On May 15, 2023, the Bitcoin Cash network underwent its latest upgrade, after exactly one year with no changes to the mainnet.
What Are CashTokens?
These tokens are distinct from the native Bitcoin Cash gas unit (BCH) but can still be transferred on the blockchain via transactions. CashToken transactions are considered just as secure as non-token transactions, with no use of additional indexing software.
The new token format enables a variety of business applications to be developed on the Bitcoin Cash blockchain, including identity tokens and decentralized exchanges.
Since CashTokens can be either fungible or non-fungible, they are suitable for a wide range of use cases. For example:
- Fungible CashTokens: Suitable for use cases where asset or data fungibility is necessary — such as on-chain stocks, bonds, stablecoins, loyalty points, voting shares and general-admission tickets.
- Non-fungible CashTokens: Suitable for use cases where token uniqueness and indivisibility are necessary — such as tokenized works of art, identity tokens, role tokens and options positions.
CashTokens were first proposed back in February 2022 via a Cash Improvement Proposal (CHIP). The CHIP specifies a new set of opcodes that extend the capabilities of Bitcoin Cash to support new financial primitives in the form of fungible and non-fungible tokens.
Besides the addition of the new token layer, several minor upgrades were made to the node software, bringing it to v24.0.0. These upgrades include:
- CHIP-2021-03: Bigger Script Integers v1.0 is implemented in v24.0.0 (MR!1253).
- CHIP-2021-02: Native Introspection Opcodes v1.1.3 is implemented in v24.0.0 (MR!1208).
- BIP-0069: Lexicographical Indexing of Transaction Inputs and Outputs is implemented in v24.0.0 (MR!1260).
Bitcoin Cash’s last upgrade went live exactly 1 year prior, on May 15, 2022.
How Do CashTokens Work?
The new tokens have a specific address format associated with them, and not all Bitcoin Cash wallets are compatible with CashToken-based transactions. The CashToken feature is opt-in, meaning wallets can accept BCH without supporting CashTokens.
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Currently, there is no marketplace for CashTokens, but users can mint tokens directly within a CashToken-compatible wallet. Some of the wallets that plan to support CashTokens include Electron Cash, Guarda, and Cashual Wallet.
The new update adds four new fields to the transaction output data model, known as token fields. These are the token category, non-fungible token capability, non-fungible token commitment and fungible token amount.
Platforms like CashScript can now be used to create UTXO smart contracts on Bitcoin Cash or develop their own CashTokens.
The CHIP specification for the CashToken upgrade also includes details for a Metadata Registry, allowing CashToken issuers to publish information easily about their token.
Which Projects Are Building CashTokens?
The first wave of projects set to leverage these new capabilities on the Bitcoin Cash blockchain is already in development. But as of yet, there is no universal project explorer or repository to keep track of them all.
As you might expect, the vast majority of current CashTokens are simple memes and AI-generated art collections. Most currently have no utility. It remains to be seen which (if any) CashTokens become established projects with long-term prospects.
Besides a temporary spike in value on the day of the hard fork, the price of Bitcoin Cash (BCH) has been largely unaffected by the upgrade, suggesting a muted response from the community. The coin is currently down 3% over the seven-day timescale.
Over a longer horizon, the BCH coin is currently down more than 97% from its all-time high value of $4,355, achieved in December 2017.