Bitcoin Cash is launched in August 2017 following a hard-fork of the Bitcoin protocol. The Bitcoin blockchain does not allow to adapt to a large number of requests and users without impacting the speed and costs of transactions. Indeed, the original Bitcoin blockchain is not capable of handling more than ten operations per second, which is extremely low compared to a network like Visa that can handle thousands. The result is slow and increasingly expensive transactions, which is alarming the Bitcoin community and creating great debate between users, miners and development teams. From that debate, is born the Bitcoin Cash. But what is it, and what can you do with it?
- Price and capitalization of Bitcoin Cash
- What is Bitcoin Cash?
- Why was Bitcoin Cash created?
- How did the fork between Bitcoin and Bitcoin Cash work?
- What are the characteristics of Bitcoin Cash?
- Why did Bitcoin SV emerge from Bitcoin Cash?
- How to purchase Bitcoin Cash?
- How to store my Bitcoin Cash?
- Advantages and limitations of Bitcoin Cash
Price and capitalization of Bitcoin Cash
You will find below the main information concerning the price and capitalization of Bitcoin Cash within particular:
- The price: in dollars and in Bitcoins, as well as the price variation over the last 24 hours
- Rank: Bitcoin Cash’s worldwide ranking compared to other Cryptocurrencies (the ranking is based on the market cap / capitalization of each crypto)
- The market cap: which represents the capitalization of Bitcoin Cash in dollars, i.e. the total amount in circulation
- Volume: which is the total amount of BCH traded over the last 24 hours (in dollars).
What is Bitcoin Cash (BCH)?
Bitcoin Cash (whose acronym is BCH and more rarely BCC, BCHABC, or BAB on some exchange platforms) is a cryptocurrency similar to Bitcoin, which came into existence on August 1, 2017. It is a fork of Bitcoin, i.e. the two Cryptocurrencies share some common characteristics but operate on different blockchain since their separation.
Bitcoin Cash is the result of a split in the community that follows the debate on the scalability of Bitcoin, that is to say on how the network should scale to adapt to user demand. Two parts of the community each had their own vision of the matter, which led to two different projects: one part, largely dominant, wanting the majority of economic activity to take place outside the main blockchain so that the network remains as decentralized as possible (Bitcoin); another part, smaller, believing that the blockchain can accommodate a very large part of the transactions while remaining sufficiently decentralized (Bitcoin Cash).
Like Bitcoin (BTC), Bitcoin Cash (BCH) has the ambition to become, as stated in the whitepaper, a decentralized peer-to-peer e-money, operating without a central bank or third party. Proponents of Bitcoin Cash (BCH) defend its legitimacy to claim Bitcoin as a continuation of the original project. Bitcoin Cash would effectively follow Satoshi Nakamoto’s vision for Bitcoin when he was still present, that is, a scaling up that would mainly take place on the blockchain.
However, Bitcoin Cash is a highly controversial project because of its contentious nature against the general opinion and the dishonest methods used by some of its defenders. In terms of price, Bitcoin Cash today represents a small part of the capitalization of Bitcoin: about 3 to 5%.
Why did Bitcoin Cash appear? (BCH)
The number of bitcoin transactions has been steadily increasing since its inception in 2009. However, since 2017, the Bitcoin network has been experiencing difficulties in processing these transactions and is regularly congested. During transaction peaks, it often takes several hours for a transaction to be confirmed or pay high transaction fees to speed up the process. In December 2017, at the peak of the last speculative Cryptocurrency bubble, the median fee was over $30 per transaction.
Why the slowness? By design, Bitcoin’s blockchain blocks are limited in size to 1 MB. A block is mined every 10 minutes on average: if we neglect the impact of SegWit, this represents a transaction capacity of 7 transactions per second and this is generally not enough to satisfy the increasing demand for use.
One of the solutions to this problem is to increase this limit, as Satoshi Nakamoto predicted in 2010. However, over time, this change lost its approval within the community, as it led some to a dangerous centralization of the network. A debate on scalability raged for years until it led to the irreversible separation between Bitcoin and Bitcoin Cash in 2017, which was effectively sealed by the cancellation of SegWit2X in November 2017.
The community of Bitcoin is divided into 2 camps:
- On one side, the Bitcoin supporters (BTC) who want to maintain a reduced block size, believing that an increase in this limit would centralize the network: for them, Bitcoin must run on a commercially available computer with a basic Internet connection, so that everyone can own a complete node if they wish. Instead of increasing the block size limit, they prefer protocol optimization solutions such as SegWit, which would increase the number of transactions managed by the blockchain by about 70%, or second layer solutions such as the Lightning network or side chains.
- On the other hand, Bitcoin Cash (BCH) proponents want the activity on the chain to develop naturally, advocating a gradual increase in the block size limit and consider that the transaction capacity provided by SegWit is not sufficient and that second layer solutions pose more problems than they solve. They believe that not all users should have to maintain a complete node, as this task should be carried out mainly by miners and large merchants. To ensure that the network remains sufficiently decentralized despite the increasing load, they rely on optimized block propagation and Moore’s Law, which states that computing power grows exponentially and costs fall in the same proportion. Before Bitcoin Cash, this part of the community had tried several times to increase the block size limit (through the Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited clients), but without success.
Who supports Bitcoin Cash? (BCH)
First of all, we must make it clear that Bitcoin Cash is a vision of Bitcoin. Therefore, the project is supported by diverse people whose deep conviction is that it is possible to scale up by gradually increasing the block size limit and that the Bitcoin Core team has disappointed by refusing to compromise.
Bitcoin Cash is first supported by a majority of the miners, or rather by a majority of the mining pools. In the batch, we find the ViaBTC cooperative, which supported the project by mining the 1st block, as well as the Chinese company Bitmain specialized in ASIC manufacturing, which controls 2 of the biggest cooperatives in terms of computing power: Antpool and BTC.com. Bitmain is often associated with the figure of its co-founder, Jihan Wu, who is also the first individual to have translated Bitcoin’s white paper into Chinese. The company is also suspected of encouraging the use of Bitcoin Cash because the company holds a Chinese patent on AsicBoost, a technique for creating blocks 20% faster than normal that SegWit makes obsolete.
On the developers’ side, there are the Bitcoin XT and Bitcoin Unlimited development teams, each of which maintain an independent implementation of Bitcoin Cash. In addition, Bitcoin Cash has the support of Gavin Andresen, the lead developer of Bitcoin Core between the departure of Satoshi in 2010 and 2014.
But perhaps the most emblematic figure behind Bitcoin Cash is Roger Ver, the CEO of the company Bitcoin.com and one of the first major investors in Bitcoin and related companies. Ver is indeed a celebrity in the industry because of his continued activism for Bitcoin between 2011 and 2017. Bitcoin.com now occupies a prominent place in the Bitcoin Cash community: indeed, much more than an information site, it is also a Bitcoin portfolio supporting BTC and BCH, a block explorer and a mining cooperative. Bitcoin.com promotes Bitcoin Cash throughout the year, including sponsoring events and various projects.
How did the fork between Bitcoin and Bitcoin Cash go?
The fork between Bitcoin and Bitcoin Cash took place on August 1st at Block 478 559. By increasing the block size limit to 8 MB, the implementation of Bitcoin Cash caused a hard fork of the Bitcoin blockchain, i.e., a duplication of the chain into two distinct chains: the one following the old rules (BTC) and the one adopting the new rules (BCH).
This fork bears the somewhat abstruse name of “User Activated Hard Fork” (UAHF) about the “User Activated Soft Fork” (UASF), which wanted to push the Bitcoin network to adopt SegWit in the same period. It was programmed by the Bitcoin ABC software implementation developed by Amaury Séchet, ABC being the acronym for Adjustable Blocksize Cap, i.e., “adjustable block size limit”. This client has become the Bitcoin Cash protocol’s reference implementation, as is Bitcoin Core for Bitcoin.
The two resulting strings, Bitcoin and Bitcoin Cash, therefore share the same history before August 1st. This is why if you had BTCs on a portfolio at the time of the fork, you should have the same number of BCHs at the same address. If a trading platform kept your Bitcoins for you, it depends on its policy. If it supported the fork, it credited your BCHs directly to your account or allowed you to withdraw them. It is also possible that it did not support it and kept your BCHs against your will.
Note that Bitcoin Cash has implemented replay protection, which makes transactions incompatible from one chain to another and prevents malicious players from replaying them to take over other people’s funds.
In summary, if you had 0.5 BTC stored on Coinbase at the time of the fork, then you must have received 0.5 BCH.
The list of exchange platforms that support BCH can be found on the official website.
This fork remains controversial for several reasons:
- Increasing the size of the blocks increases the size of the blockchain. Thus, we need more efficient nodes.
- The Bitcoin Cash fork was against the majority of the Bitcoin world players. This is a disadvantage, and many do not accept this currency and consider it illegitimate.
- Some see the main supporters of this fork (Bitmain, Roger Ver…) as manipulators who have sought to serve their personal interests.
What are the features of Bitcoin Cash (BCH)?
Since Bitcoin Cash is a fork of Bitcoin, it shares with it a number of characteristics, in particular :
- Its monetary emission is approximately the same so that the maximum number of tokens in circulation is 21 million.
- The consensus method used is Proof-of-Work based on the SHA-256 hash function.
- A block is mined every 10 minutes on average.
However, there are many differences between the two Cryptocurrencies. The main features that differentiate Bitcoin Cash from Bitcoin are :
➡ A block size limit of 32 MB
The block size limit was increased from 1 to 8 MB in August 2017 and then increased 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 the blocks are never full, two major consequences follow:
- Transaction fees remain constantly below one cent.
- Confirmation times are minimal: 10 minutes on average. Moreover, to receive a small amount, one can simply wait for the transaction to be validated by the network (2-3 seconds) rather than waiting for confirmation because one knows that it will be included in the next block. The security of these quasi-instantaneous payments is not perfect, but it will be greatly improved in the future by pre-consensus mechanisms currently under development.
➡ Segwit and RBF not supported
Since the hard fork of August 1, 2017, took place before the activation of SegWit, Bitcoin Cash does not include this update. Transactions in Bitcoin are therefore still malleable, although different measures may be adopted in the future. Bitcoin Cash has also canceled the Replace-by-Fee (RBF) that was introduced in Bitcoin at the beginning of 2017 and which allowed to increase the fee for a transaction awaiting validation in order to speed up the process.
➡ More opportunities for smart contracts
To improve its ability to process smart contracts, Bitcoin Cash has enriched its internal scripting language by adding some fifteen operating codes. For the most part, these are old operating codes, deactivated by the developers because they were a potential vector of attack, which have been securely reactivated or replaced by new codes of approximately the same type. In addition, two additional operating codes (OP_CHECKDATASIG, OP_CHECKDATASIGVERIFY) have been implemented to facilitate the use of oracles on the chain. Finally, the ability to write raw data to the blockchain has been increased to 220 bytes per transaction.
➡ A more accurate difficulty adjustment algorithm
In Bitcoin, the mining difficulty adjusts to the overall computing power every two weeks, so that the block time remains 10 minutes on average. To survive as a minority chain, Bitcoin Cash had to implement a new adjustment algorithm that changes the difficulty to all blocks. It should be noted that the algorithm urgently deployed in August 2017 was flawed and caused the mining of Bitcoin Cash to accelerate to the point where there are currently 85,000 BCH more than BTC. This episode had no impact on the final number of tokens in circulation and the flaw was corrected on November 13, 2017.
➡ A new address format
Although traditional addresses still work, a new format has been implemented to prevent users from sending BTCs to a BCH address and vice versa. This format adopts the base 32, more adapted to QR codes, to represent the address. An example of an address is :
⚠ Please note that Bitcoin Cash addresses are quite similar to Bitcoin addresses. Never send Bitcoin Cash (BCH) to your Bitcoin address (BTC), you risk losing your funds for good.
➡ An improved signature algorithm
The algorithm for signing a transaction has been modified according to BIP-143 to make two improvements to the initial algorithm :
- It avoids redundant hashes when verifying a signature.
- It secures the offline signature used by hardware wallets such as the Ledger Nano X.
➡ A protocol optimized for large blocks
Bitcoin Cash’s developers plan to optimize the protocol in order to adapt it to a high volume of transactions. This includes improvements such as the canonical order of transactions, which requires the transactions contained in a block to be arranged in lexicographical order or block propagation methods such as Graphene or Xthinner. The project is to eventually support blocks of 1TB to allow each human being on Earth to make about fifty transactions per day.
➡ Regular upgrades
The protocol is upgraded every 6 months through a hard fork. Planned improvements are listed on the Bitcoin Cash roadmap available on the official website. These upgrades will disappear once the protocol has been finalized.
Why did Bitcoin SV (BSV) emerge from Bitcoin Cash? (BCH)
On November 15, 2018, Bitcoin Cash was to undergo its usual upgrade in the form of a hard fork. However, unlike other upgrades, the proposed changes did not meet with unanimous approval. It is in this context that Bitcoin SV (BSV) was born.
The proponents of BSV, represented by Craig Wright (nChain) and Calvin Ayre (Coingeek), wanted to restore Satoshi’s vision (Satoshi’s Vision, SV), i.e. to stick to the original model of Bitcoin, remove the block size limit and lock the protocol as soon as possible to allow the ecosystem to develop smoothly. This is why they opposed the changes orchestrated by the Bitcoin Cash development teams, going so far as to threaten to attack the Bitcoin Cash chain with their computing power.
This episode did a lot of harm to Bitcoin Cash by dividing its community and weakening its credibility.
How to purchase Bitcoin Cash (BCH)?
To buy or trade Bitcoin Cash (BCH), you can go to several platforms called exchanges.
Some of these platforms allow you to buy BCH directly in dollars. Some allow you to buy Bitcoin, Ether, or other cryptocurrencies for fiat currency which you can then exchange for Bitcoin Cash.
How to store Bitcoin Cash (BCH)?
The 2 safest electronic wallets to store your Bitcoin Cash are the Ledger Nano X and the Trezor.
Ledger is a French company that offers a wide range of electronic wallets to store and secure cryptocurrencies. Ledger supports the storage of Bitcoin Cash.
The Trezor wallet comes in the form of a USB key on which it is possible to store cryptocurrencies such as Bitcoin Cash.
Advantages and Disadvantages of Bitcoin Cash (BCH)
- Inherits Bitcoin’s monetary properties and proven robustness
- Speed of transactions
- Low transaction costs
- Support for miners (ViaBTC, Bitmain, Bitcoin.com)
- A bad press among a part of the Cryptocurrency community
- Increased risk of 51% attacks as a minority channel on SHA-256
- Relative centralization of mining
- Aggressive style in development (upgrades every 6 months) and risk taking