When politics happen to blockchains, hard forks can instigate new projects. Bitcoin Cash (BCH) was created by a group of developers, investors, entrepreneurs, and miners who were unsatisfied with Bitcoin’s development plans. Created in August 2017, Bitcoin Cash is a peer-to-peer electronic cash system that focuses on increased scalability and low transaction fees. The project is also referred to as Bitcoin ABC (Adjustable Blocksize Cap).
In 2017, Bitcoin was suffering from long transaction confirmation times and growing transaction fees, detracting from its initial premise of being near-instant payments with very low fees. Before the creation of Bitcoin Cash, there was a strong debate in the Bitcoin community about the implications of increasing the block size limit.
Since Bitcoin is decentralized, proposed changes to the protocol require widespread agreement. Therefore, all network nodes need to reach consensus when making changes and updates to the Bitcoin software.
The SegWit soft fork was planned before the BCH hard fork, but the Bitcoin Cash proponents believed that SegWit was an inferior alternative to increasing the block size limit. The Bitcoin Cash fork from Bitcoin was supported by some notable members of the blockchain industry, including Jihan Wu (co-founder of Bitmain) and Roger Ver (CEO of Bitcoin.com).
How does BCH work?
Unlike Bitcoin, Bitcoin Cash has an increased block size limit, which allows for more transactions to be included in each block. The block size limit was initially raised from 1 MB to 8 MB and then raised again in 2018 to 32 MB.
Both Bitcoin and Bitcoin Cash adjust their mining difficulty through the so-called difficulty adjustment algorithm (DAA). However, Bitcoin adjusts the difficulty every 2016 blocks, while the mining difficulty of Bitcoin Cash is adjusted after each block.
In the past, Bitcoin Cash also implemented an emergency difficulty adjustment (EDA) algorithm to decrease the mining difficulty and incentivize miners to join the network. However, the algorithm was later removed due to instabilities. The EDA implementation is one of the reasons why the BCH blockchain is thousands of blocks ahead of Bitcoin.
BCH key features
- The BCH source code was based on the original Bitcoin protocol.
- The supply is capped at 21 million.
- As a fork of Bitcoin, BCH also uses the Proof of Work (PoW) consensus mechanism to issue new coins.
- Increased block size from 1 MB to 32 MB.
- The community argues that the BCH ethos aligns more closely with Satoshi’s original plans.
- The BCH mining difficulty is adjusted after each block through the difficulty adjustment algorithm (DAA).
- BCH did not implement SegWit.
- BCH implemented Schnorr Signatures in 2019.
- Smart contract development built-in as a later update.
Day to day payments
The Bitcoin Cash community defends that BCH is designed to be used as money. You can use it to quickly send and receive money to and from anyone with a BCH wallet, both individuals and businesses. With fast transaction times and low fees, BCH can be more suitable for daily use than Bitcoin, especially when making small payments.
While there are stores and merchants that accept Bitcoin Cash payments, it doesn’t seem to be a widespread practice yet. As of June 2021, Bitcoin.com Map flags thousands of stores accepting BCH, but a great portion of them does not currently mention or provide such a payment option, which suggests that the map is inaccurate or outdated.
How to store Bitcoin Cash (BCH)
Some Bitcoin Cash proponents recommend using either the Bitcoin.com or Coinomi wallets to store BCH. Both of these software wallets are available across Windows, Mac, Linux, Android, and iOS.
It’s important to keep in mind that BTC and BCH run on distinct blockchain networks. You can’t send Bitcoin to a Bitcoin Cash wallet address and vice versa.
In 2018, part of the Bitcoin Cash community forked the protocol to create another cryptocurrency called Bitcoin Satoshi Vision (also known as Bitcoin SV or BSV), which has an even larger block size limit of 2 GB.
The contentious hard fork was supported by Craig S. Wright and Calvin Ayre and the event is known as the Hash War. However, BSV failed to get broad support from the crypto community. The lack of support and adoption is likely related to Craig S. Wright’s false claims about being the inventor of Bitcoin, Satoshi Nakamoto.
Among the thousands of cryptocurrency projects that forked from Bitcoin, BCH is one that managed to remain relatively relevant. While it may not have gone on to experience the same heights and notoriety as Bitcoin, you can still find stores that accept BCH as payment, particularly because of its lower transaction fees and faster confirmation times.
Still, larger block sizes also bring concerns about network security and, as such, Bitcoin is still considered the most secure blockchain network. Also, Bitcoin continues to be the most popular cryptocurrency, meaning that BCH has lower market liquidity and adoption than BTC.