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.
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:
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.
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.
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).
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.