What is Bitcoin Cash? A Beginner’s Guide for it!

In this article, you will understand how did Bitcoin Cash, also known as BCH come about and all the incidents leading up to its creation. To put it plainly, Bitcoin Cash was born through a hard fork in the Bitcoin blockchain as the Bitcoin blockchain were facing scalability issues.


How do Bitcoin transactions work and the scalability issue behind it?

Bitcoins are a peer to peer decentralized currency system, and this system functions when miners work by mining for blocks and by adding transactions to the blocks. The “proof of work” process is when the miners use their computing power to discover a block and then adds transactions onto the blocks. The one MB limit for the size of every block was originally implemented to lower the possibility of potential spam and DDoS-attacks. While there were not that many transactions happening in the network, the limit wasn’t affecting anything at all. The limit of a block in the chain is only 1MB which limits the number of transactions which can go through at one time.

As Bitcoin gained popularity, the number of transactions increased exponentially, the 1MB limit which equates to about 4.4 transactions per second was not enough, and soon people had long waiting time before their transactions would go through which created a backlog of transactions.

Graph showing the increase in transactions per month since 2009:


Hard Fork vs Soft Fork

In order to solve this scalability issue, there were 2 suggestions made:

  1. Soft Fork
  2. Hard Fork

Whenever a chain needs to be updated there are two ways of doing that: a soft fork or a hard fork. A fork is a condition whereby the state of the blockchain diverges into chains were a part of the network has a different perspective on the history of transactions than a different part of the network. That is basically what a fork is, it is a divergence in the perspective of the state of the blockchain.

Soft Fork

Soft Forks are backwards compatible. Some of you all might be wondering what this means? Imagine you are you running MS Word 2005 and you want to open a file created on MS Word 2015, you will be able to do so because MS Word 2015 is backwards compatible.

However, there are still some differences, the updates that you enjoy on the newer version will not to visible on the older version. In the MS word example, suppose you are able to insert videos into MS Word 2015, you would not be able to see the video when you are opening the MS Word 2015 when opening it in MS Word 2005.

Hard Fork

The main difference between Hard Fork and Soft Fork is that Hard Fork is not backwards compatible. Once implemented, there is no way of going back whatsoever. Users who do not join the upgraded version of the blockchain, will not be able to get any access to updates and are able to interact with the users on the new system. Think of XBox 360 and XBox One, one cannot use or the play XboX 360 game files on the XBox One.


How Bitcoin Cash was created?

Here come the question that we have been anticipating, so what exactly is Bitcoin Cash?

Bitcoin Cash (BCH) is very similar to Bitcoin except for some noticeable differences:

  1. The blocksize is 8MB
  2. Emphasizes on peer to peer transactions
  3. It offers a way to adjust the proof-of-work difficulty quicker than the normal 2016 block difficulty adjustment interval found in Bitcoin.

Since the Hard Fork, Bitcoin Cash been gaining popularity due to a few reasons:

More exchanges and wallets are agreeing to accept and take Bitcoin Cash. When the Hard Fork first happened, most exchanges were reluctant to take up BCH, but as of now more and more exchanges are accepting it. This, in turn, gives it credibility which increases its value.

Miners are increasingly interested in mining Bitcoin Cash. BCH currently is very attractive for miners, as Bitcoin cash has a set rule as to when it decreases its difficulty, the difficulty rate adjusts according to a number of miners in the system. If there are fewer miners, then the difficulty rate goes down because the overall hashing power of the system goes down.

Thus this attracted many miners to give their hashing power which in turn increases its value. Since the block size is 8 MB as well, it will enable more transactions within the block which will generate more transaction fees for the miners.


The Upcoming Fork

The upcoming 15 November 2018 hard fork is expected to be the fourth successful hard fork completed by the Bitcoin Cash community. The first one took place on 1 August 2017 when BCH was split from BTC, with the next 2 successful hard forks occurring on 31 November 2017 and 15 May 2018.

It will upgrade BCH with new protocol changes. Looking back, the November 2017 hard fork for BCH was to fix the network’s difficulty adjustment algorithm (DAA), while the May hard fork increase the block size to 32 MB and increasing the default data carrier size to 220 bytes. All of these protocol changes were designed to enhance the usability and scalability of the BCH network without resorting to centralized scaling solution like the Lightning Network that is currently being proposed by the legacy (BTC) developers.

15 August 2018: Code Complete

Code for BCH protocol upgrades is expected to be completed on 15 August 2018. Once all code has been received by August, testing on the testnet will begin.

15 October 2018: Testnet Deadline and Official Release

Bitcoin ABC will launch the official release for version 0.18 in October. By launching the official release on 15 October 2018, Bitcoin ABC is giving node operators about 30 days to upgrade their software in anticipation of the hard fork.

15 November 2018: Hard Fork

The hard fork is expected to take place on November. Node operators will be required to upgrade their software prior to this date to ensure compatibility with the new version of BCH.


The future of Bitcoin Cash

Since the hard fork on 1 August 2017, the cryptocurrency market has went through a couple of ups and downs and it is hard to tell where BCH is currently headed. We are also still unsure of the long term effects and repercussions it will cause to BTC.

However, with the new 8MB blocksize, it is a very lucrative and alluring prospect and we shall wait and see how this would affect miners in the long run. Would increasing the blocksize be enough to solve this scalability issue? And will BCH be able to overtake BTC as the new primary chain? All the answers in this questions would gradually come into light, but as of now it is all mere speculations. However, what we have here is a very interesting experiment which would no doubt teach us many lessons moving forward.

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