A beginner’s guide to Bitcoin Cash

28 May 2018

bitcoin cashBitcoin Cash is another Bitcoin alternative that emerged after years of unresolved disagreements about scaling issues with regards to the Bitcoin protocol.

The somewhat ‘controversial’ scaling proposal in Segwit2x attempted to remedy the situation by joining two code change ideas – the code optimization Segregated Witness (SegWit) and a block size increase.

However, this was not enough to avoid a Bitcoin fork.

Since we’ve already explained Bitcoin’s protocol in another post, here are the two relevant differences between BTC and BCH:

  • Bitcoin Cash (BCH) increases the block size to 8MB
  • It removes SegWit, a code change that we explain here.

Main differences between Bitcoin and Bitcoin Cash

In July 2017, mining pools and private firms, who represented between 80% to 90% of Bitcoin computing power voted to implement a technology known as segregated witness, codenamed SegWit2x. The separation of signature data from block verification means that about 65% of data can be processed separately from the block, hastening transaction times as a result.

Bitcoin Cash emerged partly due to concerns of miners and developers over the update and its ability to scale effectively. They argued that Segregated witness technology did not meaningfully address the fundamental problem of scalability and said that it did not follow the roadmap initially outlined by Satoshi Nakamoto – the anonymous party that first proposed Bitcoin’s blockchain technology. In addition, the process of introducing SegWit2x wasn’t totally transparent, so concerns about undermining decentralisation and democratisation were amplified.

On August 1st 2017, some miners and developers went along with their plans to hard fork, creating a new currency: Bitcoin Cash. This network has implemented an increased block size of 8mb to accelerate the verification process with an adjustable level of block difficulty to ensure the chain’s survival and transaction verification speed, regardless of the number of miners supporting it. This change has raised concerns about the security of Bitcoin Cash.

Why should you care?

If you owned Bitcoin in your own private wallet prior to the fork, then you now have the same amount of Bitcoin and Bitcoin Cash. So those who want to liquidate their replicated earnings can do so with great glee! And while most exchanges were not prepared for this event, the market has adapted, and so too has deVere Crypto.

Now you can trade Bitcoin Cash to your heart’s content on our platform!

What features does Bitcoin Cash bring to the table?

Bitcoin Cash primarily offers three new features. First, its block size is 8Mb instead of Bitcoin’s 1Mb, which means that the number of transactions per second have also increased. At the same time, the rate at which blocks are secured has also increased, de-incentivising miners due to less frequent pay-outs.

Secondly, it offers replay and Wipeout protection, which means that both BTC and BCH blockchains can coexist peacefully with minimal disruptions.

Thirdly, it offers a way to adjust the proof-of-work difficulty which is allegedly faster than the 2017 block difficulty adjustment interval present in Bitcoin.

In truth, Bitcoin Cash’s entry into the market creates more questions than it answers. But that won’t stop analysts, speculators and investors from diving into the situation as this competitive digital landscape unfolds.