Bitcoin Cash is a peer-to-peer electronic cash system that aims to become sound global money with fast payments, micro fees, privacy, and high transaction capacity (big blocks). In the same way that physical money, such as a dollar bill, is handed directly to the person being paid, Bitcoin Cash payments are sent directly from one person to another.
What is Bitcoin Cash?
Bitcoin Cash (BCH) is a cryptocurrency that intends to offer an alternative to the world’s oldest and most widely traded cryptocurrency, Bitcoin (BTC).
Launching in 2017, Bitcoin Cash was created by a group of Bitcoin users who disagreed with the roadmap proposed by the project’s principal developer group, Bitcoin Core, and who believed different technical decisions were needed to bring Bitcoin to a global audience.
Bitcoin Cash proponents tended to believe Bitcoin required modifications to make it competitive with traditional payment systems like Visa and PayPal. They also advocated for lowering the fees users pay to send transactions, preferring to shift these costs to other parts of the network.
How Does It Work?
Bitcoin Cash is settled using a larger block size (which is 4-8 times larger than BTC, depending on the use of Segregated Witness) to process transactions more quickly.
These transactions are quick enough that you could make a grab-and-go retail purchase with BCH (like a cup of coffee), but if you were making a large purchase such as a car or a house, you could opt for a slower, more secure cryptocurrency like BTC.
BCH and BTC, therefore, fulfill different roles. Not every cryptocurrency is a store of value, and not every cryptocurrency needs to process data quickly to function like a credit card transaction. It makes sense to use different tools for different tasks — much like using a credit card for restaurant dining and a bank transfer to buy a house.
Ultimately, BCH is faster and features lower processing fees than BTC, but is still used less frequently as everyday cryptocurrency payments have yet to be widely adopted. Over time, many believe that greater awareness and complementary technological improvements and innovations will pave the way for BCH to serve as a leader in cryptocurrency payments.
Bitcoin Cash is a decentralized peer-to-peer electronic cash system that does not rely on any central authority like a government or financial institution. As such, it represents a fundamental redesign of the very nature of money. The core features of Bitcoin Cash are:
Open to anyone. Nobody controls or owns Bitcoin Cash. There’s no CEO, and you don’t need to ask for permission to use it.
Pseudonymous. Identities are not tied to transactions. This helps to ensure that Bitcoin Cash remains free to be used by anyone, without censorship.
Transparent. All transactions are recorded on a global public ledger called the blockchain. The ledger is updated at regular intervals in blocks that are connected to form a chain. This allows anyone to easily see the full history of ownership and helps to eliminate the potential for fraud.
Distributed. The public ledger (blockchain) is stored voluntarily by a network of participants known as ‘nodes.’ This helps to ensure the longevity of information.
Rules-based. Nodes follow a set of rules (a protocol) to achieve consensus on the state of the ledger. This consensus is what constitutes the ‘truth’ as to who owns what. The protocol, however, can evolve as participants demand – although there is high degree of consensus required to make changes. This makes Bitcoin Cash a quasi-political system, with participants forming a kind of social contract.
Immutable. The technology deployed means that, once recorded in the blockchain, transactions effectively cannot be altered.
Secure. Through a process known as Proof of Work (PoW), ‘miners’ compete to add new blocks to the chain that constitutes the ledger (again, the blockchain). The hardware and energy costs associated with PoW mining contribute to the security of the network along with game-theory driven principles such that attacking the network is both prohibitively expensive and guarantees the attacker cannot profit directly.
Fixed supply. Only 21 million coins will ever be created. This makes Bitcoin Cash a hard asset, like land or gold, providing an opportunity for people to store value in digital realm over long periods of time.
Low Fees. Bitcoin Cash enables reliable, fast, and affordable transactions of any value and regardless of location (including cross-border transactions). This makes it an effective alternative to payment networks like Visa and Mastercard.