What Is Bitcoin Cash (BCH)? Everything You Need to Know

What is Bitcoin Cash (BCH)?

Bitcoin Cash (BCH) is a peer-to-peer cryptocurrency that emerged in August 2017 as a hard fork of Bitcoin. Its primary objective is to serve as a scalable and efficient digital currency, addressing the limitations in transaction speed and cost that are inherent in the original Bitcoin network.

Key Features of Bitcoin Cash (BCH)

Larger Block Size

Bitcoin Cash increases the block size to 8MB at launch and later to 32MB, enabling more transactions per block. This design makes Bitcoin Cash particularly suitable for everyday payments and small transactions.

Fast and Low-Cost Transactions

BCH is engineered for quick transaction confirmations, typically within a few seconds, coupled with low transaction fees. This feature makes it ideal for small payments, cross-border remittances, and point-of-sale purchases.

Peer-to-Peer Digital Cash

Bitcoin Cash emphasizes its role as a peer-to-peer electronic cash system, aiming to fulfill the original vision outlined in Bitcoin’s whitepaper by enabling users to send and receive payments directly without relying on intermediaries or high transaction costs.

Decentralization and Open Development

Like Bitcoin, Bitcoin Cash operates on a decentralized blockchain. Anyone can participate in the network as a miner, developer, or node operator. Several development teams contribute to Bitcoin Cash, fostering a diverse and competitive ecosystem.

Smart Contract Support

Bitcoin Cash’s blockchain supports the Simple Ledger Protocol (SLP), allowing for the creation of tokens and enabling some smart contract-like functionality.

The Birth of Bitcoin Cash

When bitcoin went through a hard fork in August 1, 2017, it resulted in the creation of a second digital currency. We won’t get into too much detail about hard forks today, but suffice to say that it is a permanent split in the Bitcoin community caused by a difference in scaling perspectives.

Since there are no central authorities controlling digital currencies, changes in the blockchain are decided by consensus. If enough people in the community disagree with a change, they can create a similar but distinct coin and proceed with their solutions.

The BCH fork happened because the transactions per second for Bitcoin was nearing its limit. When Satoshi Nakamoto created Bitcoin back in 2009, he envisioned an online payment system that allowed its users to transact directly. As interest towards Bitcoin picked up in 2017, more and more people started using it. This made the blockchain more congested.

This means that, prior to the Bitcoin blockchain making additional technical changes, fees kept increasing and processing times became longer. Obviously, this was not good for a digital currency trying to be a mode of payment.

BCH supporters claim that the solution would be to increase the block size from 1MB to 8MB, whereas BTC supporters pushed forward with their plan to improve scalability with Segregated Witness (SegWit). BCH supporters believe that their solution will allow the network to handle more transactions per second. Faster confirmations also mean that users do not have to pay high fees for their payments to be successful.

How Does Bitcoin Cash Work?

Bitcoin Cash (BCH) is a cryptocurrency stemming from a hard fork of the Bitcoin blockchain in 2017. It was designed to tackle Bitcoin's scalability issues by increasing the block size, which enables faster transactions with lower fees. Here's a step-by-step guide to how Bitcoin Cash operates, from creation to network validation:

Proof-of-Work (PoW) Consensus Mechanism

Bitcoin Cash utilizes a proof-of-work algorithm to timestamp every new block, similar to Bitcoin. This requires miners to use powerful computers to process transactions and add new blocks to the BCH blockchain. The PoW mechanism ensures network security and decentralization by requiring miners to solve complex mathematical problems to validate transactions.

Block Size and Scalability

Bitcoin Cash increased its block size limit from 1 MB to 8 MB, and later to 32 MB, allowing more transactions per block. This larger block size facilitates lower transaction fees, making BCH suitable for everyday use. However, it also requires more computational power, potentially concentrating mining power among fewer miners, which could risk network centralization.

Difficulty Adjustment Algorithm (DAA)

Bitcoin Cash employs a difficulty adjustment algorithm to maintain a consistent block generation time of about 10 minutes. The DAA adjusts the mining difficulty based on the time taken to calculate new blocks, ensuring constant block times despite changes in mining power. Initially, the BCH network used an Emergency Difficulty Adjustment algorithm, which was replaced due to stability issues.

Mining Process

The mining process begins with creating a crypto wallet, selecting appropriate equipment like ASIC miners or GPUs, installing mining software, joining a mining pool, and starting the mining process. Although ASIC miners are preferred due to their efficiency, GPUs and CPUs are also options, albeit less efficient due to the high computational demands of the SHA-256 algorithm used by Bitcoin Cash.

Network Maintenance and Key Features

The Bitcoin Cash network is maintained by various independent developer teams, ensuring decentralization and resistance to political or social attacks. Supported by numerous wallets and services, BCH continues to grow as a digital currency. Key features include increased block size for scalability, a focus on transaction speed with low fees, and smart contract development, which adds additional functionality to the network.

Use Cases of Bitcoin Cash

Scenario 1: Fast and Low-Cost Transactions

Scenario Description: Bitcoin Cash (BCH) facilitates quick transactions with low fees, making it suitable for everyday payments like small purchases, cross-border remittances, and point-of-sale transactions.
Challenges: Traditional financial systems often incur high fees and slow processing times, particularly in cross-border payments.
Solutions: BCH provides a fast and cost-effective alternative, allowing peer-to-peer transactions that bypass these inefficiencies.
Results or Benefits: Users benefit from reduced transaction costs and faster processing times, enhancing the overall efficiency of digital payments. 💸

Scenario 2: Peer-to-Peer Electronic Cash System

Scenario Description: BCH is designed to operate as a peer-to-peer electronic cash system, enabling direct transactions without intermediaries.
Challenges: Intermediaries often increase transaction costs and processing times.
Solutions: BCH eliminates the need for intermediaries, offering direct and low-cost transactions.
Results or Benefits: Users experience greater financial autonomy and reduced transaction costs. 🤝

Scenario 3: Decentralization and Open Development

Scenario Description: BCH operates on a decentralized blockchain, encouraging participation from miners, developers, and node operators.
Challenges: Centralized systems often face issues like single points of failure and limited innovation.
Solutions: BCH's decentralized model fosters a competitive and diversified ecosystem.
Results or Benefits: Enhanced network security and innovation with a broad range of contributors. 🌐

Scenario 4: Smart Contract Support

Scenario Description: BCH supports smart contracts and token creation through the Simple Ledger Protocol (SLP).
Challenges: Limited functionality in traditional payment systems restricts broader applications like dApps and tokenization.
Solutions: BCH enables diverse applications beyond simple payments, including dApps and custom token creation.
Results or Benefits: Expands BCH's utility in the blockchain ecosystem, offering more than just payment solutions. 📜

Scenario 5: Adjustable Difficulty Algorithm

Scenario Description: BCH employs an Emergency Difficulty Adjustment (EDA) mechanism to maintain network stability.
Challenges: Fluctuations in mining activity can disrupt block production.
Solutions: EDA dynamically adjusts mining difficulty to ensure consistent block production.
Results or Benefits: Guarantees network reliability and stability, even during fluctuations. 🔄

Scenario 6: Global Adoption

Scenario Description: BCH is widely accepted by merchants globally, enhancing its usability for practical transactions.
Challenges: Traditional systems face barriers to global acceptance and integration.
Solutions: BCH's efficient design makes it an attractive option for merchants and e-commerce platforms.
Results or Benefits: Increased merchant acceptance and utility as a global payment system. 🌍

Scenario 7: Real-World Usability

Scenario Description: BCH continuously seeks partnerships to expand its real-world application, including collaborations with major retailers.
Challenges: Limited acceptance and usability in everyday transactions can hinder cryptocurrency adoption.
Solutions: BCH's ongoing efforts to increase usability and merchant acceptance broaden its application scope.
Results or Benefits: Enhanced everyday transaction utility across various sectors, from retail to services. 🛒

Why Choose Bitcoin Cash for These Use Cases

BCH offers fast, low-cost transactions, ideal for everyday payments and remittances.
Its decentralized and open development fosters innovation and security.
Smart contract support expands its use beyond payments, enabling diverse applications.
Global acceptance and merchant partnerships boost its utility and adoption.

Pros of Bitcoin Cash

Fast Transaction Times

Bitcoin Cash is renowned for its fast transaction processing, making it a favorable choice for everyday transactions where speed is crucial.

Low Transaction Fees

The transaction fees associated with Bitcoin Cash are relatively low, offering a cost-effective solution for users who engage in frequent transactions.

Better Scalability

With its enhanced scalability, Bitcoin Cash can handle more transactions per second compared to Bitcoin, making it more efficient for high-volume usage.

Decentralized

Bitcoin Cash operates on a decentralized network, reducing the risk of central control or single points of failure, thereby enhancing security and trust.

Direct Peer-to-Peer Transactions

Allowing direct transactions between parties without third-party involvement, Bitcoin Cash ensures more efficient and secure transfers.

Cons of Bitcoin Cash

Deviation from Bitcoin's Philosophy

Bitcoin Cash's divergence from Bitcoin's original philosophy may foster skepticism and lower trust among certain cryptocurrency communities.

Low Trust

Due to its controversial creation through a hard fork, Bitcoin Cash often faces trust challenges within the broader cryptocurrency community.

Volatility

Like many cryptocurrencies, volatility is a significant concern for Bitcoin Cash, with prices subject to unpredictable fluctuations.

Selling Pressure

Recent trends indicate a notable exodus of Bitcoin Cash holders, increasing selling pressure and potential downside risks.

Limited Adoption

Despite its advantages, Bitcoin Cash's adoption rate lags behind Bitcoin, limiting its utility and potential value growth.

Is Bitcoin Cash Right for You?

Bitcoin Cash is suitable for users who prioritize fast and low-cost transactions and value the security of a decentralized network. However, its volatility and limited adoption might deter those looking for a more stable investment. Consider your transaction needs and risk tolerance to determine if Bitcoin Cash aligns with your financial goals.

Pros	Cons
Fast Transaction Times	Deviation from Bitcoin's Philosophy
Low Transaction Fees	Low Trust
Better Scalability	Volatility
Decentralized	Selling Pressure
Direct Peer-to-Peer Transactions	Limited Adoption

Additional Considerations

Mining: Bitcoin Cash mining operates similarly to Bitcoin, with miners solving mathematical equations to verify transactions and receive rewards in BCH.
Purchase Methods: Bitcoin Cash can be purchased using credit or debit cards through platforms like Simplex, or through crypto-for-crypto exchanges.
Security: Users are advised to store their BCH in secure wallets to protect against potential security risks.

Where to Buy and Sell BCH?

You can buy and trade BCH through exchanges such as Coins.ph, a trusted platform that enables Filipino users to trade BCH with ease, while also offering high security and fast transactions.

Coins.ph is regulated by the Bangko Sentral ng Pilipinas (BSP) and is the first-ever blockchain-based company in Asia to hold both Virtual Currency and Electronic Money Issuer licenses from a central bank.

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How to Buy Bitcoin Cash (BCH)?

Via Coins Pro, BSP Licensed Spot Exchange:

Step 1: Log into your Coins Pro account and click [Balance].
Step 2: Select the currency you want to deposit, click on [Deposit] and enter your desired cash-in amount.
Step 3: Select BCH/PHP pair and enter the [Order Quantity] you would like to trade.
Step 4: Click Buy or Sell to place your Limit and Stop Orders.
Step 5: Wait for your order to be filled.

Buy BCH on Coins Pro!

Disclaimer: The information and publications in this article are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation offered or endorsed by Coins.

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