What is Bitcoin Cash (BCH)

  • Home
  • What is Bitcoin Cash (BCH)
Shape Image One
What is Bitcoin Cash (BCH)

Table of Contents


Created in 2017, Bitcoin Cash (BCH) is a fork of Bitcoin that aims to increase the scalability of Bitcoin by allowing more transactions to be included in one block.

Bitcoin Cash supports smart contracts and NFTs and allows developers to issue their own crypto tokens on the blockchain as well.

In this article, you will learn about Bitcoin Cash, its additional functionalities, and how it’s different from the Bitcoin blockchain.

What is Bitcoin Cash (BCH)?

Bitcoin Cash (BCH) was created on August 1st, 2017 after the members of the Bitcoin blockchain couldn’t come to an agreement on a change to a core attribute of the blockchain. This disagreement caused the Bitcoin blockchain to experience a hard fork, creating Bitcoin Cash as a result.

Bitcoin was created as a cheaper and more reliable alternative to the traditional financial system. However, as Bitcoin grew in popularity, dealing with the largest cryptocurrency started to become more expensive.

When we use a bank for our money-related work, the bank takes care of our transactions based on the information and documents presented to them.

For a decentralized monetary system, like Bitcoin, transactions are verified by network members using a shared database, aka the blockchain ledger, and are considered approved once included in a verified block.
These blocks of transactions are chained together by cryptographic techniques, making a system we know as a blockchain.

The process of creating a new block with all the transactions and getting it approved by the majority of blockchain members can be quite difficult and may take time. We know this time as the Block Time which is around 10 minutes for Bitcoin.

This is the reason why block size is considered an important factor with a direct effect on the scalability and speed of a blockchain system.

The growing demand for Bitcoin made the fees rise too and as the Bitcoin transaction fees increased, many became unable to use this cryptocurrency, undermining the original vision of Bitcoin. The average Bitcoin transaction fee increased as high as $55.16 in December 2017.

To resolve this issue, some developers proposed increasing the block size to make room for more transactions to be included in one block and therefore, boost the throughput of the system.

On the other hand, a group of developers believed that adopting Segregated Witness (SegWit) is sufficient to scale the Bitcoin network further (We will discuss both of these solutions in the next section).

These proposals split the network into two groups, making the block-size proponents separate their ways and go ahead with their ideal change in a new blockchain. The new chain was called Bitcoin Cash which has the same history as Bitcoin up until the point where the fork happened (block 478558).

After the fork, the Bitcoin transaction fee continued to stay an open issue that could increase when the network was facing significant demand. In April 2021, the transaction fees recorded an all-time high of $62.78.

How Bitcoin and Bitcoin Cash are different?

Bitcoin Cash has the same roots as Bitcoin and shares some similarities with the cryptocurrency. Both coins use the Proof of Work (PoW) consensus mechanism and have a maximum supply of 21 million tokens.

The main difference between Bitcoin and Bitcoin Cash is the block size. However, this increased block size has allowed Bitcoin Cash to offer some extra features to its users as well.

Let’s take a look at some of the differences between Bitcoin and Bitcoin Cash together:

Block Size

Bitcoin has a limited block size of 1 MB which Bitcoin Cash increased to 8 MB to allow for more transactions per block and boost the network’s capacity.

Bitcoin Cash didn’t stop there and increased its block size to 32 MB in 2018 to make its system ready for additional features such as the support for smart contracts.

Bitcoin Cash’s increased block size allows it to run more than 100 transactions per second while Bitcoin can only handle around 7 transactions per second.

Segregated Witness (SegWit)

Bitcoin adopted SegWit while Bitcoin Cash went ahead with changing the block size. Segregated Witness, or SegWit for short, was another proposed solution for Bitcoin’s scalability problem. SegWit tries to fit more transactions into a block by removing the signatures from transaction data.

In addition to this, SegWit addresses a security issue in the Bitcoin network. Transaction Malleability allows users to cancel a transaction by changing its Transaction ID (TX ID) before it’s confirmed by the network.

TX ID is created based on the specific information of a Bitcoin transaction and is the unique identifier for that transaction. By making a slight change in the address, the TX ID will change completely. SegWit addresses this issue by removing the signatures from transactions.

Let’s see how it works with an example:

Alice asks Bob to send her 5 bitcoins. Bob goes ahead and sends her the bitcoins which creates a unique transaction for this transfer.

Alice then re-creates this transaction with a slightly different signature which causes the Transaction ID to change completely. If Alice’s transaction gets approved first by the network, she will receive the 5 bitcoins and Bob’s transaction will be ignored.

Alice can then claim that she has never received the bitcoins from Bob. Bob can check for his transaction all he wants but he will not find any record of it as it was canceled. He probably will send the bitcoins again to Alice, gifting her 5 extra bitcoins.

DeFi Applications and NFTs

SmartBCH is a side chain that allows developers to create their own Decentralized Finance (DeFi) applications and NFTs on the Bitcoin Cash blockchain. SmartBCH is compatible with the Ethereum Virtual Machine (EVM).

Token Ecosystem

Bitcoin Cash allows projects to create their own tokens on the blockchain as well. Simple Ledger Protocol (SLP) is Bitcoin Cash’s token system which acts similarly to the ERC-20 standard of the Ethereum blockchain.

Where to buy BCH?

In addition to offering Bitcoin Cash (BCH) for trading on various cryptocurrency exchanges, including DIFX, they also provide a comprehensive guide on how to buy BCH for interested users. On DIFX, BCH is available as an BCH/USDT pair, enabling users to conveniently trade the cryptocurrency.

Sign up for a DIFX account today and start trading!