What is Bitcoin Cash?

by in Crypto 101

Bitcoin Cash

After the vote for the introduction of the SegWit2x protocol, in Summer 2017, the hard fork of the leading crypto was released. That is precisely how owners of Bitcoins become owners of Bitcoin Cash, and how the currency was made.

This fork is the largest and loudest in the history of digital currency. If most of the forced “branches” of the blockchain do not find broad support from the community, then in 2018, BCH even started trading on the exchange. To understand where so many admirers came from the hard fork, we will analyze what Bitcoin Cash is, and we will touch on the history of cryptocurrency in more detail.

What is Bitcoin Cash?

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Bitcoin Cash is a payment system and crypto of the same name with a BCH symbol, which appeared on August 1, 2017, as a fork of Bitcoin. Like the "big brother," the Bitcoin Cash is both a payment system and a means of payment. BCH is actively traded on cryptocurrency exchanges and is used as a measure of the value of many goods. Unlike the first cryptocurrency network, the block size in Bitcoin Cash is 32 MB. That partially solves the scalability problem, making cryptocurrency a worthy alternative to Bitcoin.

Bitcoin Cash is the hard fork of the leading cryptocurrency, as its creators did not support updating the protocol with a compromise solution to the scalability problem of SegWitx2. As a result, a new cryptocurrency based on the BTC protocols was created. It works on the same principle and is a branch of the very first blockchain designed by Satoshi Nakamoto. At the same time, transactions in two separate branches are not compatible with each other and are not recorded in the joint chain of blocks.

The reason for the emergence of Bitcoin Cash is a disagreement in the crypto community. Though most miners (up to 95%) agreed with the proposal to improve cryptocurrency, part of the community was not convinced. Users felt that a new protocol was introduced to delay the solution to the scalability problem. That allowed miners and investors not to lose money due to the fall in BTC prices against the background of updated news. The solution was a hard fork created by part of the Bitcoin development team and former Facebook chief engineer.

Today, Bitcoin Cash is no longer a minority decision. Users began to trust the new currency and understood the advantages of huge blocks. The network is regularly updated, and the development team is actively correcting the shortcomings of the Bitcoin network.

How does Bitcoin Cash work?

From the technical side, the BCH operation algorithms are no distinct from the similar structure of the Bitcoin system. Except for a few innovations in hashing signatures and protection against duplication of transaction blocks, cryptocurrency has the same structure. Perhaps that is why experts consider Bitcoin Cash a more thoughtful analog of BTC. It is necessary to describe the principle of the blockchain, to understand how Bitcoin Cash works.

Blockchain is a continuous chain of transaction blocks, interconnected by links. Links are located in specific places of allocated memory, known as block headers. The transaction is the process of transferring BCH from one user to another. With the help of electronic signatures, cryptographic algorithms and keys, coins are securely and irreversibly transferred from the sender to the receiver. At the same time, there is a pointer to the previous transaction by which the coins were received.

As in the Bitcoin system, other users are the guarantor of transaction legitimacy. A copy of the blockchain is located on the computer of each user registered in the Bitcoin Cash network. Thus, transparency of transactions is achieved, which in this case does not have a single cent and issuer. Computing power, based on the Proof-of-Work principle, is used to check transfers between users and confirm the legality of receiving coins. Users with large capacities, or miners, calculate the hash amount, which contains data on the transaction and its "journey" on the blockchain. For spending personal power, the miner receives a reward in BCH.

Due to the increased block size, more transactions are placed in it. That ensures the stability of the system at high rates of daily turnover. At the same time, the block is not solved by the miner slowly because of its size, since the complexity of the calculations is modified every hour, and it is calculated in 9-10 minutes. As a result, users receive cheap transactions that are realized in a few seconds.

To rank transactions in a queue, the principle of commissions is used. Miners also receive them as a reward. At the same time, commissions are not troublesome for the user - the average figure is $0.0029 per transfer. So, the user can transfer a tremendous amount to anywhere in the world by paying for the transaction less than 1/3 a cent. It is a severe competitor not only for top cryptocurrencies but also for the modern banking system.

Bitcoin Cash also operates on the principle of Proof-of-Work. The computing power of computers is used to confirm the transaction. It is spent on calculating the hash amount with the search for all the previous information on the receipt of coins. The labor of miners is used to keep the system decentralized.

Bitcoin Cash combines the most useful: the reasonableness and reliability of Bitcoin with the speed of a more relevant block structure in a decentralized chain.

BCH: Pros and Cons

Here are some obvious advantages that Bitcoin Cash has:

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Bitcoin network problem resolved. Unlike the leading digital currency, BCH solved the scalability problem. The combination of regular updating of mining complexity and flexible block size makes it possible to carry out transactions in seconds. At the same time, waiting for confirmation even in busy periods is less than 2 minutes. For example, for Bitcoin, the transfer confirmation time is 1-2 hours, and for the global currency system SWIFT, it takes 10-15 minutes.

Little commissions. In the PoW system, commission plays a specific role. The more valuable the payment and the faster it needs to be made, the more commission the user designates. On especially busy days on the Bitcoin network, the size of the commission can reach $20-50. Bitcoin Cash offers a healthy alternative - less than 1 cent per transaction between any users. At the same time, the transfer sequence between user wallets will be less than 2 minutes. That is a definite advantage of BCH over most cryptocurrencies.

System reliability. The first cryptocurrency is considered the most reliable project on the blockchain. It was created and developed by professional cryptographers, mathematicians, and developers. Based on this system, Bitcoin Cash was created, which incorporated the best aspects of distributed computing and data-storage technology. Additional security of the system provides a stable audience of the project.

Decentralized development. Since several independent groups are involved in the development, it is more challenging for big players to influence the transformation of the cryptocurrency protocol. That creates an additional degree of protection against attack 51% since the concentration of power in one person is monitored and warned by developers on time. The initiators of the fork are regular users from the Bitcoin community. Each of them is in his way interested in the decentralization of cryptocurrency.

And of course, the system has its disadvantages, which we are going to mention:

Lack of complete anonymity. Like most cryptocurrencies, BCH is not completely anonymous, but only partly hides the user. Probably, through open information about transactions, you can track the real identity of a person. That exposes the attractiveness of cryptocurrency for those who want a confidential payment system.

Lack of own developments. The Bitcoin Cash construction team did not start implementing its project from scratch but decided to use the Bitcoin protocol. Thus, the creators spent a minimum of effort and money on creating a new cryptocurrency they received a lot.

Bitcoin Cash: how to get and store it?

Buying and exchanging BCH is as easy as in the case of Bitcoin. To place the purchased cryptocurrency somewhere, you need to have a wallet with a bitcoin address. The developers of BCH did not create their wallets.

You can buy BCH in three different ways:

  • Purchase from individuals at LocalBitcoinCash.org;
  • Use popular cryptocurrency exchangers or ATMs;
  • Get BCH on exchanges.

The BCH wallet uses the same address format and the same device as Bitcoin. Therefore, if you are the owner of an address in Bitcoin Core, then you do not have to register a new wallet.

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There are four options to store your Bitcoin Cash:

  • Cold storage hardware wallet;
  • The desktop program;
  • A mobile wallet;
  • Online services.

Many cryptography experts and early investors in digital assets believe in Bitcoin Cash and consider it as a replacement for a dying Bitcoin. It remains to observe the situation and invest in the most promising project.