Bitcoin CashWhat is Bitcoin Cash?

New arrivals keep appearing in the crypto world, and Bitcoin Cash is one of them. But what is Bitcoin Cash exactly? Here you read all about it.

Bitcoin Cash is a coin that came about on 1 August 2017 from a split of the Bitcoin network. Up to that date, Bitcoin and Bitcoin Cash shared the same history. A group of developers and miners wanted to make more transactions per second possible by increasing the block size. The rest of the community opted for other solutions, such as SegWit and the Lightning network. When that discussion proved unsolvable, the network split into two separate chains.

Today Bitcoin Cash is an independent cryptocurrency with its own network, its own miners and its own price. The most important difference from Bitcoin: a Bitcoin Cash block can hold up to 32 MB of transactions, against 1 MB for Bitcoin. In practice that means faster confirmations and lower transaction fees, but also less recognition and acceptance than its bigger brother.

With Bitcoin Cash you can send and receive value, just as with Bitcoin. All transactions are recorded on the Bitcoin Cash blockchain, a public ledger kept worldwide by miners and nodes. A node is a computer that keeps and checks a full copy of the blockchain. The more nodes, the more robust and decentralised the network.

Transactions are bundled into blocks. With Bitcoin Cash up to 32 MB of transactions fit into one block, where with Bitcoin that is only 1 MB. An average transaction therefore costs only a fraction of a cent and is usually confirmed within 10 minutes. Like Bitcoin, Bitcoin Cash uses Proof of Work to validate transactions: miners put in computing power to find new blocks and receive a reward in BCH for it.

In 2017 the Bitcoin network ran into a capacity problem. More and more people were using Bitcoin, blocks were regularly full and transaction fees were rising. The Bitcoin developers saw the solution in clever layers on top, such as SegWit and the Lightning network. Another group, mainly miners and large companies, found that too complicated and simply wanted to make the blocks bigger.

When the two camps could not reach agreement, the supporters of bigger blocks carried out a hard fork on 1 August 2017. A hard fork is a definitive split of the blockchain: from that block on, the rules are incompatible and two separate chains run in parallel. From that day Bitcoin (BTC) and Bitcoin Cash (BCH) existed separately. In November 2018 Bitcoin Cash split once more: into BCH (also called BCH ABC) and Bitcoin SV. Most exchanges and wallets, including BTC Direct, work only with BCH.

Because Bitcoin Cash shares the same basic architecture as Bitcoin, the applications are comparable. Three forms of use are the most common:

• Sending value directly. You can transfer BCH from person to person, worldwide, without a bank in between. The transaction fees are usually a fraction of a cent, handy for small amounts or international transfers.
• Paying at web shops and charities. More and more (web) shops accept BCH, often through a service that converts the coins straight into euros. A well-known example is EatBCH, a charity that only accepts donations in Bitcoin Cash because of the low cost and the speed.
• Investing. The price of BCH moves strongly with the wider crypto market. Some investors see an opportunity in that, others a risk. Only invest money you can afford to lose, because the value can also fall sharply.

Before you can receive Bitcoin Cash, you need a wallet, a kind of digital purse. That can be an app on your phone, a program on your computer or a hardware wallet (a small physical device that keeps your keys offline). Do you have a wallet? Then there are three routes to BCH:

• Buying through a broker. The easiest route. At BTC Direct you buy BCH from €30 with iDEAL, credit card or bank transfer. The coins are sent straight to your own wallet.
• Receiving it for goods or services. Do you have your own web shop or work freelance? You can let customers pay you directly in BCH.
• Mining. Bitcoin Cash uses Proof of Work, so mining is possible. In practice this only pays off with specialised equipment (ASICs), cheap electricity and the right pool. For most people buying is more cost-effective.

• Live since: Bitcoin since 2009, Bitcoin Cash since 1 August 2017 (a split from BTC).
• Created by: Bitcoin by Satoshi Nakamoto, Bitcoin Cash through a hard fork, led by miners and large companies.
• Block size: Bitcoin 1 MB, Bitcoin Cash 32 MB.
• Scaling solution: Bitcoin uses SegWit + Lightning Network, Bitcoin Cash opts for bigger blocks.
• Transaction fees: Bitcoin variable, can run up. Bitcoin Cash usually a fraction of a cent.
• Average confirmation time: About 10 minutes for both.
• Mining algorithm: Both Proof of Work (SHA-256).
• Smart contracts: Bitcoin through Lightning + side chains, Bitcoin Cash on-chain since a later fork.
• Market size: Bitcoin is by far the largest cryptocurrency, Bitcoin Cash sits in the top 30 (varies a lot).