What is BItcoin Cash and How Does it Work? • Benzinga Crypto

Though commonly confused with one another because they share basic structures, Bitcoin and Bitcoin Cash are distinct cryptocurrencies. Understanding the difference between Bitcoin and Bitcoin Cash can help you determine which investment opportunity you’d like to add to your cryptocurrency portfolio. Read on to learn a little more about the structure of Bitcoin Cash and how it functions. 

What is Bitcoin Cash?

Before we can talk about what Bitcoin Cash (BCH) is and its advantages, it’s important to understand the basic framework of the original Bitcoin (BTC).

Bitcoin is able to facilitate transactions using a series of data records called “blocks.” Together, these blocks form the “blockchain,” a permanent and public record of every transaction that has taken place on the Bitcoin network. A single Bitcoin block contains data on the date, time and value of transactions, as well as information on the wallet address of the user who initiated the transfer and the user receiving the transfer. Each block on the blockchain must be confirmed by a network before the transaction can be recorded and completed.

As the Bitcoin network becomes more and more popular and the cryptocurrency increases in value, this format has created a bottleneck commonly referred to as the “scalability problem.” The scalability problem is, in essence, the Bitcoin network’s inability to handle the influx of new transactions occurring on the network in a quick and efficient manner.

When compared to other cryptocurrency projects, Bitcoin’s network is slow, able to create a new block just once every 10 minutes. Each block added to the blockchain is limited to 1MB in size, which limits the amount of information that can be stored on each block. As a result, the Bitcoin network can currently handle about 7 transactions per second, causing transactions to pile up and wait in line for confirmation before going through. When you compare this speed to a network like Visa’s (which can handle about 24,000 transactions per second) you can see why it’s impractical to implement Bitcoin as a large-scale payment processing network.

BCH attempts to solve this scalability problem primarily through increased block size. As opposed to Bitcoin’s original 1MB block limitation, a block on the BCH network is able to contain 8MB of data, increasing the number of transactions that can occur per second to more than 100. While these larger blocks allow more transactions to be processed, they also mean that the BCH network is more centralized when compared to networks that use smaller blocks like the original Bitcoin.

BCH originated from a hard fork in the original Bitcoin network. This hard fork occurred in 2017 and was caused by a riff in the Bitcoin community over the scalability issue and how it should be solved. The debate has continued beyond the occurrence of the 2017 hard fork, with an additional hard fork occurring within the BCH network itself in late 2018. This hard fork created Bitcoin SV, an adjustment to the BCH protocol that introduced larger block sizes and reduced transaction fees.  

BCH hit an all-time high value of about $4,355 on December 20, 2017. Since this time, the price of BCH has fallen by more than 90%, maintaining a value of around $400 per coin at the time of writing. BCH is currently the 12^th largest cryptocurrency when measured by total market capitalization, with a current market cap of more than $7.5 billion and an average daily trading volume of $1.2 billion. BCH is a popular investment cryptocurrency and is available on a wide range of exchanges, including Coinbase, Kraken and more.

Why Use BCH?

BCH offers multiple benefits over the original Bitcoin network and other major cryptocurrencies on the market and large-scale financial institutions. Some of the biggest benefits of BCH’s infrastructure you may want to consider include the following.

• Faster transactions: One of the main benefits of using BCH over Bitcoin is its faster transaction rates. Because each block on the BCH network is larger, it can process each individual transaction with less of a wait time. This speed may make BCH more suitable for use as an electronic cash payment system when compared to Bitcoin.
• Enhanced scarcity: BCH has a limited total supply of 21 million coins. This means that there can never be more than 21 million BCH in existence, which increases its scarcity when compared to cryptocurrencies like Dogecoin, which has an unlimited supply of coins that can be mined.
• Decentralized: Like Bitcoin and other major cryptocurrencies, BCH offers users a decentralized way to complete payments and send money. This means that it doesn’t depend on a centralized network or payment processing medium to complete transactions, and that no single person or entity “controls” the BCH network.
• Low transaction fees: On most BCH transactions, processing fees come out to less than a few pennies. These low fees enable new microtransaction capabilities — for example, tipping content creators without paying excess fees.
• Private payment infrastructure: BCH’s quick processing and low transaction fees have enabled a new economy of microtransactions. Anyone can easily accept BCH as a business owner using only a smartphone, and private payment tools like CashShuffle and CashFusion make the process easier and more intuitive. 

Benzinga’s Favorite Cryptocurrencies

Are you interested in learning more about cryptocurrency investments? BCH is just 1 of thousands of cryptocurrencies that you can invest in. Explore a few of our favorite investment opportunities within the emerging cryptocurrency market using the table below. 

Investing in Cryptocurrency

With lower fees when compared to the original Bitcoin and faster transactions, it’s easy to see why investors may be interested in trading or holding BCH. However, it’s important to remember that the cryptocurrency market is still developing and that cryptocurrencies are highly unregulated compared to securities like stocks and bonds. If you do decide to invest in BCH (or any other cryptocurrency) know that the price of your assets can drop drastically at any point in time.

Protect your financial future by investing only a small percent of your capital into any individual cryptocurrency project and by using cryptocurrencies as a complement to a fully diversified investment portfolio. Never invest more money than you can afford to lose in the cryptocurrency market.