What Every Bitcoiner Should Know About Bitcoin Cash (BCH)

Since Bitcoin was created, there have been some questions surrounding the currency’s ability to scale effectively. Do you know, how many transactions can the Bitcoin network process per second? Seven. Transactions consume about 10 minutes to process. As the network of Bitcoin users will grow, the waiting time will get longer, because there would be more transactions to process without a change in the underlying technology that processes them. On the other side, Visa processes 150 million transactions per day, averaging out to roughly 1,700 transactions per second. This comparison shows that the Bitcoin transaction processing time is slow which might become a barrier in its growth plan. As such, the blockchain developers and cryptocurrency miners recommended two solutions to eradicate this problem or barrier.

Solution -1: Optimising the amount of data (that requires verification in each block) to be smaller for faster and cheaper transaction processing.

Solution -2: Optimizing the data blocks to be bigger for processing more information in a given time-frame.

Bitcoin Cash was built based on these two aforesaid solutions.

So, what is Bitcoin Cash (BCH), what are its advantages and disadvantages, and how it is different from Bitcoin (BTC)? Before we dive deep and discuss these core topics in more detail, let’s perform a quick background check on BCH so that you can have a better understanding.

• BCH is a splinter coin that was forked from the original Bitcoin cryptocurrency and got into circulation with effect from 1st August 2020.
• At the time of the release of BCH, all the Bitcoin holders were provided with an equal amount of BCH. (the same has been duly recorded in the BCH forked blockchain)
• The term ‘fork’ means that the technology behind the original Bitcoin has been implemented into the BCH architecture.
• During the initial days of BCH launch, Coinbase (a leading crypto trading platform) refused to support BCH because the exchange was not able to agree with the coin’s merits and potential. Later in January 2018, the exchange started supporting BCH transactions on the platform.

Talking about the support, the BCH is getting a lot of it from the crypto users, miners, and developers all across the globe even after the fact that the coin is a new player in the market. Also, the CoinMarketCap has listed the future options of BCH. Have a look at the graph below to understand the notable reach of BCH as of December 2020-

As you can see in the above graph shared, many popular exchanges, mining pools, and wallets are the supporters of BCH. As far as Bitcoin Cash blockchain goes, it looks skyrocketing as can be seen in the image shared below-

What is Bitcoin Cash?

Bitcoin Cash officially launched in August 2017 is a modified version of BTC that has accommodated the recommended solutions (as illustrated above) for faster and cheaper transaction processing.

A small group of influential miners, developers, investors, and users who were against the agreed consensus (aka BIP-91 or SegWit2x) forked the original Bitcoin blockchain to create the new version that recognizes the same codebase but only a few modifications. This newer version today is known as Bitcoin Cash (BCH). It should be noted that the symbol for Bitcoin Cash is BCH.

The official Bitcoin Cash Website Stated

Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate.

The Features of Bitcoin Cash

• Block Size Limit Increase – The blocks of Bitcoin Cash was built eight times (8 MB) larger in comparison to Bitcoin and has now been further increased to 32 MB.
• Replay and Wipeout Protection – Should two chains persist, Bitcoin Cash minimizes user disruption, and permits safe and peaceful coexistence of the two chains, with well thought out replay and wipeout protection.
• New SigHash Type – As part of the replay protection technology, Bitcoin Cash introduces a new way of signing transactions. This also brings additional benefits such as input value signing for improved hardware wallet security, and elimination of the quadratic hashing problem.

Other features have been illustrated in the below image

Advantages of investing in Bitcoin Cash

1. Decentralized: Bitcoin cash is decentralized which eliminates the need and approval of any third-party financial institution for the execution of transactions. The major advantage of BCH is its immunity to political attacks.

2. Scalable: The size of the Bitcoin Cash block is 32 MB as of November 2020, which has unleashed the potential for further expansion and adoption of the digital currency.

3. Low Transaction Cost: The heightened scalability of Bitcoin Cash has resulted in decreased validation time and transaction fees. According to Bitcoin.com, the commission charged for executing 236 bytes transaction costs as little as $0.001-$0.008.

4. Easy to Acquire: It is very easy to own BCH because of its availability on a wide range of popular cryptocurrency platforms like Binance, Coinbase, Kraken, Bitstamp, etc.

5. Popular: Bitcoin Cash is one of the most popular coins on the grounds of market cap and trading volume. This is one of the core reasons why traders go with BCH.

Disadvantages of Investing in Bitcoin Cash

1. Slow Adoption: Despite the fact that Bitcoin Cash is a popular cryptocurrency, it is yet to be adopted in full force by the investors. Its market penetration is low and the confidence among users is yet to be achieved.

2. Less Profitable: The Bitcoin Cash Network’s computation process is complex which impacts the data extraction speed. Result? The minders earn fewer profits and it is a fact that the mining complexity affects the cryptocurrency value.

3. Lower Liquidity: In terms of transaction volume, daily returns volatility, and other financial factors, the quantum of Bitcoin Cash transactions is relatively lower than Bitcoin transactions. This means that the liquidity of BCH is lower compared to Bitcoin. The BCH pairs are traded less on crypto exchanges and this is one of the major drawbacks as of now.

4. Branding Issues: Bitcoin Cash is experiencing branding issues that have negatively impacted the faith of investors in this digital currency. These branding issues have resulted because of the currency’s struggle to distinguish itself from Bitcoin and the fact that it has experienced several splits in the past including Bitcoin SV.

5. Credibility: Unlike Bitcoin, Bitcoin Cash is new in the market. As such, it would consume some more years for the new currency to build the reputation and credibility in the market to establish itself as a brand.

How is Bitcoin Cash Mined?

Like most of the cryptocurrencies, Bitcoin Cash is also decentralized, and for a decentralized network to work, it needs nodes/computers to verify the transactions. Now the question is how the transactions are verified? Miners solve mathematical and arithmetical questions equations on the blockchain by using computer power. Once the mathematical equation has been solved by a computer/node on the network, the transaction block gets verified and then the reward is received for such transaction verification.

In Bitcoin Cash mining, the reward is BCH coins. However, the competition in mining the currency is huge these days making it harder to mine the coins. As such, only those individuals are able to bag good rewards who can produce large amounts of computing power. In order to generate large computing power for becoming a successful miner, a lot of money (thousands of dollars) is required to be invested.

Although there are some other options like a mining pool for beginners. A mining pool is a network of other miners where the miners can together pool their computing powers to solve the mathematical equations for earning Bitcoin Cash reward. If the mining pool achieves success in verifying the Bitcoin Cash transactions, then all the reward generated is distributed equally among the miners of the pool.

Joining a mining pool is simple. The following websites can be visited to learn more about joining the pool-

• BTC.com
• ViaBTC
• F2Pool
• Bitcoin.com

Bitcoin Cash mining is a reliable and popular method for mining and earning BCH coin provided that the right software, as well as hardware, has been put into use.

How Bitcoin Cash different from Bitcoin

After the fork of Bitcoin Cash from 8 MB to 32 MB, the currency’s capability to execute more transactions every second has tremendously increased. In order to calculate the transactions that can be processed every second, the following information is needed-

Size of Block: 32 MB or 33554432 Bytes

Time Consumed by Block: 10 minutes or 600 seconds

Now, in order to calculate the transactions that can be done in 1 second, we will divide Block size by time consumed by block.

33554432 Bytes / 600 seconds = 55924.05 Bytes/s

In one second, the BCH network can process the 55924.05 Bytes worth of transactions which is much faster in comparison to the typical Bitcoin (BTC)

Now, let’s have a look at how Bitcoin Cash is different from Bitcoin-

As far as the users of Bitcoin/Bitcoin Cash are concerned there is very little noticeable difference on the front end when using either currency. The main difference between these coins is the fact that, given an equal hash rate, the BCH protocol allows for more transactions per second, which means, faster payments and lower fees. I already wrote the features of Bitcoin Cash above.

Conclusion

So, in the end, Bitcoin Cash is a forked coin from the main Bitcoin/ Bitcoin Core and the Difference is that Bitcoin Cash is created to process faster payments at fees lower than Bitcoin (BTC). The investors should have a look at the potential of this coin and analyze its market positions to understand how much this currency has grown in such a short time.