The Blockchain Handbook - Chapter 4: Bitcoin Cash (BCH)

cryptaligator (28)in #cryptocurrency • 6 years ago

A result of a hard fork in Bitcoin that occurred in August 2017, Bitcoin Cash (BCH) is an upgraded version of the original Bitcoin with an increased block size limit of 8MB, which expands the number of payments per second that can be processed on the platform. The result is a system that is smoother and faster, capable of cheaper transactions for the user base. Currently, Bitcoin Cash has a market cap of $21,129,252,437, with a value around $1,245.41, equivalent to about 0.14340800 BTC.

Created to follow the original Nakamoto roadmap for global adoption and embrace a return to form for the Bitcoin platform, Bitcoin Cash occupies the 4th spot on the most-valuable cryptocurrency rankings. It has a 24-hour volume around $464,303,000, experiencing a surge in growth near the beginning of 2018 which has leveled off, but could spike again. At present, the circulating supply of Bitcoin Cash is 16,965,700 BCH, with a maximum supply of 21,000,000 BCH.

Bitcoin Cash: Competition, Pros and Cons

As an offshoot of Bitcoin, Bitcoin Cash split to address the issue of scalability. Because of the limited block size of the Bitcoin Classic (1MB) and the increasing value of the currency, adopters began expressing concerns about potential slowdowns in transaction processing times. According to Investopedia:

"By 2015, the value of Bitcoins had increased substantially and average block size had reached 600 bytes, creating a scenario in which transaction times could run into delays as more blocks reached maximum capacity."

Transaction speed with the Bitcoin Classic block size limit was three per second, and, as Bitcoin Cash adopters have noted, the original cryptocurrency hit an "invisible wall" in 2017, wherein "fees skyrocketed, and Bitcoin became unreliable, with some users unable to get their transactions confirmed, even after days of waiting."

Since the Bitcoin community couldn't come to a consensus on the best path forward, Bitcoin Cash proponents initiated the hard fork in the currency, implementing new features to address the perceived limitations of Bitcoin Classic. Specifically, Bitcoin Cash:

Increased the block size from 1MB to 8MB in the hopes of speeding transactions and helping the cryptocurrency scale as use grows.
Chose not to adopt SegWit as a solution for increasing block capacity.
Did away with the replace-by-fee feature.
Introduced replay and wipeout protection.
Offered a way to adjust proof-of-work difficulty faster than the normal 2016 block difficulty adjustment interval found in Bitcoin.

The professed benefits of these features are numerous. In particular, the decision not to use SegWit and instead increase the block size helps to circumvent what proponents of Bitcoin Cash see as its three main drawbacks:

SegWit increase would only equate to 1.7MB blocks, even when used for 100 percent of transactions -- a paltry increase in the eyes of Bitcoin Cash adopters.
Discardable signatures from soft fork implementation would weaken Bitcoin's security model.
Future capacity increases would be hampered due to bandwidth inefficiency and potential quadratic hashing attacks.

Furthermore, the quicker adjustments to proof-of-work difficulty provide a way to ensure that the blockchain remains viable in the event of abrupt hash rate drops, as might be the case during market price fluctuations. It's all geared toward making Bitcoin Cash faster, with the ability to grow and scale. The hard fork creation of Bitcoin Cash didn't come without its detractors, though. As Investopedia notes:

"Because the computer power required to process larger blocks could price out some smaller miners, critics worry that adopting Bitcoin Cash's approach will lead to power being concentrated in the hands of companies that can afford more and better equipment."

It is possible that those at the top could force unwanted changes on regular community users, disrupting true consensus, but that scenario remains to be seen.

The Uses of Bitcoin Cash

The issue of scalability is one that is central to Bitcoin Cash's intended real-world use:

"Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate."

As opposed to Bitcoin Classic's model as a store of value (think digital gold), Bitcoin Cash is designed to be used for day-to-day transactions, in the vein of PayPal. Bitcoin Cash proponents want to see the utility of the cryptocurrency grow, increasing the demand and doing away with the high fees and slow transaction times associated with Bitcoin Classic.

In other words, Bitcoin Cash can be spent on purchasing goods, services and just about anything else that requires a monetary transaction. A list of industries that have adopted Bitcoin Cash for such purposes can be viewed here.

The Future for Bitcoin Cash

Some experts, like entrepreneur Vinny Lingham, believe Bitcoin Cash will outpace Bitcoin Classic, citing the greater demand for peer-to-peer cash over digital gold. This future remains to be seen, but if Bitcoin Cash's plans work as imagined, Bitcoin Cash will execute on the "original vision of peer-to-peer electronic cash" envisioned by founder Satoshi Nakamoto.

In the near future, adopters of Bitcoin Cash can expect several changes, including further increases to block sizes, new transaction signatures, a more responsive difficulty adjustment algorithm, and other software improvements by way of the decentralized development process.

Sources:

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6 years ago in #cryptocurrency by cryptaligator (28)

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The Blockchain Handbook - Chapter 4: Bitcoin Cash (BCH)

Bitcoin Cash: Competition, Pros and Cons

The Uses of Bitcoin Cash

The Future for Bitcoin Cash

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