What is Bitcoin Cash (BCH) - what you need to know about it?

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Tokeneo
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6 min reading

In this article we will quickly explain what bitcoin cash is and how, and for what purpose it was created.. If you are interested in what a bitcoin "brother" is, we invite you to read our guide.

bitcoin cash what it is

First bitcoin's hard fork

Bitcoin Cash (BCH), also known as Bcash (mainly by its opponents to avoid the use of the phrase "Bitcoin" in the name) is an open-source crypto based on a decentralized blockchain transaction register. The idea behind the creation of Bitcoin Cash was to allegedly realize "the true vision of Satoshi Nakamoto". (an anonymous creator of bitcoin) and not only create an alternative to BTC, but even replace it fully. To this day, however, the plan has failed, despite this, many BCH developers and promoters claim that Bitcoin Cash is a real bitcoin. One of the main promoters of Bitcoin Cash is Roger Ver.

Bitcoin Cash is based on the bitcoin source code, being at the same time its first minority (Art Nouveau) hardfork. This means that a certain part of the community, so far focused on bitcoin, has decided to disconnect and introduce its own vision of the project's development already on the new chain of blocks. The Bitcoin Cash hard-fork was completed on Tuesday 1 August 2017. It consisted in dividing the bitcoin block chain into two independent networks (the existing bitcoin blockchain and the new Bitcoin Cash), with the assumption that each BTC owner receives an equivalent (1:1) number of BCHs assigned to his private key after the division.

Bitcoin Cash was created as a split among the developers who decided to separate from the bitcoin community in order to oppose BTC's biggest problems (low scalability of transactions, high transfer costs) and, in their opinion, to realize to a greater extent the vision of an anonymous BTC code creator (which was Satoshi Nakamoto), written in whitepaper. The increase in BCH scalability was achieved in a fairly simple way, by increasing the maximum block capacity eight times - from 1 MB in bitcoin to 8 MB in bitcoin cash. Such a solution is also called on-chain scaling, i.e. based on a technical solution implemented within the block network.

Thanks to this, Bitcoin Cash could process about eight times more transactions than bitcoin (BTC can handle a maximum of about 7 transactions per second). 15 May 2018 Bitcoin Cash quadrupled its block size to 32 MB, thus becoming cryptocurrency with the largest (maximum) size of a single transaction block.

Read also: How Does Bitcoin Mining Work?

Bitcoin Cash - basic technical information

BCH is based on the source code of BTC and was its first minority hardfork (the next one was Bitcoin Gold, in October 2017). Initially, Bitcoin Cash had an eight-fold maximum block size (8 MB), but since mid-May 2018, it has been increased thirty-fold (32 MB) compared to bitcoin, which theoretically provides 32x greater scalability than BTC's transactions (8 million transactions a day, instead of 250 thousand). Currently, however, BCH does not use its high block capacity due to the low number of transactions, usually more than twice lower as in bitcoin. So far, the size of the BCH block has not even reached the original value of 8 MB (on average, it is less than 500 KB, i.e. half an MB, not counting the so-called stress tests, i.e. massed, artificial network load).

The average block time is the same as in the case of BTC and is 10 minutes, similarly to the Proof of Work consensus algorithm, which is SHA 256 - this means that BTC and BCH can be mined using the same devices (ASICs).

BCH does not implement SegWit protocol, which reduces the size of transactions, and does not work on increasing scalability by second layer protocol, e.g. Lightning Network, which moves transactions with micropayments off-chain.

The increase in BCH's scalability is based solely on increasing the size of transaction blocks, which in the future may result in a much faster (up to thirty-fold) increase in the volume of blockchain networks compared to BTC.

The transaction fee in BCH was assumed to be lower than in BTC, and currently it is - average several times lower than in bitcoin, usually below 10 cents (USD), not exceeding the $1 threshold so far.

Bitcoin Cash, like bitcoin, has a limited supply of up to 21 million units, which means that it is inflationary in nature.

Read also: Bitcoin wallets - how they work and which one is the best?

Conflict between BTC and BCH - why Bitcoin Cash was created?

In the bitcoin environment, there were various visions of the development of the first cryptocurrency that could not be reconciled, which caused various conflicts. The result of the biggest one can be called the creation of Bitcoin Cash, whose developers separated to develop a new cryptocurrency according to their own vision, although the supporters themselves claim that BCH is a "better bitcoin".

BTC enthusiasts are also most often hostile towards BCH, emphasizing, among other things, that Bitcoin Cash is not a "second bitcoin", but another altcoin. The expression of this is calling him Bcash, so as to avoid the phrase "Bitcoin" in his name. From a technical point of view, the minority hard-fork results in another independent crypto, which means that BCH is an altcoin.

The main problem with bitcoin is its low scalability, allowing it to process about 7-15 transactions per second (TPS). In the case of higher network load, the throughput is too low to handle all transactions, which results in a longer waiting time for confirmation as well as higher transaction fees. It is worth recalling that at the time of the highest load on the BTC network (December 2017 - January 2018), the average transaction fees were as high as $50. Currently, this problem is solved by the increasingly widespread implementation of SegWit.

According to BCH supporters, bitcoin no longer fulfills the vision of Satoshi Nakamoto's whitepaper as a common means of payment. Instead, BTC has become a speculative asset in which transaction fees are too high and confirmation time too long to be treated as a daily payment instrument.

The maximum capacity of a transaction block in BTC from the beginning was 1 MB to prevent, among other things, DDoS attacks (network spamming) and too fast blockchain growth. Initially (and actually until the beginning of 2017) the number of transactions was not large enough to threaten scalability, but this ended with increasing interest in bitcoin. Different groups of developers had different visions for increasing scalability, but each of them agreed on one thing - BTC's capacity must be increased for the project to continue to grow.

Read also: How and Where To Buy Bitcoin?

Developers now focused on BCH suggested a simple on-chain scaling solution, which was to increase the maximum size of a block so that more transactions could be made in it. Opponents of this solution claimed that larger blocks do not solve the problem of scalability, but only linearly increase the number of processed transactions, additionally increasing the blockchain size at a faster pace and negatively affecting the degree of decentralization.

Bitcoin Cash supporters were also against the introduction of the SegWit protocol to bitcoin, which ultimately reduced the size of a single transaction.

As no agreement was reached, on August 1, 2017 developers supporting the vision of increasing block size separated from the bitcoin chain, creating Bitcoin Cash, where the block size was increased to 8 MB.

The Bitcoin Cash developers planned that after the hard-fork process, most of the existing bitcoin miners would switch to Bitcoin Cash mining, making the hashrate (global processing power generated by the miners) of BTC smaller and BCH would become "real bitcoin", marginalizing the role of BTC.

BCH has only managed to get instantaneous higher processing power than BTC twice - August 23 and November 12, 2017.

It can therefore be concluded that the plan to persuade BTC miners to mine BCH has failed.

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