Introduction
The divergence and competition within the blockchain space have given rise to many new projects, among which Bitcoin Cash (BCH) was launched in August 2017 by a group of developers, investors, entrepreneurs, and miners dissatisfied with the direction of Bitcoin's development. As a peer-to-peer electronic cash system, Bitcoin Cash aims to enhance blockchain scalability and reduce transaction fees. This project is also referred to as "Bitcoin ABC" (Adjustable Block Size).
Blockchain Scalability
In 2017, Bitcoin faced widespread criticism due to long transaction confirmation times and soaring fees, which contradicted its original vision of enabling near-instant payments with low costs. Before the inception of Bitcoin Cash, the Bitcoin community experienced intense disagreements over whether to increase the block size limit.
The decentralized nature of Bitcoin means that proposals for protocol changes must achieve broad consensus. Consequently, modifications and upgrades to Bitcoin software require agreement from all network nodes.
Bitcoin Cash is designed to be a more scalable cryptocurrency that aims to reduce transaction fees and shorten confirmation times. The BCH community believes that the project aligns more closely with Satoshi Nakamoto's vision of peer-to-peer electronic money. Its primary advantage lies in providing a faster and cheaper payment experience, making it more suitable for everyday transactions.
Shortly after the Bitcoin Cash fork, the original Bitcoin blockchain underwent a long-awaited soft fork upgrade, adopting a technology called SegWit (Segregated Witness). This technology was proposed by Bitcoin developer Pieter Wuille in 2015 to address network congestion and other scalability issues.
Although the SegWit soft fork was planned before the BCH hard fork, supporters of Bitcoin Cash argued that it did not adequately increase the block size limit. In contrast, the Bitcoin Cash fork garnered support from prominent figures in the blockchain industry, including Bitmain co-founder Jihan Wu and Bitcoin.com CEO Roger Ver.
How Does BCH Work?
Bitcoin Cash directly derives its code from the original Bitcoin, sharing many similarities between the two networks. Both utilize a proof-of-work consensus mechanism, allowing anyone to contribute computing power. Furthermore, after the fork, all addresses holding BTC received an equivalent amount of BCH (though the address strings remain the same, they exist on different networks).
Similar to Bitcoin, BCH has a target block time of 10 minutes and a maximum supply of 21 million coins. The issuance of BCH halves approximately every 210,000 blocks (roughly every four years), with the current block reward set at 6.25 BCH per block.
Unlike Bitcoin, Bitcoin Cash has relaxed the block size limit, allowing each block to contain more transactions. The block size limit was increased from the original 1 MB to 8 MB and further raised to 32 MB in 2018.
Despite this, since 2017, instances of BCH's average block size exceeding 1 MB have been rare. We can compare the average block sizes of BTC and BCH on BitInfoCharts.com.
Both Bitcoin and Bitcoin Cash manage mining difficulty through a so-called Difficulty Adjustment Algorithm (DAA), with Bitcoin adjusting every 2016 blocks, while Bitcoin Cash adjusts immediately after each block is generated.
In the past, Bitcoin Cash attempted to implement an Emergency Difficulty Adjustment (EDA) algorithm to lower mining difficulty in order to attract miners to the network; however, this algorithm was ultimately abandoned due to stability issues. The implementation of EDA was one of the key reasons why the BCH blockchain led Bitcoin by thousands of blocks.
In 2019, Bitcoin Cash introduced a technology called Schnorr signatures, an alternative algorithm that changes the way digital signatures are created. The Schnorr signature scheme offers advantages in security, privacy, and scalability compared to the ECDSA scheme currently used by Bitcoin.
Key Features of Bitcoin Cash (BCH)
Bitcoin Cash (BCH) originates from the original Bitcoin protocol, sharing the same codebase. The total supply of BCH is capped at 21 million coins. As a fork of Bitcoin, BCH also employs a proof-of-work (PoW) consensus mechanism to issue new coins. In contrast to Bitcoin, the block size for BCH has been increased from 1 MB to 32 MB, a change that the community believes aligns more closely with Satoshi Nakamoto's original vision.
BCH adjusts mining difficulty through a Difficulty Adjustment Algorithm (DAA) after each block is generated and has not implemented SegWit technology. Additionally, BCH introduced Schnorr signatures in 2019 and integrated smart contract development capabilities to facilitate future updates.
Everyday Payments
The Bitcoin Cash community aims to develop BCH as a currency for everyday use. Users can transact funds with anyone holding a BCH wallet. Compared to Bitcoin, BCH offers faster transaction speeds and lower fees, making it particularly suitable for small daily payments.
While some shops and businesses accept Bitcoin Cash payments, its adoption remains limited. As of June 2021, thousands of merchants accepting BCH payments were marked on the Bitcoin.com map; however, most merchants did not explicitly mention or offer this payment option, indicating that the listed results may be inaccurate or outdated.
How to Store Bitcoin Cash (BCH)
We recommend using Trust Wallet for storing BCH. Additionally, many cryptocurrency wallets support BCH storage, such as hardware wallets like Ledger, Trezor, and Cobo Vault. You can also opt for desktop wallets like Electrum Cash to store BCH.
Some supporters of Bitcoin Cash suggest using Bitcoin.com or Coinomi wallets, both of which support Windows, Mac, Linux, Android, and iOS systems.
It is essential to note that Bitcoin and Bitcoin Cash operate on different blockchain networks, meaning you cannot send Bitcoin to a Bitcoin Cash wallet address, and vice versa.
Bitcoin SV
In 2018, a faction of the Bitcoin Cash community chose to fork and create another cryptocurrency called "Bitcoin Satoshi Vision" (Bitcoin SV, or BSV), which further relaxed the block size limit to 2 GB.
This controversial hard fork was supported by Craig S. Wright and Calvin Ayre, an event referred to as the "Hash War." However, BSV has not gained widespread recognition within the cryptocurrency community, possibly due to Craig S. Wright's claims of being Bitcoin's creator, Satoshi Nakamoto.
Conclusion
Among the thousands of cryptocurrency projects forked from Bitcoin, BCH still maintains relative relevance. Although it does not enjoy the same level of recognition and attention as Bitcoin, some merchants accept BCH payments primarily due to its low transaction fees and fast confirmation speeds.
However, the increase in block size has raised concerns about network security, leading to Bitcoin being regarded as the most secure blockchain network. Additionally, Bitcoin remains the most popular cryptocurrency, and BCH cannot compete with it in terms of market liquidity and adoption.
Risk Warning
While the cryptocurrency market offers significant growth potential and innovation opportunities, it also carries a high level of market risk and price volatility. The value of crypto assets can fluctuate dramatically in a short period, potentially leading to substantial financial losses for investors. Additionally, the cryptocurrency market faces multiple risk factors, including technical risks, legal and regulatory uncertainties, cybersecurity threats, and market manipulation. We strongly advise users to conduct thorough research and due diligence before making any investment decisions and to consult professional financial advisors. All investment decisions are made at the user’s own risk. Thank you for your trust and support of Venkate!
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