Bitcoin Cash, as the name implies, is a virtual currency that is closely related to Bitcoin. Its market capitalization is the 10th largest as of May 2021.
Bitcoin Cash is characterized by the following main points.
- Created by a hard fork of Bitcoin
- System changes to deal with scalability issues
- Automatic adjustment of the mining difficulty level
The details of each of these features are explained in detail below.
|Symbol||BCH / BCC|
|Current price (May 2021)||$850.01|
|Market Cap (May 2021)||$15,930,742,258|
|Date of Launch||August 2017|
|Max Supply||21,000,000 BCH|
Bitcoin Cash (BCH) Features
Created by a hard fork of Bitcoin
Bitcoin Cash is a currency that was created in a hard fork from the cryptocurrency Bitcoin in August 2017.
A hard fork is a system change in the blockchain that makes it incompatible with past systems and creates a new cryptocurrency.
There are two types of hard forks as follows
- One cryptocurrency. The system is changed.
- Two cryptocurrencies are created. Traditional type and modified type
Bitcoin Cash is a case of (2).
Incidentally, Bitcoin has repeatedly undergone many hard forks, and there are many derived Bitcoins.
Cryptocurrencies created by a hard fork of Bitcoin
- Bitcoin Cash (BCH)
- Bitcoin Gold (BTG)
- Bitcoin Diamond (BCD)
- Super Bitcoin (SBTC)
- Lightning Bitcoin (LBTC)
The first of these to branch off from Bitcoin was Bitcoin Cash.
System changes to deal with scalability problem.
Bitcoin Cash was hard forked in order to solve the scalability problem, which had been a bottleneck for Bitcoin (a problem of slow processing speed caused by the limited block size).
Due to the system change, Bitcoin Cash has some features that Bitcoin does not have.
Feature 1: Block size extended to 32MB
Bitcoin Cash has expanded its block size to 32MB.
Basically, the larger the block size, the more transaction information can be processed, so it functions as a countermeasure to scalability issues.
Because the amount of data that is processed in a single transaction is larger, it can be processed more quickly than bitcoin, leading to shorter transfer times and lower fees.
Bitcoin Cash’s block size was expanded to 8MB at the beginning of the hard fork, and then further quadrupled to 32MB in 2018.
Since it was set up to hold such a large amount of transactions, the large block size is known to be one of the unique features of Bitcoin Cash.
Bitcoin, on the other hand, did not expand the block size as Bitcoin Cash did, but introduced Segwit, which compresses the data size for recording. This system change has also improved processing speed on the bitcoin side.
Feature 2: The idea of processing everything on-chain
Bitcoin Cash has improved processing speed by increasing the block size.
This is said to be due to the idea of recording everything on-chain. On-chain recording is a highly transparent method of keeping all information on a single blockchain.
On the other hand, Bitcoin is discussing how to solve the scalability problem by utilizing off-chain (another blockchain linked to the blockchain) such as the Lightning Network.
Automatic adjustment of mining difficulty
Bitcoin Cash uses an algorithm called the Difficulty Adjustment Algorithm (DAA) to adjust the difficulty of mining the virtual currency.
DAA is a system that adjusts the difficulty of block generation in mining at a rate of once every 10 minutes. This system results in the acquisition of benefits such as shorter transaction speeds and lower fees.
Bitcoin uses an algorithm called “Normal Difficulty Adjustment (NDA)” for mining, and adjusts the difficulty level every two weeks based on the volume of transactions and the relationship with the miners.
In the early days of Bitcoin Cash, an NDA equivalent to Bitcoin was used, which led to a situation where the number of miners was low and the hash rate was not stable.
Specifically, with NDA, a large number of miners participate only when the difficulty level changes and mining becomes easier, but when competition becomes fierce and mining rewards are not received as expected, mining stops and the hash rate drops, making it impossible to operate stably.
For this reason, Bitcoin Cash was shifted to DAA, which allows for frequent adjustment of block difficulty.
As a result, the above problems are less likely to occur, and stable mining is now possible.
How Bitcoin Cash Works
Bitcoin Cash was created as a derivative of Bitcoin. Since it is a hard fork of Bitcoin, many parts of its structure are the same as Bitcoin.
Max supply and halving are the same as Bitcoin
The issuance limit for Bitcoin Cash is approximately 21 million units, the same as Bitcoin. The amount of reward for mining is also the same as for Bitcoin.
Mining with PoW
Proof of Work (PoW) is also used for mining Bitcoin Cash.
This method, which determines the mining reward based on the amount of computation by the computer, is also famous for its use in Bitcoin.
While this makes mining more secure and resistant to unauthorized attacks, it also increases the cost of computer specifications and electricity.
History of Bitcoin Cash
Created by a hard fork in August 2017
In August 2017, a hard fork took place due to bitcoin’s scalability issues, and bitcoin cash was born. Bitcoin Cash, which aims to improve processing speed in a different direction than Bitcoin, started to attract attention in many markets.
A hard fork will take place again in 2018.
After being distributed as Bitcoin Cash, it will undergo another hard fork in 2018.
As a result, Bitcoin Cash will split into “Bitcoin Cash (Bitcoin ABC)” and “Bitcoin SV”.
The main reason for the split is said to be the conflict between Bitcoin Cash, which wants to keep the block size at 32MB and increase the convenience of the cryptocurrency by implementing cross-chaining, and Bitcoin SV, which wants to further expand the block size to 128MB.
In this way, a cryptocurrency is being created from a split coin by a further split.