What is Bitcoin Cash and how does it work?
Bitcoin Cash is a clone of an older version of Bitcoin in which the team of developers has changed some parameters, such as the size of the blocks. The idea is to be able to allow more transactions to take place on the blockchain without having to rely on off-chain solutions such as the Lightning network deployed in Bitcoin. However, the project lacks traction as most of the Bitcoin community has never supported this vision. Bitcoin Cash is now seen primarily as a mere speculative tool in the cryptocurrency market.
Bitcoin Cash (BCH) price and capitalization.
Below is key information about the price and capitalization of Bitcoin Cash, including:
Price: in dollars and in Bitcoins, as well as the price change over the last 24 hours.
Ranking: overall ranking of Bitcoin Cash compared to other cryptocurrencies (the ranking is based on the market capitalization of each crypto).
Market capitalization: represents the market capitalization of Bitcoin Cash in dollars, i.e. the total amount in circulation.
Volume: this is the total amount of BCH exchanged in the last 24 hours (in dollars).
What is the Bitcoin Cash (BCH) cryptocurrency?
Bitcoin Cash (abbreviated as BCH and less commonly as BCC, BCHABC or BAB on some exchange platforms) is a cryptocurrency similar to Bitcoin launched on August 1, 2017. It is a fork of Bitcoin, meaning that the two cryptocurrencies share some common characteristics, but have operated on different blockchains since their separation.
Bitcoin Cash is the result of a split in the community that followed the debate over Bitcoin’s scalability, i.e., how the network should scale to meet user demand. Two parts of the community had their own vision, which resulted in two different projects: one part, which largely dominated, wanted most of the economic activity to take place outside the main blockchain so that the network would remain as decentralized as possible (Bitcoin); another, smaller part believed that the blockchain could host a very large proportion of transactions while remaining sufficiently decentralized (Bitcoin Cash).
Like Bitcoin (BTC), Bitcoin Cash (BCH) aspires to become a decentralized peer-to-peer electronic currency that operates without a central bank or third party. Proponents of Bitcoin Cash (BCH) argue that it can legitimately claim to be Bitcoin in the sense that it is a continuation of the original project. Bitcoin Cash would, in effect, follow the vision that Satoshi Nakamoto had for Bitcoin when he was alive, namely a scaling that would be primarily on the blockchain.
However, Bitcoin Cash is a highly controversial project due to its controversial nature, which clashes with popular opinion, and the dishonest methods of some proponents. In terms of price, Bitcoin Cash today represents only a small part of the Bitcoin price: about 3 to 5%.
Why has Bitcoin Cash emerged?
The number of Bitcoin transactions has steadily increased since its launch in 2009. However, since 2017, the Bitcoin network has had problems processing these transactions and is regularly overloaded. During transaction peaks, it often takes several hours to confirm a transaction or high transaction fees are charged to speed up the process. In December 2017, at the height of the latest cryptocurrency bubble, average fees were in excess of $30 per transaction.
Why are they so slow? The block size in the Bitcoin blockchain is limited to 1 MB per design. On average, one block is mined every 10 minutes: if we do not take into account the impact of SegWit, this corresponds to a transaction capacity of 7 transactions per second and is usually not enough to meet the growing demand for usage.
One solution to this problem is to increase this limit, as planned by Satoshi Nakamoto in 2010. Over time, however, this change lost support within the community, as some felt it led to a dangerous centralization of the network. The scalability debate dragged on for years, culminating in the irreversible separation of Bitcoin and Bitcoin Cash in 2017, effectively sealed by the repeal of SegWit2X in November 2017.
The Bitcoin community split into two camps:
- On the one side, Bitcoin (BTC) advocates who wanted to keep the block size small and felt that increasing this limit would centralize the network: for them, Bitcoin should run on any computer with a simple Internet connection, so that everyone can have a full node if they wish. Instead of increasing the block size, they prefer protocol optimization solutions such as SegWit, which would increase the number of transactions managed by the blockchain by about 70%, or second-level solutions such as the Lightning network or sidechains.
- Proponents of Bitcoin Cash (BCH), on the other hand, want activity on the blockchain to increase naturally and advocate a gradual increase in the block size limit. They believe that the transaction capacity provided by SegWit is insufficient and that second-tier solutions pose more problems than they solve. They believe that not all users need to maintain a full node, as this task should be performed mainly by miners and large traders. To keep the network sufficiently decentralized despite the increasing load, they rely on block propagation optimization and Moore’s Law, which states that computing power grows exponentially and its cost decreases in the same proportion. Prior to Bitcoin Cash, this part of the community had tried several times to increase the block size (through the Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited clients), but without success.
Who supports Bitcoin Cash?
First of all, it should be clear that Bitcoin Cash is a vision of Bitcoin. Therefore, the project is supported by a large number of people who are deeply convinced that scaling is possible by gradually increasing the block size, and who disappointed the Bitcoin Core team by refusing to compromise.
Bitcoin Cash is initially supported by most miners, or rather most mining pools. These include the ViaBTC co-op, which supported the project by mining the first block, and the Chinese ASIC company Bitmain, which controls two of the largest co-ops in terms of computing power: Antpool and BTC.com. Bitmain is often associated with the figure of its co-founder Jihan Wu, who was also the first to translate the Bitcoin white paper into Chinese. The company is also suspected of promoting the use of Bitcoin Cash because it holds a Chinese patent on AsicBoost, a technique for creating blocks 20% faster than normal and made obsolete by SegWit.
As for developers, there are the Bitcoin XT and Bitcoin Unlimited development teams, each of which maintains a separate Bitcoin Cash implementation. In addition, Bitcoin Cash is supported by Gavin Andresen, the lead developer of Bitcoin Core between Satoshi’s departure in 2010 and 2014.
But perhaps the best-known figure behind Bitcoin Cash is Roger Ver, the CEO of Bitcoin.com and one of the first major investors in Bitcoin and Bitcoin companies. The latter is, in fact, a celebrity in the industry due to his continuous activism in favor of Bitcoin between 2011 and 2017. Bitcoin.com is now a major player in the Bitcoin Cash community: it is more than just an information site, it is also a Bitcoin wallet supporting BTC and BCH, a block explorer and a mining cooperative. Bitcoin.com promotes Bitcoin Cash throughout the year by sponsoring events and projects.
How did the fork between Bitcoin and Bitcoin Cash come about?
The fork between Bitcoin and Bitcoin Cash took place on August 1 at block 478,559. By increasing the block size limit to 8 MB, the Bitcoin Cash implementation caused a hard fork of the Bitcoin blockchain, i.e. a duplication of the chain into two separate chains: the one following the old rules (BTC) and the one adopting the new rules (BCH).
This fork has the somewhat abstruse name “user-activated hard fork” (UAHF) in reference to the “user-activated soft fork” (UASF) that attempted to have the Bitcoin network adopt SegWit at the same time. It was programmed by the Bitcoin ABC software implementation developed by Amaury Séchet, ABC being the acronym for Adjustable Blocksize Cap. This client has become the reference implementation of the Bitcoin Cash protocol, as well as Bitcoin Core for Bitcoin.
The two resulting chains, Bitcoin and Bitcoin Cash, therefore have the same history before August 1: if you had BTC in a wallet at the time of the fork, you should therefore have the same number of BCH at the same address. Whether an exchange holds your Bitcoins for you depends on their policy. If they supported the fork, they may have credited your BCH directly to your account or allowed you to withdraw it. It is also possible that they did not support the fork and kept your BCH against your will.
Note that Bitcoin Cash has implemented replay protection that makes transactions incompatible from one chain to another, which prevents malicious actors from replaying them to grab other people’s money.
This is the list of exchange platforms and wallets that have supported Bitcoin Cash:
Exchange platforms wallets.
- Coinbase Pro (GDAX)
Therefore, if you had 0.5 BTC stored on Coinbase at the time of the spin-off, you should have received 0.5 BCH.
The list of exchange platforms that support BCH can be found on the official website.
However, this fork remains controversial for several reasons:
Increasing the block size will increase the size of the blockchain. Therefore, more powerful nodes are needed.
The Bitcoin Cash fork went against the majority of the Bitcoin world. This is a disadvantage and many do not accept this currency and consider it illegitimate.
The main proponents of this fork (Bitmain, Roger Ver…) are seen by some as manipulators who wanted to serve their personal interests.
What are the characteristics of Bitcoin Cash (BCH)?
As Bitcoin Cash is a fork of Bitcoin, it shares a number of features with it, especially :
Its monetary output is essentially the same, so the maximum number of tokens in circulation is 21 million.
The consensus method used is proof-of-work, which is based on the SHA-256 hash function.
On average, one block is mined every 10 minutes.
However, there are many differences between the two cryptocurrencies. The most important functions that distinguish Bitcoin Cash from Bitcoin are :
➡ A block size limit of 32 MB.
The block size limit went from 1 to 8 MB in August 2017 and was raised to 32 MB in May 2018. This limit allows the Bitcoin Cash network to process between 97 and 236 transactions per second without increasing fees. Since blocks are never full, this has two important consequences:
Transaction fees are constantly kept below one cent.
Confirmation times are minimal: 10 minutes on average. In addition, to receive a small amount of money, one can simply wait for the network to confirm the transaction (2-3 seconds) instead of waiting for confirmation, knowing that it will be included in the next block. The security of these near-instantaneous payments is not perfect, but it will be greatly improved in the future thanks to the pre-consensus mechanisms that are currently being developed.
➡ Segwit and RBF are not compatible.
As the hardfork took place on August 1, 2017 before SegWit was activated, Bitcoin Cash does not include this update. Therefore, Bitcoin transactions remain malleable, although various measures may be taken in the future. Bitcoin Cash has also reversed the replacement by fee (RBF) that was introduced in Bitcoin in early 2017 and allowed for increased fees for a transaction that is still awaiting validation to speed up the process.
➡ More capabilities for smart contracts.
To enhance its smart contract processing capabilities, Bitcoin Cash has added about 15 op-codes to its internal scripting language. Most of them are old op-codes that had been disabled by the developers because they represented a potential attack vector, and have been safely reactivated or replaced by new, roughly equivalent codes. Two additional opcodes (OP_CHECKDATASIG, OP_CHECKDATASIGVERIFY) have also been implemented to facilitate the use of oracles in the channel. Finally, the ability to write raw data to the blockchain was increased to 220 bytes per transaction.
➡ A more accurate difficulty adjustment algorithm.
In Bitcoin, the mining difficulty is adjusted every fortnight to adapt to the overall computing power, so that the block time remains at 10 minutes on average. To survive as a minority chain, Bitcoin Cash had to introduce a new adjustment algorithm that changes the difficulty at each block. It should be noted that the emergency algorithm used in August 2017 was flawed and resulted in Bitcoin Cash mining at an accelerated rate, so that there are currently 85,000 more BCH than BTC. This episode did not affect the final number of tokens in circulation and the bug was fixed on November 13, 2017.
➡ A new address format.
Although traditional addresses still work, a new format has been introduced to prevent users from sending BTC to a BCH address and vice versa. This format adopts base 32, more suitable for QR codes, to represent the address.
➡ An improved signature algorithm.
The algorithm for signing a transaction has been modified in accordance with BIP-143 to introduce two improvements over the original algorithm:
It avoids redundant hashtags when verifying a signature.
Secures the offline signature used by hardware wallets such as the Ledger Nano S.
➡ A protocol optimized for large blocks.
Bitcoin Cash developers have plans to optimize the protocol to handle large transaction volumes. This includes improvements such as canonical transaction order, which requires transactions in a block to be in lexicographic order, and block propagation methods such as Graphene or Xthinner. The plan is to support 1 TB blocks so that every person on Earth can perform about 50 transactions per day.
➡ Periodic updates.
The protocol is updated every 6 months via a hard fork. The planned updates are listed in the Bitcoin Cash roadmap on the official website. These upgrades will be phased out as the protocol is finalized.
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