Bitcoin is the world’s most popular cryptocurrency, created in early 2009 by a person or group pseudonymously known as Satoshi Nakamoto. Satoshi intended for Bitcoin to be a peer-to-peer electronic cash payment system built on a decentralized infrastructure, free from the need of a traditional financial institution such as banks and other central authorities like the government.
While Bitcoin has achieved great success and popularity, it has been less popular as a payment solution due to its slow transaction speeds and high transaction fees as the network became flooded by users. Today, Bitcoin is the largest cryptocurrency by market cap, and many consider it a store of value (more like digital gold) rather than a payment solution.
However, some early Bitcoin users and developers sought to execute Satoshi’s original aim for Bitcoin and wanted to improve the cryptocurrency’s performance as a peer-to-peer electronic cash system; hence, the creation of Bitcoin Cash.
What is Bitcoin Cash?
Bitcoin Cash (BCH) was created in 2017 to address Bitcoin’s transactional woes and has proven to be more suitable for smaller day-to-day payment operations given its lower cost and faster transaction speeds. However, BCH was not created amicably as it sent a widening rift in the cryptocurrency community at the time.
Bitcoin cash (BCH) is a hard fork of the Bitcoin cryptocurrency blockchain, meaning that the latter’s code was copied and altered to create an entirely new crypto asset – BCH. The hard fork was executed by various developers and miners on the Bitcoin network and took place at block 478,558, forming a new proof-of-work (PoW) blockchain independent of Bitcoin.
What’s a Hard Fork in Blockchain?
Think of a hard fork as a significant software update to your favourite applications, which may either remove or add features to the application that may not be particularly pleasing to you. This was precisely the case for the Bitcoin community.
Some members of the Bitcoin community had concerns about the split, the primary issue being Bitcoin’s block size. Bitcoin has been limited to1-MB blocks, making the network slow and expensive as more users competed to get their transactions into blocks. An increase in the block size of Bitcoin was proposed to enable the network to take in more transactions per second, thereby increasing its throughput, seeing there is more space for data.
This came with downsides, however, as miners on the network will be required to do more work (i.e. generate more computational power). This automatically knocks off small-time miners on the network as the platform risks becoming centralized, favouring giant mining corporations with dedicated, improved and sophisticated hardware.
Bitcoin Cash Use Case: High-Speed Microtransactions
Bitcoin and Bitcoin Cash share many similarities, particularly the 21-million-coin limit or total supply and several other use cases. However, Bitcoin Cash’s primary usage has been for executing small transactions at a cheaper rate and faster speed.
Users can expect a low transaction fee or even zero-fee transactions when using BCH, and affordable transactions allow for BCH to be used in retail transactions. The average cost per transaction is usually below $0.01, and the transaction speed allows 116 transactions per second compared to 3-7 transactions per second for Bitcoin Core (BTC). Speed and low transaction costs are essential in small day-to-day transactions such as grabbing a cup of coffee on your way to work or simply paying for a cab.
With Bitcoin’s transaction time spanning up to an hour at peak network congestion, Bitcoin Cash steps in as an alternative digital cash payment solution for these kinds of transactions. This makes BCH a more business-centric cryptocurrency and is accepted by many merchants across the globe, including electronic online payment giant – Paypal. Of course, with the advent of services like CryptoWallet, which allows users to spend BTC instantly with a debit card, this use case is less significant.
Bitcoin Cash Use Case: Smart Contracts and DApps
Bitcoin Cash chain also supports smart contracts and decentralized applications (dApps). Although BCH is nowhere near other dApps and smart contract deployment platforms like Ethereum, Polkadot, and Solana, it still remains a suitable option for developers as it has brought about applications focused on enhancing privacy in cryptocurrency transactions.
CashShuffle and CashFusion are typical examples of privacy-based applications running on the Bitcoin Cash blockchain, built with its native smart contract language – Cashscript. BCH’s smart contract functionality enables it to execute more complex functions such as token issuance, NFTs and decentralized finance apps.
Bitcoin Cash Use Case: Store of Value
Furthermore, Bitcoin Cash (BCH) also represents a good store of value, just like digital gold. With its total supply capped at 21 million and a halving event scheduled every 4-years, BCH is a deflationary asset and has a market cap of over $10 billion at the time of this writing, making it a good store of value for investment purposes. It is worth noting that crypto investments are risky due to their volatile nature and experts warn against investing more than 5% of your total investment portfolio.
In summary, Bitcoin cash combines the gold-like scarcity with the liquid nature of traditional fiat currencies to meet the demands of a global decentralized electronic payment system.
Bitcoin Cash in Crypto
Although Bitcoin cash has achieved its aim as a better payment method in comparison to Bitcoin, it is yet to attain its fundamental goal – spurring the global adoption of digital currency largely due to the crypto market’s volatile nature.
Bitcoin and other altcoins are largely speculative, meaning they are not associated with any physical asset or organization and are simply valued at what people are willing to pay for it. This makes crypto assets easily susceptible to my media hype, manipulation from crypto whales and more.
However, BCH has been instrumental in facilitating the use of cryptocurrencies for small transactions such as in day-to-day commerce and tipping online creators. Also, being smart-contract enabled, developers can build complex applications ranging from simple web apps to decentralized platforms.