Welcome back to another post where we dive into different crypto assets and discuss their fundamentals, their purpose, and ultimately tell you my opinion on them. Today we have the iconic Bitcoin Cash (BCH) cryptocurrency that we are going to discuss. I can say without a shadow of a doubt that this coin is quite controversial across the market with very strong differing opinions on both sides.
Either way, I will aim to be as objective as possible in this post and give you everything you need to know to adequately access this project to the best of your own abilities with all the presented facts. Lets start our dive into one of the top currencies on the market – What is Bitcoin Cash!
Nothing should be considered investment or financial advice. Enjoy the ride.
Although as always, before we dive straight into the main topic there is something you need to know. If you do not already, then you are going to want to know what a fork is on the blockchain in order to properly understand the origins of Bitcoin Cash.
What Are Forks
In the crypto world, forks are currently the only way to update the source code for certain projects.
For instance, Bitcoin which is the largest digital asset on the market can only be updated with a fork. Forks can actually come in two different ways:
- Soft Fork
- Hard Fork
The first way is what people call a soft fork. A soft fork is basically an update to the main source code, but it is more of an additional layer to the main code, not a necessity for the original code to run. That means a project can under-go a soft fork update without having to completely update its code and switch to a new blockchain.
The second and most heard about fork on the market is called the hard fork. Unlike the soft fork, a hard fork is a change to the fundamental code behind a project which means that the entire community of developers, exchanges, and nodes all need to switch to the new code, abandoning the old blockchain and joining the new one. Now, the new blockchain does have all the previous history of the old one, but it continues on in a different way than the original one.
With this example, we can now dive into the main question of – what is Bitcoin Cash, and classify which fork it falls under.
What Is Bitcoin Cash
To summarize, Bitcoin Cash is a hard fork of Bitcoin that was performed when the original community faced a disagreement with how to update the original Bitcoin protocol to fix the scalability issue.
Bitcoin Cash hard forked from the original code base in order to allow for a larger block size than originally intended. In the event of this hard fork, there were several things that happened.
First, a large mining group called Bitmain changed all of their miners to mine on the new blockchain on August 1, 2017. In addition, a sufficient number of community members and nodes followed this movement and supported the new digital asset. Last of all, exchanges across the market decided to not only list Bitcoin, but the forked version of Bitcoin Cash as well.
Clearly this was successful since Bitcoin Cash has maintained a top 10 spot in the market basically since its creation on August 1, 2017. Right after the creation, the asset actually peaked at the number 4 spot in the entire market.
While this is impressive, the reasoning behind the split has caused a good amount of debate.
What Is The Purpose Of Bitcoin Cash
The reason behind the original split of Bitcoin to Bitcoin Cash was in order to increase the block size from 1 megabyte to 8 megabytes.
This was directly related to the issues persisting in mid 2017 where there was a backlog of transactions on the Bitcoin blockchain do to the limited blocksize. This backlog cause transactions to take up to 4 days to get confirmed and transaction fees surged to upwards of almost $40 per transaction.
This indicated that Bitcoin was not ready to become the online payment provider that Satoshi originally though it would become.
Therefore, a group of miners lead by China super mine Bitmain and the proposed Bitcoin Jesus Roger Ver, came up with the solution to increase the blocksize for bitcoin confirmations.
In simple terms for those that are unfamiliar with blockchain, lets discuss what we mean by “increasing blocksize”.
Every transaction is really a piece of data that is placed on the Bitcoin blockchain in a single block. That block has a total size that it can store data. Therefore, there is a limit to the amount of data that can be stored in each block, which means there is a limit to the amount of transactions that can be stored per block.
Roughly this ties out to around 4 to 5 transactions per second given that a Bitcoin block is confirmed on average every 10 minutes. That may seem like a lot of transactions per block, but it really is not when you take Visa’s 25,000+ transactions per second that it can handle.
Now, Visa transactions are also not being broadcasted to a public ledger shared around the world, and likewise is controlled by a centralized server which simplifies the data transfer immensely. Regardless, the Bitcoin blockchain has a long way to go before it can be used for any common day payment system.
Arguments Against Increasing Blocksize
While increasing the block size might sound like a simple solution, it goes much deeper than that.
You see, if you continually increase the blocksize then you are eventually limiting the speed at which computers and miners across the global can receive and upload the necessary data to start confirming the next block on the blockchain.
Making blocks larger and larger may solve the transactions per second issue, but what it does to the overall network is diminishes it’s strength. As you continually increase blocksize, the requirements for storage and faster servers becomes higher. This cuts out a lot of the smaller mining farms and could reduce the decentralization of the overall network focusing power in the larger firms.
Therefore, the Bitcoin Core community proposed a different solution.
Compress Transaction Size
Just like we do when we store photos on our computers or videos on our phones, the Bitcoin Core community suggested that they create a way to compress transaction size. This would be like saying would you rather store compressed photos, files, and videos on your computer or have to just continually purchase new hard drives to support all of your work?
Clearly, you would rather just host compressed files and images instead of having to purchase new hardware. This is the solution that Segwit provided.
Segwit was a protocol solution that would store part of the transaction files off the main network in order to decrease the transaction size by up to 75%. Another solution that they have proposed is called layer two solutions that the Bitcoin Lightning network utilizes. We won’t dive into that much in this post.
Bitcoin Cash Fork
Ironically, the forked community of Bitcoin cash encountered even more problems within their own community over time.
In November 2018, the original community that forked from the Bitcoin community again was faced with a disagreement.
Instead of coming up with a compromise to their problems, the BCH community split into two groups.
One lead by Bitmain and Roger Ver again, and the other led by a fanatic named Craig Wright and his mining co-horts.
It has been largely accepted on the market that Craig is a fraud and scammer, even to the point of proposing that he was the original Satoshi Nakamoto that created the Bitcoin protocol and whitepaper. Yet, time after time he has failed to submit sufficient evidence, been proven a liar on multiple occasions even publicly, and now faces a huge lawsuit for some of his actions. We can only hope this man goes to jail very soon.
The original Bitcoin Cash stood strong against this hard fork of their own community, and has since stayed at a higher overall market cap then its forked counterpart Bitcoin SV proving that it is resilient to the changes.
Is BCH The Real Bitcoin?
With all of this information, you can easily be overwhelmed.
There question still remains – Is BCH the real Bitcoin?
To put it simply, no. Bitcoin Cash is a very close version of the original Bitcoin, but over time the BCH community has made even more changes to the source code like increasing the block size once again, and even implemented their own form of smart contracts.
While the BCH project has plenty of support, it is a shadow of what the Bitcoin (BTC) community and network is currently, and will likely never reach such levels of adoption. The main reason for this is lack of innovation. It is simply a child of the grandfather currency.
Thanks for reading! If you want to learn about another cryptocurrency called EOS then click here!