Bitcoin was designed so that no one group or person could control it. Bitcoin’s decentralized design has many advantages, but things can get tricky when there are disagreements with the community about the best way forward.
Not all of those forks have led to new networks, but of those that have, Bitcoin Cash is probably the best known.
What is Bitcoin Cash?
Bitcoin Cash is a modified version of Bitcoin that runs on its own blockchain network. It works in almost the same way as Bitcoin, but there are several key differences.
The largest difference is block size, or how much transaction information a single block on each chain can handle.
On the Bitcoin network, each block is 1 MB in size. Immediately after the Bitcoin Cash fork, the Bitcoin Cash block size was 8 MB, eight times bigger than on the Bitcoin network. In May 2018, Bitcoin increased its block size again, this time to 32 MB.
This means that Bitcoin Cash can now process 32 times as much information per block as Bitcoin can. As a result, Bitcoin Cash transactions tend to be faster and have lower fees. Security may be lower on the Bitcoin Cash network, though, as less mining power goes into mining each Bitcoin Cash block.
Did you know?
Bitcoin Cash is sometimes abbreviated to Bcash.
Who invented it?
The idea for Bitcoin Cash was put forward by a group of Bitcoin developers. However, the person most directly connected to the currency today is Roger Ver, an early Bitcoin adopter and investor.
A brief history
June 2017 – a group of developers and miners on Bitcoin put forward a proposal called Bitcoin ABC, which wanted to increase the block size
July 2017 – not everyone agreed on the proposed change
August 2017 – Bitcoin hard forks leading to the creation of Bitcoin, and Bitcoin Cash
November 2020 – Bitcoin Cash forked a third time, this time to Bitcoin Cash Node (BCHN) and Bitcoin Cash ABC (BCHA), Bitcoin Cash Node went on to be called Bitcoin Cash (BCH)
June 2021 – smartBCH, a Bitcoin Cash sidechain, was launched
What’s so special about it?
Bitcoin Cash shares many of the same features as Bitcoin, but has faster transaction times and lower fees. Though Bitcoin might be better known, Bitcoin Cash has supporters who believe that Bitcoin Cash is closer to the original purpose and vision of the Bitcoin project.
How is Bitcoin Cash produced?
Bitcoin Cash, because it shares the same background as Bitcoin, is produced in the same way. Miners compete to solve complex mathematical puzzles. This process is called proof of work.
How does it work?
It operates in much the same way as Bitcoin—the only differences for users are that the Bitcoin Cash network can verify transactions more quickly than Bitcoin, and fees are often lower.
You need a Bitcoin Cash wallet to send and receive the currency, and it can be used to pay for a variety of goods and services.
Did you know?
Bitcoin Cash was the first successful fork in Bitcoin, and it remains the one with the highest market cap except for Bitcoin itself.
What can you do with Bitcoin Cash?
You can use Bitcoin Cash in the same way you can use Bitcoin; as a self-custodied store of value, as a payment method, or both. As Bitcoin Cash has faster transaction times and lower fees, but its value has retreated significantly from its last all-time-high in 2017, it is often seen as more viable as a payment method than as a store of value.
In July 2021 smartBCH, a Bitcoin Cash sidechain, was launched. The sidechain is EVM compatible, meaning that smart contracts that can run on Ethereum can also run on smartBCH.
As of May 2022, there was more than $23 million in total locked value on the smartBCH chain, with the biggest platforms being BenSwap and MistSwap. Both are tiny platforms in the larger DeFi ecosystem, though, with less than $10 million in total locked value on each platform at the time of writing.
The future of Bitcoin Cash
The technical advantages (and disadvantages) that Bitcoin Cash had immediately after its fork from Bitcoin remain today. Bitcoin Cash still has a larger block size than Bitcoin, and that comes with lower fees and faster transaction times, but also raises some questions about security.
Developments such as Bitcoin’s Lightning Network also make fast payments with low fees possible on the original Bitcoin network, which Bitcoin advocates see as negating Bitcoin Cash’s USP. However, Bitcoin Cash supporters might point out that Bitcoin Cash achieves low fees and fast transaction times independently, without the need for a layer 2 solution such as the Lightning Network.
Regardless of the technological advantages and disadvantages of each chain, neither Bitcoin or Bitcoin Cash can succeed without adoption. Just as for other cryptocurrencies then, how many people and institutions decide to use Bitcoin Cash will be a key factor in whether it succeeds in the future.
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