time, the price of the crypto may have changed a lot upwards, which would represent a huge loss for them.
At this point, BCH has better payment attributes than BTC. The only challenge that remains today is user recognition. However, the coin is still young and there is a lot of time for that to change.
A Summary of the Benefits of BCH
• Low Fees
One of the major benefits of BCH is that the fees are extremely low. The fees are usually up to six decimals, which translates to fractions of a cent. It allows anyone to transact any amount of money at almost no cost.
• Greater Privacy
Using BCH provides you better anonymity during transactions. If you are sending BCH to someone directly, you do not need to provide any of your details to a third party. When transacting via bank, you usually have to provide all your details, even for a transaction worth a few dollars.
• Access to Promotions
Some merchants who accept BCH will offer their customers exclusive deals. The reason for this is that it eliminates bank card fees, which significantly eat into the profits of many small businesses. They sometimes pass on these benefits to BCH uses via discounts and lower rates.
• Secured through Decentralization
All transactions using BCH are secured via a decentralized P2P network. It ensures that no single power owns the network and no one can shut it down.
• Stable and Secure Coin
Compared to other major coins, the price of BCH has remained relatively stable. Besides that, the network is maintained by a huge network, which makes it immune to hackers.
• Speedy Transactions
Transactions that take place on the BCH network only take nanoseconds to confirm. The reason for this is the large block sizes that enable scalability within the network.
A Robust and Growing Payment Infrastructure
Bitcoin Cash developers have a focus on making it a payment coin instead of an asset. To achieve this, they have reached out to various partners. In the few years it has been around, the developer team has managed to create a quick and convenient payment infrastructure.
The Anonymity of BCH
The BCH crypto coin does offer some level of anonymity compared to using the legacy financial sector. If you are transacting with someone directly from wallet to wallet, you do not need to provide the details of your transactions to any other third party.
However, if you opt to trade BCH on conventional crypto exchanges, you will have to give up some of your anonymity. Increasing crypto regulation means that crypto exchanges have to provide transaction details to government agencies. Besides that, most mainstream crypto exchanges have implemented KYC rules. Only share the bare minimum information when you are using a crypto exchange and nothing more. However, you have to be aware that crypto exchanges can be legally compelled to share any private data you share with them.
Besides that, when transacting using BCH online, most websites will collect cookies and other bits of data that allow them to track you down. Some of the details they collect are the OS, PC Model, IP address, and much more. However, BCH still offers better anonymity compared to using fiat currency payments.
The Safety of BCH
BCH is a robust network that is secured by numerous miners across the world. In short, the computing power that would be needed to crack the network far outweighs any potential benefits one would gain. The cryptographic encryption is another added layer of security for the payment infrastructure, which ensures safe and secure transactions.
Many hard wallets support Bitcoin Cash. If you want increased protection, you can always purchase one of these hard wallets to store your BCH offline. Compare to storing your crypto at an online exchange, a BCH hard wallet offers you complete protection from intrusion by hackers.
A Robust Developer Team
The Bitcoin Cash team is quite robust and comes from all over the world. They all work towards the goal of keeping the BCH network secure and safe. Besides that, they also work on various projects to increase the functionality of the BCH coin. There are currently three main categories of projects being worked on by the BCH developers:
These projects work to improve the scalability of the BCH network. The goal is to improve the number of transactions that can be processed in a second. These projects work on areas such as UTXO commitments, Faster Block Propagation, Schnorr Signatures, transaction ordering, and much more.
• Use Cases
These projects work in finding new functionality for users and merchants. The projects have the goal of improving the mass adoption of BCH. Eventually, they plan to make BCH a great alternative to fiat currencies. Various projects working on this are Sighash, Pre-Consensus, CashAddr, Fractional Satoshis, Fee improvements, and Best Money.
Projects in this category include TOKEN ECONOMY, Basic Opcodes, and New Transaction Format.
Various other projects work on building the infrastructure that will power the Bitcoin Cash ecosystem. Some of these projects are Open Bazaar, Awesome, Satoshiwall, Marco Coino, and many others.
Investors in Bitcoin Cash
Bitcoin Cash is not beholden to any investor interests. An independent developer team that is committed to the original vision of Satoshi Nakamoto maintains it. As a result, centralized parties cannot control its development. BCH is thus a true representation of the vision of Satoshi Nakamoto.
Mining Bitcoin Cash
Mining BCH requires specialized ASIC mining rigs. It comes with a larger block size, which means you need larger storage capacity to mine the BCH network. To make the right decision, you should use profitability calculators to determine the returns you will get. However, when you mine BCH, you get more tokens compared to Bitcoin.
BCH is still a young network and there is a lot of room for growth. While its price is still low compared to that of BTC, the BCH ecosystem is growing. In the future, those who hodl their coins could see a huge payoff. Besides that, the BCH hash power is more evenly distributed across the world, unlike the BTC hash power, which is highly centralized by a few major companies around the world.
Widespread Support by Crypto Wallets and Exchanges
Crypto wallets are the method used to store BCH. Today, there are tens of wallets, which support BCH. Besides that, BCH is supported by numerous crypto exchanges. It makes it easy to trade BCH and to exchange it directly with anyone who owns a crypto wallet. If you are ever in quick need of fiat cash, you can quickly exchange your BCH for cash at one of the many crypto exchanges that support it.
Huge BCH Community
The BCH coin has a huge active community online. Members of the BCH community work tirelessly to promote the use-cases of BCH. For new members of the BCH coin, they can find a lot of useful information on the main BCH website. There are also active communities on social media that update the world on developments around BCH.
BCH Has a Bright Future
The crypto market is highly volatile. As a result, when it comes to the question of whether BCH is a good investment, there is no clear answer. The crypto market can wipe out 50% or more of the value of your holdings. However, it can also pump up the value of your holding by double digits in a few days.
Like any investment you make, you should ensure that you diversify your portfolio. In general, holding on your coins over the long term seems like a wise decision. If you invest a small amount of your net worth into BCH, you could see it pay off in a big way in the future.
Like any other investment, you need to take precautions. These precautions include making a careful analysis of the market. Besides that, ensures that you securely store your crypto.
Legal Disclaimer: I am not a financial advisor. The advice here given is not financial advice even though my excitement might make it look like such. Always talk to your financial advisor if you are to invest in any cryptocurrencies.