Last Updated on September 7, 2022 by Oddmund Groette
Since the emergence of Bitcoin in 2009, thousands of cryptocurrencies have been created. While many were created to solve a specific problem in the emerging blockchain technology, some cryptocurrencies are just spin-offs of the older ones, and Bitcoin Cash is one of such. What exactly is Bitcoin Cash?
Bitcoin Cash is a cryptocurrency created from a fork of Bitcoin in August 2017. The cryptocurrency was created to accommodate a bigger size of blocks, which allows more transactions to be processed and improves scalability. However, in November 2018, Bitcoin Cash split further into two cryptocurrencies: Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision).
Let’s take a look at this cryptocurrency to see how it works.
What is Bitcoin Cash?
Bitcoin Cash is a cryptocurrency that was created from a fork of Bitcoin in August 2017. It shares many of the same characteristics as the original Bitcoin but also integrates a number of changes and features that set it apart. One of those features is that it accommodates a bigger size of blocks, which allows more transactions to be processed and improves scalability.
As with Bitcoin, Bitcoin Cash uses a decentralized network, offering transparent yet secure transactions. Users can send it on a peer-to-peer basis, without any third-party involvement. Transactions are immutable and secure. Among crypto users, it is a tradable asset, trading on many crypto exchanges with the ticker symbol, BCH.
In November 2018, Bitcoin Cash split further into two cryptocurrencies: Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision).
How does Bitcoin Cash work?
Bitcoin Cash works as a digital currency that can be sent directly from one person to another via its blockchain network — a distributed public ledger that shows transaction blocks stored voluntarily by a network of participants known as ‘nodes.’ Miners maintain the nodes and verify transaction blocks.
Just like Bitcoin, Bitcoin Cash uses a proof-of-work algorithm to timestamp every new block, and a new block is generated every ten minutes on average. The time needed to calculate a new block is influenced by a parameter called the mining difficulty. It is programmed in a way that the block time is kept roughly constant. So, if the total amount of mining power increases, the mining difficulty also increases, and if the mining power decreases, the mining difficulty decreases.
What is the difference between Bitcoin Cash and Bitcoin?
The main difference between Bitcoin and Bitcoin Cash is the block size. While the maximum block size of Bitcoin is 1MB, that of Bitcoin Cash is 32MB. The larger block size makes it more scalable, which enables it to carry out more transactions per second, reduces its environmental impact, and in theory, increases its viability as a currency.
Bitcoin Cash, on its website, claims that it has the capacity to process as many as 200 transactions per second, which makes transactions faster and reduces the cost of transactions. A Bitcoin Cash costs less than a penny compared to a Bitcoin transaction that costs up to $50. The downside to faster transaction verification is that it’s potentially less secure than Bitcoin. With larger block sizes, fewer miners are needed to process and confirm transactions, which could make it easier for a hack.
Another difference between BCH and BTC is market size. As of the time of writing (August 11, 2022), Bitcoin Cash has a total market cap of around $2.8 billion compared to Bitcoin’s $467 billion market cap.
Bitcoin cash trading strategy (backtest and example)
We have previously published a cryptocurrency trading strategy.
A backtest of bitcoin cash trading strategy is coming soon.