What is Bitcoin Cash (BCH)

2025-01-20
What is Bitcoin Cash (BCH)

In recent years, Bitcoin Cash (BCH) has gained significant attention as a leading alternative to Bitcoin (BTC). 

While Bitcoin’s primary use has evolved into a store of value and settlement layer, Bitcoin Cash aims to keep the original vision of Bitcoin alive: a peer-to-peer, decentralized electronic cash system. 

Since its inception in 2017, Bitcoin Cash has grown into a widely used cryptocurrency, empowering both merchants and users with low fees, fast transactions, and a decentralized network.

Unlike Bitcoin, which has struggled with scalability issues, Bitcoin Cash has implemented significant changes to enhance its transaction speed and reduce costs, making it a practical option for daily payments. 

But what exactly is Bitcoin Cash, and how does it work? In this article, we will dive deep into the details of Bitcoin Cash, its benefits, and how it stands out in the crypto world.


Source: bitFlyer

What is Bitcoin Cash (BCH)?

Bitcoin Cash (BCH) is a peer-to-peer cryptocurrency that aims to fulfill the original vision of Bitcoin as outlined in its whitepaper by Satoshi Nakamoto

It was created to be a fast, low-cost, and decentralized alternative to traditional banking systems. 

Bitcoin Cash emerged as a result of a hard fork from Bitcoin in August 2017, following disagreements within the Bitcoin community over how to scale the network.

The primary difference between Bitcoin and Bitcoin Cash is the block size. Bitcoin Cash increased the maximum block size from Bitcoin’s 1MB to 32MB, allowing for more transactions to be processed in each block, significantly reducing congestion and transaction fees.

Key Features and Benefits of Bitcoin Cash

Low Transaction Fees

Bitcoin Cash transactions typically cost less than one penny, making it ideal for microtransactions and international money transfers. This ultra-low-cost structure eliminates high transaction fees that limit other cryptocurrencies.

Global Peer-to-Peer Payments

Bitcoin Cash allows users to send money anywhere in the world 24/7 without third-party approval. The network’s always-on functionality makes it a reliable tool for financial inclusion, especially in regions with limited access to traditional banking.

Decentralization and Security

Bitcoin Cash operates on a decentralized network free from government control. Users have full ownership of their funds, mitigating the risks of bail-ins or frozen accounts. Blockchain technology ensures tamper-proof and transparent transactions.

Privacy and Anonymity

While Bitcoin Cash transactions are public, BCH offers better privacy than traditional payment systems. Users can enhance anonymity by learning about privacy-focused transaction techniques.

Merchant Adoption and Discounts

Many businesses accept Bitcoin Cash due to low fees and no chargebacks. Some even offer discounts for BCH payments, encouraging adoption and demonstrating its practical benefits.

Read also: Bitcoin Cash (BCH) Price Prediction 2025-2050

TOKENOMICS of Bitcoin Cash

Bitcoin Cash (BCH) shares a foundational similarity with Bitcoin in terms of its capped supply, which is limited to 21 million coins. 

This fixed supply plays a crucial role in its value proposition by creating scarcity. In economic terms, scarcity combined with growing demand contributes to price appreciation over time, making BCH a potential hedge against inflation. 

Unlike fiat currencies that can be printed at will by central banks, the predetermined supply of BCH ensures that inflationary pressures are minimized.

The distribution of Bitcoin Cash occurs through a process known as mining. Miners compete to solve complex mathematical problems, validating transactions and adding new blocks to the blockchain. In return for their work, miners are rewarded with newly minted BCH, known as block rewards. 

These rewards are halved approximately every four years in an event called the halving, reducing the rate of new coin issuance and further enhancing scarcity. 

Additionally, transaction fees paid by users for sending BCH are distributed to miners as an incentive to maintain the network's security and efficiency. 

The combination of block rewards and transaction fees forms the core of Bitcoin Cash’s tokenomics, influencing its overall supply dynamics and market value.

Working Principle of Bitcoin Cash

Bitcoin Cash operates using the proof-of-work (PoW) consensus mechanism, the same method utilized by Bitcoin. 

In this system, miners use computational power to solve cryptographic puzzles, ensuring that only legitimate transactions are added to the blockchain. 

This process not only validates transactions but also secures the network from attacks, as attempting to alter transaction history would require enormous computational resources, making it economically infeasible for bad actors.

One of the primary innovations of Bitcoin Cash compared to Bitcoin is its larger block size limit. While Bitcoin’s block size is capped at 1 MB, Bitcoin Cash initially increased this limit to 8 MB and later to 32 MB, significantly boosting its transaction capacity. 

Larger block sizes allow Bitcoin Cash to process a higher number of transactions per second (TPS), reducing congestion and keeping transaction fees low. 

This scalability improvement makes BCH more suitable for everyday use and microtransactions, positioning it as a practical, peer-to-peer digital currency designed for quick and affordable payments.

BCH Halving

BCH undergoes halving approximately every four years, reducing the block reward miners receive by half. 

The last halving occurred in April 2020, reducing rewards from 12.5 to 6.25 BCH per block. This deflationary mechanism limits supply and influences price dynamics.

Mining Bitcoin Cash

Mining BCH requires specialized hardware (ASICs) and consumes substantial energy. Miners earn block rewards and transaction fees, contributing to network security. Due to its smaller network compared to Bitcoin, BCH mining can be less competitive.

BCH Wallet and How to Use It

To store and transact with BCH, users need a compatible wallet. Popular wallets include:

  • Mobile Wallets: BCH wallets for Android and iOS.
  • Hardware Wallets: Secure physical devices for offline storage.
  • Desktop Wallets: Software for PC-based access.

Using BCH involves generating a public address for receiving funds and private keys for security. Always back up private keys to prevent loss of funds.

Bitcoin vs. Bitcoin Cash: Key Differences

Block Size

  • Bitcoin (BTC): 1MB (can scale up to 4MB with SegWit)
  • Bitcoin Cash (BCH): 32MB

Transaction Speed

  • Bitcoin (BTC): Slower, especially during network congestion
  • Bitcoin Cash (BCH): Faster due to larger block sizes

Transaction Fees

  • Bitcoin (BTC): Higher fees
  • Bitcoin Cash (BCH): Lower, typically less than a cent

Use Case

  • Bitcoin (BTC): Store of value and investment asset
  • Bitcoin Cash (BCH): Digital currency for everyday transactions

Security

  • Bitcoin (BTC): More secure due to its larger network
  • Bitcoin Cash (BCH): Less secure with a smaller mining network

Conclusion

Bitcoin Cash fulfills the vision of a decentralized, fast, and low-cost digital currency. With features like scalability, privacy, and broad merchant adoption, BCH remains a practical alternative for peer-to-peer payments and daily transactions.

FAQ

What is Bitcoin Cash (BCH)?

Bitcoin Cash is a peer-to-peer digital currency created to enable fast, low-cost transactions globally. It was forked from Bitcoin in 2017 to address scalability issues.

How does Bitcoin Cash differ from Bitcoin?

The primary difference lies in block size: Bitcoin Cash has a 32MB block size, enabling faster transactions and lower fees compared to Bitcoin’s 1MB.

Why should merchants accept Bitcoin Cash?

Merchants benefit from lower transaction fees, no chargebacks, and access to a growing customer base interested in crypto payments.

What is BCH halving?

BCH halving occurs roughly every four years, reducing mining rewards by half to control inflation and limit coin supply.

How do I store and use BCH?

Use BCH-compatible wallets, including mobile, hardware, and desktop options. Secure your private keys and back them up to avoid losing access to funds.

Disclaimer: The content of this article does not constitute financial or investment advice.

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