Bitcoin Cash, abbreviated as BCH, is the result of a hard fork on Bitcoin which executed in August 2017. At the core it is essentially the same as Bitcoin but there are a few noticeable differences (listed further on in this guide). The reason for the hard fork was due to disagreements on Bitcoin scalability issues which has been debated about through the years amongst the community.
Scalability has always been a hot topic and heavily discussed even before Bitcoin hit the mass media. When bitcoins are transacted, miners need to add new blocks to the blockchain in order for it to be become valid. The problem is that Bitcoin has a block size limit of 1MB so only so many transactions can be processed within newly discovered blocks. This worked during the early years but now with rapidly increasing users it has slowed down the speed of Bitcoin immensely. This issue will only worsen as cryptocurrencies become more and more popular.
The reason this block size limit was put in place was to prevent spam transactions that clog up the network. Currently the network can handle roughly 4.4 transactions per second which is totally insufficient for the volume today let alone the future where numbers could match top financial service companies such as Visa who is capable of handling 24,000 transactions per second.
What this means at the moment is that your transaction will take longer to validate on the Bitcoin network unless you tip a high fee to the miners. In the larger scheme of things, even with this problem, transactions are still much faster than any current financial services like international bank transfers.
Not to expand into too much detail, one of the solutions was the integration of segwit which essentially increases the number of transactions possible per block by storing the digital signatures separately from the other data. Bitcoin Cash was 'forked' off from Bitcoin because a large portion of the community disagreed with the implementation of segwit. BCH goes for a different approach that utilizes the features noted above which work towards true "peer-to-peer electronic cash".
Difference vs Bitcoin
- A larger block size of 8MB: A larger block size means more transactions can be processed by miners per block.
- Replay and wipeout protection: Prevention of maliciously repeated transactions so both blockchains (Bitcoin and Bitcoin Cash) can coexist peacefully.
- No segwit: Segwit is not implemented on this fork.
- Improved PoW difficulty adjustment system: A quicker method for block mining difficulty adjustment compared to Bitcoin.
There are many who speculate that the origins of Bitcoin Cash was a planned move by big players in the cryptocurrency world to rake in profits in the future. These players include the likes of Roger Ver, Jihan Wu, Calvin Ayre and many other large mining groups in Asia. The sudden rise and fall of Bitcoin Cash during the launched started to stir up trouble as as many individuals in the community believed this to be true.
The subsequent pump and dump pattern that was experienced in November 2017 was another strong indicator that the whales were at play as it spiked from a steady $700 to almost $3000 within the span of a week. As over 50% of the trading volume came from Korean exchange Bitthumb, it was unusually suspicious. Many who dived into the BCH game early made huge profit gains whereas those who decided to jump the BTC ship over to BCH at the all-time high immediately regretted it.
From the $3000 all-time high it plummeted down to lows of $800 and began to steadily gain momentum again. Although the price changes of Bitcoin Cash looked manipulated, there is obviously still the chance that it was purely due to hype from the Koreans which was what happened with other crytocurrencies such as Dash and Monero. There is no doubt that those who were afraid also made accusations and posted fake news on places like Reddit to spread FUD and FOMO between the two digital coins.
The majority of the crypto community see Bitcoin Cash as a copy or fake because of their strong loyalty to Bitcoin core. Many don't understand that they should be considered as two fundamentally different coins that serve two different purposes. Bitcoin is very similar to gold where it's a great investment and store of value but is difficult to move, whereas Bitcoin Cash is more relatable to fiat money which is cheap and fast to transact for goods.
There is a strong chance that both cryptocurrencies will thrive in the future where users will trade Bitcoin for Bitcoin Cash to purchase goods online when the value is high. Once the controversy dies down and Bitcoin Cash becomes globally accepted, the price swings should level out and BCH will begin to rise to its true value in the future.
How to Buy Bitcoin Cash
Just like Bitcoin, you can purchase it on all the top rated Bitcoin Cash exchanges. The process is exactly the same where you place orders which will execute at your selected price. Of course there are many other features you can play around with in a demo feature that most exchanges offer.