Bitcoin still dominates the cryptocurrency space, but as of late we’ve seen a series of high profile splits or forks. If you exude interest in digital money, you have probably noticed that Bitcoin Cash has been the talk of the town since August 1st, 2017. But what exactly is Bitcoin Cash? Before we delve into the crux of Bitcoin Cash, let’s first touch a little on Bitcoin to bring beginners onboard.
What Is Bitcoin?
Here’s an illustration that should help you understand Bitcoins. Suppose you want to send money from the USA to Europe. You can either use wire transfer or internationally accepted payment services like PayPal. For such transfer services, you end up paying a lot in fees:
- Transaction fees
- Currency conversion fees
- Service fee to the bank
In the end you end up paying a large chunk of the transfer amount, roughly 2% to 10% as a service cost. Even though everything is done fast and electronically, why lose so much money? To circumvent such high costs, people have been switching to alternatives like Bitcoin.
Bitcoin is the world’s largest digital cryptocurrency, created in 2008 by a Japanese software engineer, Satoshi Nakamoto. Unlike other hard currencies, Bitcoin is independent of any geographical entity – meaning it’s not regulated by any country. Anyone with Internet access can use it; it’s like the official currency of the Internet. Plus, your transaction remains anonymous to everyone except you and the sender.
The good thing about Bitcoin is that you can transfer money anywhere in the world at a very low transaction fee. For example, transferring any amount of bitcoins from the US to Europe will cost you around $2 to $3.
Bitcoin Cash Explained
Bitcoin Cash is the continuation of the Bitcoin project as peer-to-peer digital cash. To better understand Bitcoin cash, you first need to understand what a blockchain is. Bitcoins operate on an open transaction ledger called the “Blockchain.” The blockchain is a shared public ledger where all the transaction data on the network is recorded. Whenever a user initiates a new transaction, that transaction is recorded and verified using blockchains.
Bitcoin Cash is a forced fork of Bitcoin. A fork is a change to the software of the digital currency that splits an existing blockchain into two separate versions. Bitcoin Cash, therefore, is a product of a forced fork that split the Bitcoin blockchain on August 1, 2017. And just like the original Bitcoin, Bitcoin Cash is fully decentralized with no central banks and is independent of any geographical entity.
A small group of miners who were dissatisfied with the limitations of Bitcoin and lack of updates decided to take the matter into their own hands. By forcing a fork in the Bitcoin blockchain, they created a new currency known as Bitcoin Cash. The thing about hard forks is that if some people disagree with the ideologies of the original group, they are at liberty to split off and start their own version with the same technology but different governance model and strategies. That’s what happened to Bitcoin.
How to Buy Bitcoin Cash (BCH)
You can buy Bitcoin Cash (BCH) much like other cryptocurrencies. Tere are the three simple steps to take.
Step 1: Get a Bitcoin Cash wallet
Before you can buy BCH, you’ll need a wallet that supports Bitcoin Cash to store it. Recently, major wallet creators have embraced Bitcoin Cash, and more are still adopting it. Hardware wallets that support BCH include industry leaders like Trezor and Ledger. Both offer the option to trade with BCH as you would with other currencies. You can view all the other wallets that support BCH on the official Bitcoin Cash website.
Step 2: Find a Bitcoin Cash Exchange
Since Bitcoin Cash is still new, its exchanges are not as many as Bitcoin exchanges. However, there are few reputable Bitcoin Cash exchanges you can work with.
Coinbase, the most popular Bitcoin exchange, just recently added support for Bitcoin Cash. Coinfloor is another excellent option for UK traders as it’s based in London. You can view all the available exchanges for BCH on the official Bitcoin Cash website.
Step 3: Transfer the Bitcoin Cash to Your Wallet
Though optional, it’s wise to not leave money on an exchange. Once you’ve finished buying your BCH, be sure to move it to your Bitcoin Cash wallet, then check the status of your transaction using the Bitcoin Cash block explorer. The transaction will be complete once you’ve received three confirmations for your Bitcoin Cash.
Is it Possible to Trade Bitcoins for Bitcoin Cash?
If you have Bitcoins (BTC), it’s possible to exchange it for Bitcoin Cash (BCH). All you need to do is find an exchange that supports Bitcoin Cash and follow their set guidelines for trading BTC/BCH.
At the time of writing this post, the BTC/BCH official rate from HitBTC was 8.7386.
You might also want to claim your Bitcoin Cash (BCH) and sell it for Bitcoin (BTC)
To sell your Bitcoin Cash on an exchange, you’ll have to decide between the three exchanges that are currently accepting Bitcoin Cash Deposits: Bittrex, ViaBTC, and HitBTC. Most people opt for HitBTC since their registration procedure is quick and easy. Also, HitBTC requires only two confirmations for the deposited Bitcoin Cash to be credited to your account and made available for trading.
Differences Between Bitcoin and Bitcoin Cash
Bitcoin Cash is basically a fork of the original Bitcoin blockchain ledger. Even though it’s a continuation of the original Bitcoin project, Bitcoin Cash features upgraded consensus rules that allow it to scale up and grow. The major difference between the two cryptocurrencies is seen in the block sizes. While Bitcoin offers one-megabyte block size, Bitcoin Cash provides a larger block size of eight megabytes.
A block refers to a group of verified transactions. At a block size limit of one megabyte, the Bitcoin blockchain is limited to up to seven transactions per second. With Bitcoin, periods of high activity and increased usage often lead to network congestion, causing transactions to take a considerably longer period. This also leads to higher transaction fees.
On the other hand, the Bitcoin Cash has blocks increased up to eight megabytes, which in theory makes the transaction process faster. The high number of transactions in the network contributes to the reduced transaction fee in the Bitcoin Cash blockchain.
With the increased block size, the Bitcoin Cash can allow around two-million transactions to be processed per day, compared to Bitcoin that provides for up to 250,000 transactions per day. The other notable difference is that Bitcoin Cash offers replay and wipeout protection.
To Sum Up
In general, Bitcoin and Bitcoin Cash do not differ much, aside from the transaction potential. While Bitcoin, for now, enjoys a larger market share, Bitcoin Cash has positioned itself as a cryptocurrency focused on transaction capacity. One advantage that Bitcoin Cash enjoys over the original Bitcoin is that the greater transaction processing power implies lower fees and faster payments.
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