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Bitcoin (BTC) remains the most popular cryptocurrency, but it’s not without flaws. Specifically, it allows a relatively low volume of transactions per second, limiting its utility for payments.
Bitcoin Cash (BCH) came into being in 2017 to address this issue, offering a cheaper, faster way to process payments. Since that time, Bitcoin Cash has grown into one of the top 25 coins in the market today.
What Is Bitcoin Cash?
Bitcoin Cash is a cryptocurrency built on the same blockchain as Bitcoin. The coin launched on Aug. 1, 2017 through a so-called “hard fork” of the Bitcoin blockchain.
Some Bitcoin blockchain participants proposed altering the rules to allow Bitcoin to process a greater volume of transactions. Most nodes voted against changing the rules, which resulted in the hard fork, creating two blockchain paths with a common origin: Bitcoin and Bitcoin Cash.
“It felt almost like the fracturing of a religion,” said Henrik Gebbing, co-founder and co-CEO of Finoa, a digital asset custodian. “Miners had to decide which chain to allocate their efforts toward, exchanges had to decide whether or not to support trading of this newly forked currency, and market participants had to decide whether they had any interest in the new currency and what its fair price should be.”
How Does Bitcoin Cash Work?
Bitcoin Cash uses a larger block size than Bitcoin—blocks are groups of transactions added to the blockchain at the same time.
Bitcoin limits blocks to 1 megabyte (MB), which allows only about seven transactions per second. Bitcoin Cash expanded the block size to 8 MB initially, and later to 32 MB, which allows it to process over 100 transactions per second.
Beyond block size and transaction speed, Bitcoin Cash works very similarly to Bitcoin. It’s an open-source, decentralized digital ledger. Miners confirm and add transactions to the blockchain by using cryptography to solve equations, receiving Bitcoin Cash tokens as reward for their work. They can then sell the coins to others. Bitcoin Cash will only release a total of 21 million coins, just like Bitcoin.
Bitcoin vs. Bitcoin Cash
As noted, the key difference between Bitcoin and Bitcoin Cash is the block size. Because of this adjustment, Bitcoin Cash can have faster and less expensive transactions. A Bitcoin transaction costs $59 on average while Bitcoin Cash costs less than a penny.
The downside to processing everything more quickly though is that it’s potentially less secure than Bitcoin. There are fewer miners needed to process and confirm transactions, which could make it easier for the Bitcoin Cash security to be compromised.
“Bitcoin cash would be better for something like a cup of coffee, while a larger purchase, such as a car or house, may warrant a slower and more secure cryptocurrency like Bitcoin,” said Daniel R. Hill, president of Hill Wealth Strategies in Virginia.
Another difference is market size. As of writing, Bitcoin Cash has a total market capitalization of around $7.1 billion. This is a fraction of Bitcoin’s $881 billion market cap.
Advantages of Bitcoin Cash
- Faster, less expensive transactions. With a transaction cost of less than one penny and the potential to process over 100 transactions per second, Bitcoin Cash could be a viable payment platform. Still, the Visa network processes 2,000 transactions per second, so Bitcoin Cash still has a way to go.
- More scalable than Bitcoin. Bitcoin Cash’s larger blocks allow for a blockchain with increased scalability, resulting in lower fees for users and therefore making it more transactable.
- Decentralized money. For those worried about too much centralized control in the financial system from banks and central governments, Bitcoin Cash offers a currency-like system that is decentralized and not controlled by any one entity.
- Accessibility. Of the thousands of cryptocurrencies out there, Bitcoin Cash is one of the more popular and can be purchased through most major exchanges, unlike lesser-known competitors. The BCH/USD price is only about $370 per coin, so it’s also more affordable than trying to buy a single Bitcoin.
Disadvantages of Bitcoin Cash
- Relatively low rate of adoption. “While most of the debate has focused on such technological debates around processing times and security, I think there is one big factor overlooked but perhaps most important with emerging technologies: adoption,” said Russell Star, head of capital markets at DeFi Technologies. “The success of any type of network, currency or technology depends on the users using it.” With fewer people using Bitcoin Cash than Bitcoin, it may struggle to grow as an accepted investment or medium of exchange.
- Weaker security. Bitcoin Cash processes transactions more quickly and at a lower cost than Bitcoin because it requires less mining power to verify new blocks. This makes the system less secure than Bitcoin.
- Branding trouble. After the fork, there was a battle to see which coin would become more popular. Bitcoin has been the clear winner, which makes it hard for Bitcoin Cash to distinguish itself, especially since they share such a similar name.
- Environmental impact. Bitcoin Cash still uses a blockchain proof of work system, where miners must run computers to solve cryptographic equations to process transactions, something that uses considerable energy. Even though Bitcoin Cash uses less electricity than Bitcoin, this system still comes at a high environmental cost.
How to Buy Bitcoin Cash
Bitcoin Cash is widely available on major cryptocurrency exchanges like Coinbase and Kraken. You set up an account, deposit cash, and then use that to buy cryptocurrencies like Bitcoin Cash. You could also buy Bitcoin Cash on platforms like PayPal.
Once you’re purchased Bitcoin Cash, hold your coins as an investment in a crypto wallet, exchange them for other coins, or use them for transactions.
Note that Bitcoin Cash has run into some issues due to branding trouble. For example, the crypto exchange OKCoin delisted Bitcoin Cash in early 2021 because they thought it might confuse investors offering both Bitcoin Cash and Bitcoin on the same system.
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Should You Buy Bitcoin Cash or Bitcoin?
Whether you should buy Bitcoin Cash or Bitcoin depends on whether you are looking for a long-term investment or something to use for transactions.
“When measured in BTC, the price of BCH has fallen steadily since its inception. It stands to reason that the original Bitcoin should serve as a safer investment,” said Gebbing.
“If choosing a blockchain to transact with, though, BCH is accepted in many of the same places that accept BTC, and can be used for near-zero fees due to the larger block size and the lesser utilization of that chain,” Gebbing added.
Like with any crypto investment, Star warns you should be careful. “Anyone considering investing in Bitcoin or Bitcoin Cash should consider whether they can stomach a volatile asset class, which is what crypto is.” He also noted that those looking to learn more about crypto and emerging technologies could benefit by broadening their horizon beyond the most popular options like Bitcoin and Ethereum.
While the concept behind Bitcoin Cash has some potential, it still hasn’t reached its lofty goal of replacing the original Bitcoin. If it starts taking off as a more accepted medium of exchange, then it might give its older, bigger brother a tougher run.
This news is republished from another source. You can check the original article here.