Bitcoin cash - History of origin

After eight years of existence of Bitcoin, and its increasing acceptance in the world, there were certain technical challenges that had to be solved in a way that users are satisfied.

Just as nothing in this world is perfect, so Bitcoin has shown flaws in some segments.

One of the most important problems for cryptocurrencies has always been its adaptability. More precisely, it was the size of the block of transactions, which after the creation of bitcoin was limited to one MB. This limitation causes significant delays in transaction processing time and limits the number of transactions that the network can process. Bitcoin cash is another story. It differs from other versions in that it has enabled an increase in block size from one MB to eight MB. The overall goal is to increase the number of transactions that the network can process, hoping that bitcoin cache will be able to compete with the volume of transactions that industrial giants.

Bitcoin cash was launched in August 2017 and has since become the most successful part of the bitcoin company.

The story of the hard fork A limit of one MB for the size of each block was originally implemented to reduce the possibility of potential spam and DDoS attacks. Although there were not that many transactions in the network, the restriction did not affect anything. As bitcoin became more and more popular, the limit of one MB began to cause an accumulation of blocks, which unnecessarily extended the transition times. The situation got out of control around May 2017, when some users said they had to wait for confirmation for up to four days.

Users have had the opportunity to pay higher transaction fees to expedite confirmation, but this approach has basically made bitcoin useless as a payment method, especially when it comes to smaller transactions. For example, paying for a sandwich or a cup of coffee with BTC was simply not sustainable, because a $ 3 cup of coffee will have a transaction fee of more than $ 15. Otherwise, the seller will receive a small amount of BTC that he cannot use.

Increasing fees related to bitcoin transactions were one of the main reasons for the emergence of bitcoin cash. A very practical test, conducted in December 2017, showed that a bitcoin cash transaction is 99.56 percent cheaper than the same transaction on a bitcoin network. At the very end of 2017, people were paying an average of $ 28 in transaction fees to move their bitcoin tokens. Some even claimed that he had to pay a fee of $ 16 for sending bitcoin worth $ 25, which is a 40 percent commission.

The Bitcoin community has come up with two possible solutions to this situation: Bitcoin Unlimited and Segregated Witness (SegWit). Bitcoin Unlimited would completely break the block size limit. Many miners supported this solution, because the absence of a limit on the size of the block would not only prevent accumulation, but would also increase the total compensation of miners for each block.

However, many developers were against this proposal, thinking that its implementation would lead to small miners going out of business, which could lead to the centralization of the entire network by large mining corporations. The Segregaged Witnes approach involved storing some information in separate files outside the blockchain. The developers claim that this will free up a lot of storage space, the blocks will fit into more transactions, and the confirmation time will be significantly reduced. But many believed it was just a more complicated temporary halt compared to the Bitcoin Unlimited approach.

As a result, a compromise protocol called SegWit2x was developed. Running this protocol involved storing some information outside the blockchain, as well as increasing the block size limit to two MB. The protocol was implemented on August 1, 2017, after 95% of miners voted for the proposal. However, the network has not experienced an immediate increase in the block size limit. For many people, this meant postponing the problem instead of solving it.

Moreover, this decision seemed to suit those who treat bitcoin as an investment opportunity rather than a payment system. Then, during the "Future of Bitcoin" conference in Arnhem, the Netherlands, the first implementation of the bitcoin cash protocol called bitcoin ABC was announced by Amari Seychet, a former Facebook engineer. Seychette and his team of developers have decided to abandon the SegWit2x protocol and increase the block size limit to eight MB. Due to such drastic changes, it is necessary to separate their creation from the original bitcoin network, it was announced that the hard fork will take place on August 1, 2017.

Hard fork is the only currently known method used by developers to update bitcoin software. The developers shared the network and actually created a new blockchain with changed rules. The original and split versions of the cryptocurrency have identical blockchains until the block when the separation occurred. Since then, these two networks have existed independently.

After the split, everyone who had bitcoins before the hard fork received the same amount of bitcoin cash tokens. The new cryptocurrency was quickly adopted by investors, because at the end of the first day of its existence, bitcoin cash became the third cryptocurrency after bitcoin and eterium in terms of total market value.