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Crypto Basics

What Is Bitcoin Cash?

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Published on:
February 11, 2021

Bitcoin Cash has a long history of forks, and has always been backed by some of the biggest personalities in cryptocurrency. What is the BCH you know today?

Table of Contents

Bitcoin Cash is both a cryptocurrency and a payment network that controversially came into existence in August 2017 as a result of a hard fork from Bitcoin’s blockchain. Its cryptocurrency ticker is BCH. 


The fork occurred due to the long-standing disagreement among the Bitcoin community members around how best to increase the block size. One group of miners and developers was in favor of the proposed SegWit2x. This soft fork was due to be implemented to the Bitcoin blockchain in 2017 with an aim to free up the network’s storage capacity to handle more transactions. Those who disagreed were in the BCH fraction, who were concerned about Bitcoin’s ability to scale effectively with the growing number of Bitcoin users. 


This split led to the creation of Bitcoin Cash, at block 478559 of the Bitcoin blockchain


The primary impetus for creating Bitcoin Cash was to indirectly increase the transaction time by increasing block size. Bitcoin’s maximum block size is 1MB, and by most technological standards, that’s not a lot of data. Bitcoin Cash increased the block size of its network to 8MB to facilitate transactions quickly.


Additionally, the total amount of data required to be verified in each transaction was reduced to further speed up the process. These changes enabled Bitcoin Cash to process over 116 transactions per second compared to Bitcoin’s seven transactions per second. 


Bitcoin Cash supporters supporters maintained that Bitcoin had failed to scale enough to keep up with Satoshi Nakamoto’s original vision for the cryptocurrency, which was that it would be used as digital cash, as described in his original white paper, “Bitcoin, a Peer-to-Peer Electronic Cash System.”

 

Bitcoin Cash Proof-of-Work (PoW) Mining

Bitcoin Cash Mining

Similar to Bitcoin, a block of the transaction on the BCH blockchain is confirmed by the miners every 10 minutes. The current reward for each block is 6.25 BCH, which will be halved to 3.125 in April 2024. In addition to block rewards, miners can also earn the transaction fees paid by the users while transferring funds on the network. 


The platform has introduced Replay and Wipeout Protection to protect its user if another fork occurs. These technologies allow two chains to exist at the same time to minimize user disruption. BCH also added a new transaction type to the network with features like prevention of the quadratic hashing issue


How Many Bitcoin Cash Are There?

As a fork of Bitcoin, Bitcoin Cash has the exact same total coin supply as BTC, namely 21 million BCH that will be mined for the next century. 

Other Bitcoin Cash Hard Forks

Bitcoin Cash Splits Into Bitcoin ABC and Bitcoin SV (2018)

In 2018, the Bitcoin Cash community split into two groups, once again largely caused by block size. Bitcoin’s first “civil war” was driven by two camps:


Bitcoin ABC (Adjustable Blocksize Cap)- this faction enjoyed the support of Bitmain chief Jihan Wu and “Bitcoin Jesus” Roger Ver, and wanted to retain the BCH block size at 32MB (the block size had been increased to 32MB in 2018), as they believed that the network didn’t scale enough at that point. 


Bitcoin SV (Satoshi’s Vision)- led by the controversial Craig Wright, whose claims that he was Satoshi had been largely debunked, and billionaire businessman Calvin Ayre, BSV wanted to increase BCH’s block size to 128 MB. 


On Nov. 15, 2018 the split took place. With the majority of miners adopting Bitcoin ABC, it was given the BCH ticker by most exchanges, while Wright’s “Faketoshi” defamation lawsuits against crypto industry members caused BSV to be kicked off most exchanges. BTC ABC retained the BCH ticker until the BCHN hard fork. 


Bitcoin Cash Forks to BCHN in 2020

On Nov. 17, 2020 Bitcoin Cash went through another fork, splitting the network into two new blockchains, the Bitcoin Cash ABC (BCH ABC) and Bitcoin Cash Node (BCHN). The hard fork came about following a proposal by a team of developers led by Amauri Sechet who wanted to upgrade the BCH network to include a “coinbase rule.” According to this rule, 8% of the BCH in circulation to be redistributed to Bitcoin Cash ABC to finance the protocol development. 


Another community group, known as Bitcoin Cash Node, opposed this rule and wanted to remove the “coinbase rule” from BCH’s network source code. Critics of the rule felt that the financial support is not warranted and were concerned about the increasingly centralization of BCH ABC. BCH maximalist, Roger Ver, also criticized the “Coinbase Rule” and considered it as “a Soviet-style central planner’s dream come true”. 


The disagreement between both the developers led to the emergence of two new cryptocurrencies, with the last common block mined at 661647. Antpool mined the block that split the BCH blockchain, while Binance mined the last common block of the network. 


Since the hard fork, BCHN has been receiving most of the support, with Bitcoin Cash’s price reaching new heights and miners mining more blocks on the network compared to BCH ABC. It was bound to happen, because 80% of miners were signaling support for BCHN before the fork. 


Can Bitcoin Cash be Traced?

A BCH address is created by a user’s wallet. Although Bitcoin Cash is decentralized, each transaction made by a user via its wallet is stored on a public blockchain which gets updated constantly. These transaction details can be accessed by anyone. BCH users are guaranteed pseudo-anonymity; however, the transactions can be traced using users’ wallet, or in some cases, IP address. 


Those looking to protect their privacy can consider some of the following methods (please adhere to financial regulations and laws in your jurisdiction at all times) : 


  • Mask your IP address using a TOR network or a VPN network.
  • Never publish your address publicly.
  • If possible, store your BCH on multiple wallets.
  • Use a mixer for larger transactions.

What Are SLP Tokens of Bitcoin Cash?

Just like ERC-20 tokens are created on the Ethereum network, Simple Ledger Protocol (SLP) tokens are created, traded and managed on the Bitcoin Cash blockchain. The development of SLP tokens is bringing decentralized finance (DeFi) to the BCH network. These tokens are an obvious and natural fit for three applications: 


  1. SLP tokens can be included in the same transactions as Bitcoin Cash, therefore suitable for reward points and discount cards.
  2. The tokens can be easily burned, thus suitable for one-time payment vouchers.
  3. SLP tokens can use BCH scripts like time locks or multiple signatures as a spending constraint. It makes these tokens a natural fit for securities.


Best Bitcoin Cash Wallets

A crypto wallet is essentially required to store or trade BCH tokens. Three main types of wallets exist today: hardware, software and paper. They can be further categorized as cold or hot wallets, depending on their work. 


Below is a list of the highest-quality Bitcoin Cash wallets: 


Bitcoin Cash Hardware Wallets

Ledger Nano S (USB Hardware Wallet)

The Ledger Nano S and Nano X hardware wallets are the leading cold storage wallets on the market. A Ledger wallet resembles a USB drive that can be connected to a device via USB. Although the device is a hardware wallet, the Ledger team has created a user-interface software called Ledger Live — which anyone can access to see their holdings. This allows users to add new wallets for different assets and manage their portfolios better. 


Pros:


  • Secure element chip
  • Open-source software
  • Can store multiple apps simultaneously 


Cons: 


  • The Nano S doesn’t have Bluetooth functionality, unlike Nano X
  • Ledger’s user data was recently hacked, exposing over 1 million email accounts and resulting in users targeted through phishing and threats of physical violence.

Trezor (USB Hardware Wallet)

Trezor is another popular hardware wallet like the Ledger, but it allows users to access third-party exchanges directly on its web interface. It also offers an option to its users to connect their devices via USB and is protected by a code. Trezor comes with a USB Type-C cable so that anyone can connect it with a smartphone. Similar to Ledger, the Trezor wallet features a built-in display that users can look at the transaction details. 


Pros: 


  • Secure and user-friendly 
  • Supports multiple cryptocurrencies


Cons: 

  • High cost
  • A small touch screen that makes it difficult to type on
  • No secure element
  • No bluetooth connectivity
  • Trezor was “hacked” in 2020 by Kraken Labs

CoolWallet S

The CoolWallet launched in 2016 as the world’s first Bluetooth mobile hardware wallet. It resembles a smart card and has an embedded e-paper screen.  It has supported each Bitcoin Cash hard fork and offers multiple ways to trade and exchange BCH on decentralized marketplaces like Binance DEX, Changelly, BitPay and UniSwap via their app. 


Pros:

  • Secure element and encrypted bluetooth
  • Waterproof, tamper-proof
  • very long battery life


Cons:

  • Smaller storage capacity means less supported altcoin assets


Desktop and Mobile Wallets

Electron Cash (Desktop/Mobile)

Electron Cash is a Simplified Payment Verification (SPV) wallet for Bitcoin Cash. It is a fork of Electrum wallet, and is available for Linux, Windows and OS X systems, while an android app also exists for mobile users. The wallet allows users to retain control of their private keys as well as provides an option to back them up with a mnemonic seed phrase. Additionally, Electron Cash supports multisig functionality for an extra layer of security. 


Pros: 

  • Seed phrase can be customized.
  • Greater level of security
  • Available on multiple devices


Cons: 

  • No iOS app available 
  • Supports only BCH, thereby not suitable for anyone wanting to store multiple digital assets


TrustWallet (mobile)

TrustWallet is a very popular software wallet application bought by Binance in 2018 that offers users multi-coin support, including for Bitcoin Cash and TrustWallet Token (TWT). The app also allows users to stake crypto and use decentralized exchanges (DEX) to trade and exchange their assets.


Pros: 

  • User-friendly and innovative wallet
  • Binance support means constant innovation and strong security features


Cons:

  • Customer service complaints
  • No two-factor authentication 


Jaxx (Desktop/Mobile)

Jaxx is another popular cryptocurrency wallet to store BCH which allows users to control their private keys. The wallet has an intuitive user-interface and presents all the necessary information required to send, receive, and store BCH in a simple manner. Jaxx wallet supports multiple cryptocurrencies and is worth considering for a diverse portfolio. 


Pros: 

  • Accessible across different platforms.
  • Supports a wide range of cryptocurrencies


Cons: 

  • No two-factor authentication 
  • Security concerns


Coinomi (Mobile Wallet)

Coinomi is a lightweight, multi-coin HD wallet for storing BCH. The wallet allows users to control their private keys from the ease of a smartphone. In addition to a desktop version, Coinomi wallet is available for both Android and iOS users. It supports more than 100 cryptocurrencies and allows users to exchange their coins from within the wallet.


Pros: 

  • Easy to understand interface
  • Wallet exchange feature

Cons: 

  • Not open source
  • Not as secure as hardware wallets


Bitcoin Cash Review

As discussed above, BCH is simply another name for a modified Bitcoin protocol. It doesn’t really have any new features or capabilities, other than a different block size from Bitcoin. Though it’s named Bitcoin Cash, it doesn’t really deal with fiat at all. In addition to its network consensus, BCH operates on the SHA-256 hash function and also has the same amount of total supply of 21 million tokens as Bitcoin. However, it does differ from Bitcoin in a few meaningful ways. 


BCH Review: BCH vs Bitcoin

Block Size

Bitcoin wants small blocks on its blockchain, whereas BCH wants to use big blocks. The current size of BTC blocks is 1MB, and the current size of BCH blocks is 32 MB. BTC wants to increase scalability off-chain by using layer 2 technologies, while BCH wants to scale on-chain by increasing the size of each block. 

Transaction Fees

BCH network has a lower average transaction fee than the Bitcoin network ($0.0011 vs. $11.71 as of Feb. 11, 2021). The low fees are attributed to the larger blocks of the BCH blockchain. 

Transaction Speed

BCH has a higher transaction speed, thanks to its block height. The BCH network can facilitate 116 transactions per second compared to Bitcoin’s seven transactions per second. 

Adoption

BTC is clearly a popular choice among all the cryptocurrencies in terms of adoption. The long history of Bitcoin is certainly a helping factor. BTC has been around for 10 years, while BCH has only been around for about three years. 

Hashrate 

The hashrate of a network represents the computing power used by miners to validate transactions. More the hash rate, the better the security! As of writing, there is a 50x difference between the hash rates of BTC and BCH. This means Bitcoin Cash is more susceptible to attacks compared to Bitcoin as its hash power is easier to acquire. 

BCH Review: Bitcoin Cash vs Bitcoin SV

In November 2018, BCH experienced a hard fork of its blockchain, resulting in the emergence of a new coin called Bitcoin SV (BSV), which stands for Bitcoin Satoshi’s Vision. This version was led by Craig Wright, who aims to keep it close to the original version of Bitcoin as he understands it. There isn't a major difference between Bitcoin Cash and Bitcoin SV, except the block size. 

Block Size

Bitcoin Cash increased its block size initially to 8 MB, then later to 32 MB. On the other hand, Bitcoin SV increased its block size limit from 32 MB to a whopping 128 MB. 

Transaction Speed

Both Bitcoin Cash and Bitcoin SV follow a similar consensus model to mine blocks, which means that neither has an advantage when it comes to speed. 

Transaction Fees

With a median fee of $.00011, Bitcoin Cash is costlier than Bitcoin SV, which has a median fee of $.0002 (as of Feb. 11, 2021). 


Bitcoin Cash vs Litecoin 

Transaction Speed 

A fully confirmed transaction on an average on both BCH and Litecoin is about the same, i.e. 30 minutes. However, the number of confirmations required by a merchant/exchange to process a transaction significantly affects the transaction speed. 

Transaction Fees 

The transaction fees on the BCH network have been consistent to date. Litecoin network, on the other hand, has a transaction fee that has been constantly dropping for the past few years. 

Hashrate

Over the last few years, BCH’s hashrate has been consistent while Litecoin’s hashrate has been constantly decreasing. This indicates that miners are leaving the Litecoin network, making it susceptible to “51%” attacks


Bitcoin Cash vs Ethereum

Flexibility 

Bitcoin Cash is meant to be a secure form of payment, whereas Ethereum is a platform for both payments and decentralized applications. BCH network has only one use-case: to be a peer-to-peer payment system. Ethereum, on the other hand, offers a wide range of flexibility to its users thanks to its smart contract functionality.

Transaction Fees 

BCH fees have always been lower than those of Ethereum. However, lately, Ethereum transaction fees have increased dramatically. The reason could be the growing usage of the Ethereum blockchain in creating decentralized platforms. 



How to Buy Bitcoin Cash

Claim


At the time of the hard fork, everyone who owned Bitcoin was awarded Bitcoin Cash. People who missed the launch can still claim their BCH reward — even three year later. There are two methods to claim depending upon the wallet of a user: 


  1. Steps for full node wallet users: 


  • Navigate the menu of your wallet, and click on “Backup Wallet.”
  • A wallet.dat file will get generated, which you need to import into a full node BCH wallet. 
  • Open your wallet, and you’ll be able to see your BCH tokens.
  • Note that some full node wallet conflicts with each other. You should first back up your private keys by installing a full node BCH wallet on a different device.


  1. Steps for a Simplified Payment Verification (SPV) wallet:


  • Find the recovery seed phrase that holds your Bitcoin private keys.
  • This seed phrase, by extension, holds your Bitcoin Cash private keys. 
  • Insert this seed into a dedicated wallet to get your BCH tokens.
  • If you’re struggling to find a recovery phrase, check with your wallet provider for announcements or procedure to claim your funds.


If you weren’t holding any BTC at the time of the hard fork, you can still buy BCH.


After getting a wallet, you’ll need your BCH address, which is a long string of numbers and letters. You’ll need to enter this address during your purchase. This leads us to the next step of finding an exchange where you can buy BCH tokens.


Where to Buy Bitcoin Cash

I. Find a BCH Exchange 


Whether you want to purchase, trade, or hold BCH cryptocurrency, the following exchanges are the best:


  • Coinbase

Coinbase is a fully regulated and licensed exchange that allows users from over 40 countries in the world to buy and sell Bitcoin Cash with several payment methods. In addition to high security, Coinbase offers insured custodial wallets to traders and investors to store their BCH investments. 


Fees: $0.99 to $2.99 

  • Binance

Though the exchange is just three years old, Binance has become a popular name in the crypto trading system. Users around the world can buy BCH tokens with bank transfers and credit cards. The exchange uses two-factor authentication as well as CryptoCurrency Security Standard (CCSS) to provide optimum security to its users. 


Fees: 0.5% buy/sell fee; 0.1% spot trading fee.


  • Kraken 

Kraken is a crypto spot exchange that offers BCH tokens in addition to future contracts and marginal trading. The exchange allows you a minimum order of 0.025 BCH to help gain exposure to multiple assets. You can also execute large buy orders if needed. You can fund your Kraken account using SWIFT, SEPA and domestic wire transfers. 


Fees: 0.16% maker fee; 0.26% taker fee.


  • Coinmama 

Coinmama allows you to buy BCH tokens with your credit card, through Apple Pay, as well as by wire transfer. The company supplies brokerage service for Bitcoin Cash, meaning it will sell you the tokens directly as opposed to trading platforms.


Fees: 5.9% brokerage service fees + 5% credit card processing fees


  • CEX.io

CEX.io exchange is both a trading platform and a brokerage service which accepts credit/debit card, wire transfers and SEPA (for EU customers) or ACH (for US residents). The platform is registered with FINCEN and applies standard AML and KYC policies to verify your identity before selling BCH tokens.


Fees: The charges vary as per the service used by you to buy/trade BCH. 

II. Transfer BCH to Wallet

Once you’ve bought BCH tokens, it is recommended you transfer them to a wallet by adding your wallet’s address while buying. 

Remember to always do your own research before buying cryptocurrencies!






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Author(s)

Werner Vermaak

I'm a technical writer and marketer who has been in crypto since 2017.

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