Cryptocurrency has fastened its pace since its inception in 2009. The popularity of Bitcoin paved the way for many new cryptocurrencies to be born in the following years, broadening the crypto market. However as the market expanded, updations and improvements in their security, transaction speed, and many more needed to be taken care of considering the high cost required for its development and infrastructure.
Bitcoin (BTC) prioritized security and decentralization over transaction speed. This resulted in very low transactions per second and would constrain the currency to be used in everyday payments. As a solution to this issue, Bitcoin Cash (BCH) was launched in 2017. So, what is Bitcoin Cash? Let us get to know everything about BCH.
What is Bitcoin Cash?
Bitcoin Cash is an altcoin that forked from Bitcoin to increase transaction times per second with reduced fees. Now you might be wondering what forked from Bitcoin means. A fork in cryptocurrency means creating a new version of the blockchain by changing the blockchain’s code.
There are two types of fork: hard fork and soft fork. Bitcoin Cash is the result of a hard fork, which is the creation of an entirely new blockchain, incompatible with the parent blockchain. Now Bitcoin and Bitcoin Cash are separate blockchains of their own.
Bitcoin Cash emerged to address the scalability problem faced by Bitcoin after it became popular. Bitcoin’s block size limit is 1MB, and Bitcoin Cash increased it to 32 MB, making it compatible with processing many more transactions on each block. As Bitcoin Cash focuses on increasing transactions with lower costs, many argue that it comes close to the original idea of creating Bitcoin by Satoshi Nakamoto in 2009.
The Birth of Bitcoin Cash
Bitcoin Cash was formed as the result of disagreement within the Bitcoin society. As the usage of Bitcoin increased, the block size, which is 1 MB, impedes the speed and expenses the user undergoes. Therefore, it was not suitable for people who wished for faster payments.
The solution to this problem was the improvement of the data placement through the usage of Segregated Witness (SegWit) and increasing the block size. When SegWit was activated in the Bitcoin network, some developers and miners concluded that a larger block size adjustment was the right approach to increasing the network’s capacity.
The layer paved the way for Bitcoin Cash with the increased block size of 32 MB. This eventually led to the formation of two different blockchains: Bitcoin and Bitcoin Cash, the original digital currency stayed in existence which is the former, and the later one developed as an optimization of bitcoin.
Features of Bitcoin Cash
Bitcoin Cash is similar to Bitcoin in several ways like its decentralized nature, the fixed supply of 21 million coins, and the consensus mechanism of Proof of Work (PoW). One of the major features of Bitcoin Cash is its larger block size of 32 MB allowing more transactions on a single block.
It is designed to reduce the traffic on the network. As Bitcoin was created to make daily transactions, but later became a form of investment and asset, increasing the number of transactions per second can reduce transaction fees, making it ideal for small and easy payments.
While the original Bitcoin has maintained the basic goal of being an electronic currency, Bitcoin Cash is gradually venturing into the use of smart contracts. These features make it more valuable for dApps and other applications built on blockchain technology.
Just like any other decentralized cryptocurrency, there is no authority to control Bitcoin Cash and is a peer-to-peer electronic cash system. The transactions are transparent and are stored in the blockchain.
Advantages of Bitcoin Cash
- Faster transactions: Bitcoin Cash can process faster transactions, especially real-time payments as it has a larger block size.
- Lower transaction fees: The low fees of Bitcoin Cash make it usable to people and companies, particularly in developing countries or those that have a weak economy and high inflation rates that make their current financial systems very costly.
- Cross-border payments: Bitcoin Cash is expanding and can be involved in cross-border settlements, where it can be considered a secure and cheap method for overseas transfers.
Issues Related to Bitcoin Cash
There are numerous risks and barriers that affect Bitcoin Cash’s development and popularization. A major challenge is that it occupies considerably less space in the public’s mind than Bitcoin as it has staked its claim as the premier cryptocurrency. Bitcoin has already made a recognizable name and has captured the attention of the public.
Another notable concern is that many view Bitcoin Cash as a clone of Bitcoin and not as an advanced form of Bitcoin. This perception influences its suitability for adoption by potential users as well as investors in general.
Furthermore, it has a larger block size, and this increases the cost of computation resources, meaning that few people can fund full-node operations. This centralization risk arises as an issue of the decentralized nature of blockchain technology.
Conclusion: The Future of Bitcoin Cash
As with any digital currency, the future of Bitcoin Cash is determined by its usefulness in addressing problems and increasing the market share. Updates to the network occur frequently with the intent of ensuring that the network gains a competitive advantage with the fast-growing crypto market by providing scalability, security and enhanced functioning. As with any emerging digital currency, it would have to be part of businesses, payment processors, and developers to increase its prominence.