What Is Bitcoin Cash (BCH)?
What Is Bitcoin Cash (BCH)?

What Is Bitcoin Cash (BCH)?

Published Jun 16, 2021Updated Feb 1, 2023


When politics happen to blockchains, hard forks can instigate new projects. Bitcoin Cash (BCH) was created by a group of developers, investors, entrepreneurs, and miners who were unsatisfied with Bitcoin’s development plans. Created in August 2017, Bitcoin Cash is a peer-to-peer electronic cash system that focuses on increased scalability and low transaction fees. The project is also referred to as Bitcoin ABC (Adjustable Blocksize Cap).

Blockchain scalability

In 2017, Bitcoin was suffering from long transaction confirmation times and growing transaction fees, detracting from its initial premise of being near-instant payments with very low fees. Before the creation of Bitcoin Cash, there was a strong debate in the Bitcoin community about the implications of increasing the block size limit.

Since Bitcoin is decentralized, proposed changes to the protocol require widespread agreement. Therefore, all network nodes need to reach consensus when making changes and updates to the Bitcoin software.

Bitcoin Cash was presented as a more scalable cryptocurrency, with reduced transaction fees and confirmation times. The BCH community argues that the project is more in line with Satoshi Nakamoto’s proposal of a peer-to-peer electronic currency. Mainly because the altcoin offers a faster and cheaper payment system that might be more suitable than Bitcoin for daily use.
Shortly after the Bitcoin Cash fork, the original Bitcoin blockchain went through a long-waited soft fork upgrade to implement a technology known as SegWit (Segregated Witness). Such an upgrade was created in 2015 by Bitcoin developer Pieter Wuille. It was implemented on the Bitcoin network to address network congestion and other scalability issues.

The SegWit soft fork was planned before the BCH hard fork, but the Bitcoin Cash proponents believed that SegWit was an inferior alternative to increasing the block size limit. The Bitcoin Cash fork from Bitcoin was supported by some notable members of the blockchain industry, including Jihan Wu (co-founder of Bitmain) and Roger Ver (CEO of Bitcoin.com).

How does BCH work?

Bitcoin Cash was directly forked from the original Bitcoin source code, so there are many similarities. Both networks run a Proof of Work consensus mechanism and are open for anyone to join and contribute. Also, any address that had BTC prior to the fork received an equal amount of BCH after the fork (same address string, but on different networks).
Similar to Bitcoin, BCH also has a target block time of 10 minutes and a max supply of 21 million coins. The emission rate of BCH halves every 210,000 blocks (roughly every four years). The current block reward is 6.25 BCH per block.

Unlike Bitcoin, Bitcoin Cash has an increased block size limit, which allows for more transactions to be included in each block. The block size limit was initially raised from 1 MB to 8 MB and then raised again in 2018 to 32 MB.

In practice, though, the average block size of BCH only surpassed 1 MB a few times since 2017. We can see a comparison between BTC and BCH average block size at BitInfoCharts.com.

Both Bitcoin and Bitcoin Cash adjust their mining difficulty through the so-called difficulty adjustment algorithm (DAA). However, Bitcoin adjusts the difficulty every 2016 blocks, while the mining difficulty of Bitcoin Cash is adjusted after each block.

In the past, Bitcoin Cash also implemented an emergency difficulty adjustment (EDA) algorithm to decrease the mining difficulty and incentivize miners to join the network. However, the algorithm was later removed due to instabilities. The EDA implementation is one of the reasons why the BCH blockchain is thousands of blocks ahead of Bitcoin.

In 2019, Bitcoin Cash implemented a technology called Schnorr Signatures, an alternative algorithm that changes the way digital signatures are used. The Schnorr Signatures scheme is simple and secure and allows for more privacy and scalability than the ECDSA scheme currently used by Bitcoin.

BCH key features

  • The BCH source code was based on the original Bitcoin protocol.
  • The supply is capped at 21 million.
  • As a fork of Bitcoin, BCH also uses the Proof of Work (PoW) consensus mechanism to issue new coins.
  • Increased block size from 1 MB to 32 MB.
  • The community argues that the BCH ethos aligns more closely with Satoshi’s original plans.
  • The BCH mining difficulty is adjusted after each block through the difficulty adjustment algorithm (DAA).
  • BCH did not implement SegWit.
  • BCH implemented Schnorr Signatures in 2019.
  • Smart contract development built-in as a later update.

Day to day payments

The Bitcoin Cash community defends that BCH is designed to be used as money. You can use it to quickly send and receive money to and from anyone with a BCH wallet, both individuals and businesses. With fast transaction times and low fees, BCH can be more suitable for daily use than Bitcoin, especially when making small payments.

While there are stores and merchants that accept Bitcoin Cash payments, it doesn’t seem to be a widespread practice yet. As of June 2021, Bitcoin.com Map flags thousands of stores accepting BCH, but a great portion of them does not currently mention or provide such a payment option, which suggests that the map is inaccurate or outdated.

How to store Bitcoin Cash (BCH)

We recommend using Trust Wallet. There are hundreds of other crypto wallets that support BCH, such as hardware wallets Ledger, Trezor, and Cobo Vault. You can also store BCH on a desktop wallet like Electrum Cash.

Some Bitcoin Cash proponents recommend using either the Bitcoin.com or Coinomi wallets to store BCH. Both of these software wallets are available across Windows, Mac, Linux, Android, and iOS.

It’s important to keep in mind that BTC and BCH run on distinct blockchain networks. You can’t send Bitcoin to a Bitcoin Cash wallet address and vice versa.

Bitcoin SV

In 2018, part of the Bitcoin Cash community forked the protocol to create another cryptocurrency called Bitcoin Satoshi Vision (also known as Bitcoin SV or BSV), which has an even larger block size limit of 2 GB.

The contentious hard fork was supported by Craig S. Wright and Calvin Ayre and the event is known as the Hash War. However, BSV failed to get broad support from the crypto community. The lack of support and adoption is likely related to Craig S. Wright’s false claims about being the inventor of Bitcoin, Satoshi Nakamoto.

Closing thoughts

Among the thousands of cryptocurrency projects that forked from Bitcoin, BCH is one that managed to remain relatively relevant. While it may not have gone on to experience the same heights and notoriety as Bitcoin, you can still find stores that accept BCH as payment, particularly because of its lower transaction fees and faster confirmation times.

Still, larger block sizes also bring concerns about network security and, as such, Bitcoin is still considered the most secure blockchain network. Also, Bitcoin continues to be the most popular cryptocurrency, meaning that BCH has lower market liquidity and adoption than BTC.