Though most of us are familiar with ‘Bitcoin’, few of us know about a subsidiary of the same which goes by the name ‘Bitcoin Cash’. Interesting right? Let us learn more about it in today’s article.
Bitcoin Cash (BCH) is a cryptocurrency that shares many of the same characteristics as Bitcoin (BTC) yet also integrates a number of changes and features that set it apart. It is considered a ‘fork’ (‘Fork’ is an everyday term for developers. It is widely used in open-source contributions and it means making a copy of the progress already made and then making changes to it without changing the main file) of Bitcoin.
Many argue that Bitcoin Cash closely resembles the original vision of the protocol of creating a peer-to-peer electronic cash system as laid out in 2008 by the person who goes by alias Satoshi Nakamoto.
Difference between Bitcoin and Bitcoin Cash
Since forking in 2017, the multiple independent teams of developers working on the Bitcoin Cash protocol have brought a number of innovations aimed at improving the usability of Bitcoin Cash as a peer-to-peer electronic cash system that supports economic freedom. These innovations, which set Bitcoin Cash apart from Bitcoin, are summarized below:
Block Size Limit
Bitcoin Cash has a larger block size limit of 32Mb than Bitcoin (1Mb). A larger block size limit increases the volume of transactions than its network can handle on-chain. While Bitcoin typically processes 37 transactions per second, it is capable of handling up to 200 transactions per second. This reduces the cost per transaction and increases the speed and reliability of the transaction. For comparison, the average transaction fee on the Bitcoin (BTC) chain is around $115 as of 2020.
Smart contract support
Bitcoin Cash developers can use smart contract languages like Cashscript to enable more complex functions than basic transactions that are possible on Bitcoin. This creates the possibility of “decentralized finance” applications such as trading in synthetic derivatives. Other use cases include personal payments with tools like CashShuffle and CashFusion. It also allows for “issuing tokens”.
By issuing tokens using the Simple Ledger Protocol, developers can issue new tokens that live on the blockchain Bitcoin Cash is like ERC20 directly on the Ethereum blockchain. For example, Tether, the largest issuer of USD stable coins, has issued USDT tokens that live on the Bitcoin Cash blockchain.
The Ledger protocol also supports non-fungible tokens (NFTs), which are functionally similar to Ethereum’s ERC721 standard. The main feature of NFTs is that they are digital tokens that are distinguishable from one another. art market for in-game tradable items.
Replace-by-fee on Bitcoin (BTC) allows double spending on a transaction or void transaction without confirmation. The lack of overwriting fees in the Bitcoin Cash (BCH) protocol makes Bitcoin Cash more secure, as unconfirmed transactions are irreversible.
It also allows for near-instant transactions of small amounts. With the Bitcoin Cash protocol upgrade in May 2021, the unconfirmed chain transaction limit previously set at 50) was removed and the double-spend experiment was introduced. This further enhances the usefulness of it as a payment solution where large volumes of small value transactions need to be processed in a short time.
Difficulty adjustment algorithm
Bitcoin Cash deploys an exponential moving target difficulty adjustment algorithm. Every day blocks are behind schedule, the difficulty is halved, while every two days blocks are ahead of schedule, the difficulty is doubled. This difficulty adjustment algorithm ensures the generation of new blocks. at a steady rate (every 10 minutes) even in the face of high price volatility and elasticity of hash power.
Bitcoin Cash’s core features
It is a decentralized peer-to-peer electronic cash. Some of the features of Bitcoin Cash are:
It is not owned by someone and is not controlled by any bank/financial institution.
Preserves your anonymity:
Identities are not tied to your transactions and you don’t need to worry about someone tracking you.
All transactions are recorded on a global public ledger known as the blockchain. The register is updated cyclically the blocks are connected together to form a chain. This makes it easy for anyone to see the full ownership history and helps eliminate the possibility of fraud.
Nodes follow a set of rules (a protocol) to reach a consensus on the state of the ledger. This consensus is what constitutes the truth about who owns what. However, the protocol can evolve as participants request, although a high consensus is required to implement changes. This makes it a semi-political system, with participants forming a kind of immutable social contract.
No one can change or alter the information stored in the blockchain. This eliminates threats of mishandling of data which often leads to many complexities.
Through a process known as Proof of Work (PoW), miners compete to add new blocks to the chain that makes up the ledger (again, the blockchain). The hardware and energy costs associated with PoW mining contribute to cybersecurity as well as game theory-based principles such as cyberattacks are both costly and ensure that attackers cannot enjoy its direct.
No more than 21 million coins of Bitcoin Cash will ever be created. This provides some additional value to it, as we know scarcity often leads to the assumption that the item is valuable.
It is one of the fastest and cheapest method to transfer funds overseas. It has the potential to place itself as an alternative to Swift/Visa/MasterCard someday.
Cons of Bitcoin Cash
Relatively low adoption rate:
With fewer people using it than Bitcoin, it can be difficult to grow as an accepted investment or medium of exchange.
It processes transactions faster and cheaper. than Bitcoin, because it requires less mining power to verify new blocks. This makes the system less secure than Bitcoin.
Trouble in branding:
After the fork, there was a battle to see which coins would become more popular. this makes it hard for Bitcoin Cash to stand out, especially since they share the same name.
It still uses a blockchain proof-of-work system, where miners have to run computers to solve cryptographic equations to process them which consumes significant energy. Although it uses less electricity than Bitcoin, the system still has a high environmental cost.
How is Bitcoin Cash mined?
Like most other cryptocurrencies, it is decentralized. This means that no person or authority has control over the network. However, for a decentralized system to work, it requires nodes (computers) to verify transactions.
So how are transactions verified? People known as miners use computing power to solve mathematical equations on the blockchain. Once a node on the network solves the mathematical equation, it verifies a transaction block. Then he gets a reward for verifying the transaction.
This reward, in the case of Bitcoin Cash mining, is Bitcoin Cash.
However, nowadays, it is becoming increasingly difficult to earn money from mining. There is so much competition that only those who can generate some amount of computing power are rewarded. To generate enough computing power to become a successful miner, you need to invest a lot of money.
There’s something called a mining pool for all the beginners out there. This is where you join the network of other miners. Together you combine your computing power to try and solve mathematical equations to earn Bitcoin Cash rewards. If your mining pool successfully verifies the Bitcoin Cash transaction, the reward is also distributed between your mining pool and other miners in the pool.
How to buy Bitcoin Cash?
It is widely available on major crypto exchanges like Coinbase and Kraken. You create an account, deposit some money, then use it to buy cryptocurrencies like Bitcoin Cash. You can also buy Bitcoin Cash on platforms like PayPal.
Note that Bitcoin Cash crashed due to issues trademark issues. It was delisted in early 2021 because they thought it could confuse investors offering both Bitcoin Cash and Bitcoin on the same system.
What do you think about Bitcoin Cash? Did it do the right thing by positioning it as a subsidiary of Bitcoin? Will it be more popular than major cryptocurrencies in the future? Let us know in the comment section.
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