What Is bitcoin cash?
Bitcoin Cash is a hard fork of the original Bitcoin.
To understand how Bitcoin Cash came into existence, you need to understand a few technical things about Bitcoin's blockchain, and learn about a few characters in the Bitcoin community.
When transactions are sent on Bitcoin, they are grouped together with other transactions in what is known as a block. Miners validate the transactions and then "solve" the block, against the puzzle set by the algorithm in Bitcoin's code. If you want to understand this on a deeper level, take a look at my guide on How Bitcoin Works.
With Bitcoin, blocks have a size limit of 1MB.
Initially, this wasn't a problem. Small block sizes allow the blocks to be mined faster, as there are less transactions to validate. However, as Bitcoin's popularity increased, the small blocks became a problem. People's transactions were getting pushed to the next block, and the next after that. On Bitcoin's protocol, those who offer the highest fees get their transactions validated first, so the bottleneck led to bidding wars which resulted in very high fees. At one point, people were paying fees of up to $10 just to make a simple transfer.
To many the solution to this problem was obvious: Increase the block size.
However, the Bitcoin community was split on this idea. While it sounds simple, there are actually many pros and cons to such a seemingly small decision.
Eventually the community was split, and a portion of them decided they would "fork" off Bitcoin and develop their own currency. On August 1st 2017, Bitcoin Cash was born.
While there were several small modifications made, the main difference with Bitcoin Cash was the larger block size, which was increased to 8MB, and later increased to 32MB, with plans to increase it even further in the future.
The bcash Team
I spent considerable time trying to answer the question "who develops Bitcoin Cash" but didn't really come up with much. Here's what I think I can tell you.
Both are known to be developing Bitcoin Cash. The Githubs are active. As for any individual developers of note, I'm unaware of any.
Bitcoin Cash is open source and technically anyone can submit changes to the protocol.
The bcash Product
Bitcoin Cash is interesting because nine times out of ten it's just the exact same product as Bitcoin and is intended to do the same thing: peer to peer exchange of value.
There are a few key differences to note:
Bitcoin Cash runs a block size of 32 MB compared to Bitcoin's 1MB block size.
Technically, this should allow for faster transaction confirmations, as more transactions can be included in each block. It should also means lower fees as there is less backlog on the network and therefore less competition. Advocates of bigger blocks claim that for Bitcoin to reach mass adoption, it needs to increase its capacity to process a large amount of transactions, and the obvious way to do that is by increasing the block size.
However, the entire reason Bitcoin Cash was created was because the majority of the original Bitcoin community didn't want to increase blocks. The claim against bigger blocks was that bigger blocks hinder decentralisation. If blocks are bigger, the system requirements to participate in the network increase - bigger blocks take longer to send, are costlier to store etc. Eventually it gets to a point where only very wealthy mining pools with millions in sophisticated hardware will be able to validate the network. Smaller blocks encourages decentralisation as regular individuals can continue to participate.
Bitcoin undergoes a mining difficulty adjustment every 2016 blocks, or roughly every two weeks. As the hash rate increases, difficulty increases with it and vice versa. This is to ensure the block time stays at an average of 10 minutes (read more about this on my article How Bitcoin Works).
Bitcoin Cash's algorithm changes the difficulty adjustment from two weeks to 24 hours. In theory, this should stabilise the hash rate and block times.
Segregated Witness (SegWit)
Segregated Witness is a change made to the Bitcoin software to reduce backlog on the network.
Within each block, there is a lot of information - the difficulty, hash of the previous block, transaction information etc. However the thing that takes up the most space in each block is the digital signature.
The digital signature is particularly important because it is what miners use to validate the transaction (i.e. to check if the sender actually has enough Bitcoin to send what he is asking to).
Therefore, Bitcoin developers decided to separate the digital signature into its own block, known as an extended block. Technically, this increased the Bitcoin block size without actually increasing the block size. The problem with SegWit was all Bitcoin wallets also needed to be modified to account for the new protocol.
Bitcoin Cash supporters were against the implementation of Segwit. Why? Because SegWit requires a fundamental change to how Bitcoin functions (moving digital signatures off chain), whereas increasing the block size was a far simpler change that would still solve the problem. Therefore when Bitcoin Cash was launched, SegWit was not adopted.
In summary, Bitcoin Cash is the same product as Bitcoin, except:
- The block size is 32MB.
- It doesn't have Segwit.
- Mining difficulty is adjusted every 24 hours.
the bcash Token (Utility and Metrics)
Bitcoin Cash is a currency coin, therefore the intended utility of the Bitcoin Cash token is to be a transfer/exchange of value, much like a dollar or a euro.
Bitcoin runs on a proof-of-work algorithm just like Bitcoin, and miners earn Bitcoin Cash as rewards. There are no plans to move to proof of stake.
There is a fixed hard cap on Bitcoin Cash of 21 million coins - the same as Bitcoin.
The bcash Community
There are a few key figures in the Bitcoin Cash community.
Roger Ver has been involved in Bitcoin from its earliest beginnings, and was even heavily involved in Mt Gox during its heyday. Roger Ver has been a strong proponent of Bitcoin, and spends a lot of time on media and awareness for Bitcoin Cash. Ver's reason for no longer supporting Bitcoin is because he believes it is no longer moving in the direction of Satoshi Nakomoto's original vision, as fees are too high and transaction times are too long. His belief is Bitcoin Cash is the truest implementation of Bitcoin's whitepaper, which intended for Bitcoin to be a global peer-to-peer currency.
Jihan Wu is the founder and CEO of Bitmain, one of the largest Bitcoin mining pools in the world. From the beginning Jihan Wu has been an ardent supporter of Bitcoin Cash and contributes a considerable amount of the hashpower through Bitmain. Bitmain was the party that initially proposed the Bitcoin hard fork.
Wu and Ver have done an impressive job of promoting Bitcoin Cash, although often they seem to do so with a lot of hostility against Bitcoin itself. Many consider this is done in self-interest, as Roger Ver's Bitcoin.com and Wu's Bitmain together control half, or close to half, of the Bitcoin Cash mining power. Bitcoin supporters claim this goes against the core principle of Bitcoin, which is decentralisation.
B Money Verdict:
Let's break down what Bitcoin Cash really is: Some people in the Bitcoin community wanted to create their own Bitcoin, so they did it. Maybe for self interest, maybe in the interest of Bitcoin. We'll never really know. But it's basically like a few guys from Facebook leaving to start their own social network.
The question is, is the new Bitcoin they created actually better?
Let's take a look:
I don't think there's a clear cut answer. It just depends what value do you place on decentralisation, against what value do you place on low fees and fast transactions.
In my opinion, Bitcoin Cash solves a problem that doesn't really exist right now. For a fast peer-to-peer currency, we already have a Bitcoin fork called Litecoin, which is super fast, super cheap and has been running a stable chain since 2011.
Bitcoin Cash seems to be backed by a few influential people, but it seems to be marred by the politics and instability that often leads to a project's demise.
While I don't think Bitcoin Cash is a bad quality product, I don't think it has enough merit to be a significant part of any portfolio.
The Good Stuff
- Faster transactions
- Lower fees
- Faster difficulty adjustments for miners.
- Backed by influencers.
The Bad Stuff
- Lots of politics and infighting.
- Very centralised mining.
- Very centralised development.
- Block size increases expected in future will lead to further centralisation.
Not much information on team, but development is much more centralised than Bitcoin.
As for the product itself, I think it's slightly better than Bitcoin, as fees and transaction times are better. However, better currency coins exist that serve the same purpose.
Intended as peer-to-peer currency only. Can't fault.
Community isn't stable. Infighting and politics is common.
How To Buy bitcoin cash In New Zealand
In New Zealand, the cheapest option to buy Bitcoin Cash is Independent Reserve - simply sign up for a free account at their homepage here: www.independentreserve.com.
To buy instantly with New Zealand dollars, I recommend using EasyCrypto. Rates are slightly more expensive than Independent Reserve, but the process is much faster and easier!
- Bitcoin Cash Wiki: https://en.wikipedia.org/wiki/Bitcoin_Cash
- Bitmain Wiki: https://en.wikipedia.org/wiki/Bitmain
- Blockgeeks guide to Bitcoin Cash: https://blockgeeks.com/guides/bitcoin-cash/
- Reddit on BCH Segwit decision: https://www.reddit.com/r/btc/comments/8vw7qt/can_anyone_explain_to_me_why_bitcoin_cash_choose/
- Bitmex blog on BCH mining: https://blog.bitmex.com/the-implications-for-bitcoin-of-the-new-bitcoin-cash-difficulty-adjustment/