Bitcoin Cash (BCH) is a cryptocurrency that was created as a result of a hard fork in the Bitcoin blockchain in August 2017. The main purpose of the hard fork was to increase the block size limit of Bitcoin, which was initially limited to 1MB. The intent of the hard fork was to help Bitcoin become a more viable payment system by allowing more transactions to be processed at a faster rate. Bitcoin Cash (BCH) has since become its own cryptocurrency with its own blockchain and its own set of rules and specifications.
Attention! The article was published in 2017.
Why did the likelihood of a hard fork seem low?
To do this, you need to remember how events have developed in the issue of scaling bitcoin over the past few months. The main improvement that a significant part of the community insisted on was Segregated Witness (SegWit) for a long time. However, it required the support of at least 95% of miners to activate it. Guided by their economic interests, not everyone agreed to support the proposal. At some point, the confrontation between several camps reached a dead end, the way out of which, as it seemed, could be the SegWit2x proposal. The solution consists of two parts: the first involves activating SegWit, the second is increasing the block size to 2Mb.
However, it also faced certain difficulties: the community was dissatisfied with the fact that this proposal was accepted behind closed doors by a group of miners and companies. The answer was the UASF proposal, a user-activated soft fork. It also involves the activation of SegWit, but at the expense of node holders (nodes), thereby depriving miners of an economic advantage.
The UASF activation is scheduled to take place on August 1, 2017, but it also carried the threat of a hard fork. It was avoided with another solution, BIP 91, which proved to be compatible with both SegWit2x and UASF. Its activation took place on July 22, after which all paths to the implementation of SegWit were opened.
So why are we talking about a hard fork again?
In the midst of all these events, a group of industry representatives (mainly Chinese miners who are pushing for a larger block size) announced their intention to launch a separate client called BitcoinABC. Initially, it was supposed to become a kind of safety net in case the second part of SegWit2x is not implemented. The client was assigned a separate coin called Bitcoin Cash (BCC).
However, to the surprise of many, the developers of BitcoinABC announced their intention to launch the protocol as early as August 1, i.e. on the same day that the UASF activation is to take place.
What does the launch of BitcoinABC (Bitcoin Cash) mean?
First, it is a permanent fork of the current bitcoin network, which, although retaining the previous record history, is incompatible with the solutions described in the SegWit2x and UASF proposals. Nevertheless, the probability of its implementation, according to many representatives of the industry, is estimated at almost 99%.
The FAQ section on the project website says:
Is Bitcoin Cash different from Bitcoin?
– Yes. Bitcoin Cash is the continuation of the Bitcoin project as a peer-to-peer digital currency. It is a fork of the bitcoin blockchain with updated consensus rules that allow for its further growth and scaling.
I use bitcoin. How does this apply to me personally?
The Bitcoin Cash fork means that if a user has a certain amount of bitcoins as of 12:20 UTC on August 1, 2017, when a new client is expected to be activated, they will then have the same amount of BCC coins.
Just like that, free money?
Yes. But on one condition – the user must personally control the private keys from his wallet. If the funds are held by a third-party provider (for example, on an exchange or in one of the online wallets), there is a high probability that the user will not be able to receive the BCC coins that are due to him. For example, the popular wallet Coinbase has already stated that it will not support Bitcoin Cash, as it is not compatible with the current version of Bitcoin.
A number of exchanges and wallets declare their readiness to distribute BCC among users, but there is no certainty that they will technically be ready to do this.
What other risks could there be when launching Bitcoin Cash?
What are the main properties of Bitcoin Cash?
First, Bitcoin Cash offers a significantly larger block size of 8MB versus the 1MB of the current bitcoin version. At the same time, the block size in Bitcoin Cash is supposed to be configurable depending on the needs.
Secondly, as already mentioned, the new software has a built-in attack protection mechanism (although this statement is questioned by a number of Bitcoin developers), as well as a slightly different structure of transaction signatures.
Thirdly, Bitcoin Cash promises faster difficulty recalculation than the current version of Bitcoin (2016 blocks).
What does this mean for the familiar bitcoin?
This is the most difficult question, and it is not at all easy to answer it at this stage. According to part of the community, the Bitcoin Cash hard fork means nothing more than the creation of a new altcoin that will have its own blockchain and its own ticker – BCC, not BTC.
However, questions remain as to which pools will mine BCC and which chain will have the higher hash rate. Is it correct to call BCC bitcoin if the hashrate of this chain suddenly turns out to be higher than that of the current version of bitcoin? What will be the volumes of both chains and what will be the price ratio of the two coins? Finally, how might the launch of Bitcoin Cash affect the second part of Segwit2x, i.e. to increase the block size to 2Mb, and which chain will be chosen by projects working on top of the Bitcoin blockchain (CounterParty, Omni, etc.)?
What is the best way to prepare for a hard fork?
It makes sense to clarify with your providers how they are preparing for a likely hard fork, otherwise the best solution would be to withdraw funds to a wallet, the private keys of which are controlled by the user himself. In this case, when a hard fork occurs and new coins appear, the user will have the opportunity to perform the necessary actions and receive coins in both chains.
Which exchanges and wallets support Bitcoin Cash?
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Bitcoin Cash (BCH) is a digital currency that was created through a hard fork of the original Bitcoin blockchain in 2017. It was created as a way to increase the block size of Bitcoin, thereby allowing for more transactions to be processed faster and cheaper. BCH has since gained popularity among cryptocurrency users, offering a low-cost and fast way to move funds and to transact with people all over the world. BCH is a great option for those looking to get into digital currencies and provides a reliable, secure, and cost-effective way for users to send and receive funds.
What is Bitcoin Cash (BCH) and how did it come about?
Bitcoin Cash (BCH) is a cryptocurrency that was created in August 2017 as a hard fork of Bitcoin. It was created as a result of disagreements among the Bitcoin community over issues such as scalability and transaction fees. Bitcoin Cash is designed to have a larger block size than Bitcoin, which allows it to process more transactions per second and keep fees low.