Bitcoin Cash is a decentralized, peer-to-peer system of electronic cash. Sounds familiar? You’re probably already noticing some eerie similarities to the description of Bitcoin, and you’d be right. Bitcoin Cash was the result of a highly contentious hard fork in the Bitcoin blockchain that took place in 2017.
Therefore, Bitcoin Cash and Bitcoin share the same origins, although they’ve since taken different paths. In this guide, we’ll take a look at how Bitcoin Cash came to be and how it’s evolved since diverging from Bitcoin in 2017.
Learn more about the differences between the two, Read
Hard Fork and Bitcoin Cash Genesis
As Bitcoin became more popular over the years since it launched, its scalability limitations became more evident. The more people attempted to transact on the network, the higher the transaction fees and the longer the waiting time. One of the critical reasons for this issue is the block size on the Bitcoin blockchain.
When Satoshi Nakamoto wrote the code for Bitcoin, he specified a block size of 1MB, limiting the number of transactions that the network can process in a given amount of time. Therefore, the Bitcoin community started to discuss ways of increasing the number of transactions in a block.
SegWit – A Contentious Upgrade
One workaround was a proposal called Segregated Witness, or SegWit, which the network implemented via a soft fork in 2017. SegWit separated the digital signatures to a Bitcoin payment from the transaction itself, meaning that a 1MB block could fit more transactions in it. A soft fork is a type of “unforced” fork on a blockchain, meaning that miners can choose whether to implement the upgrade or keep running the old version of the Bitcoin software.
However, the discussion about SegWit had been running for several years by the time it was implemented. There was a contingent of the Bitcoin community who disagreed that it was the right approach. Their preferred solution was simply to increase the block size to 8MB as they believed it offered a superior scaling solution. The dispute became extremely bitter and ultimately split the Bitcoin community in two. On August 1, 2017, the Bitcoin network underwent a hard fork when the group supporting the 8MB block size implemented their change.
Unlike the SegWit upgrade, this change was not backward-compatible. Miners had to choose which version of the software they wanted to continue with, and so Bitcoin Cash launched as a fork of the original Bitcoin blockchain.
Source: Digital Asset Research
If you were holding BTC at the time of the hard fork, then you would have received a bounty of Bitcoin Cash (BCH) as hard forks result in holders receiving an equal amount of the new cryptocurrency.
The Block Size Debate Rages On
Unfortunately, even after breaking away from Bitcoin, the Bitcoin Cash community couldn’t resolve the block size debate, and other divisions crept in. In May 2018, there was a further upgrade to increase the block size from 8MB to 32MB, along with a proposal to implement new functionality on the Bitcoin Cash blockchain, such as smart contracts and oracles. One part of the Bitcoin Cash community disagreed with this approach, favoring a further increase of block size to keep the network focused on scalability and high throughput but without the additional functionality.
By October 2018, the community was split once again, and yet another hard fork took place on the Bitcoin Cash blockchain. This time, the Bitcoin Cash blockchain maintained its block size at 32MB and introduced the additional features. In comparison, the other faction increased the block size to 128MB and became the cryptocurrency known as Bitcoin SV (or Bitcoin Satoshi’s Vision.)
Once again, anyone holding BCH received a bounty of BSV thanks to the hard fork.
Is Bitcoin Cash A Good Investment?
The Bitcoin Cash hard fork occurred during the last big crypto bull run in 2017. The timing was fortuitous, as it meant that BCH could ride this wave. From a starting price of around $300 on August 1, 2017, BCH increased to its all-time high of $4335 in December 2017.
Unfortunately, it crashed in the coming weeks, along with the rest of the cryptocurrency markets. However, BCH remained one of the top ten cryptocurrencies by market cap for several years. Even at its all-time low of $75 in December 2018, BCH was still ranked as the #5 cryptocurrency. Currently, it’s trading around the $500 mark.
Nevertheless, even though the cryptocurrency markets have recently been on another epic bull run, Bitcoin Cash hasn’t managed to recover its 2017 highs and has even started to fall behind some new and old competitors. At the time of writing, Bitcoin Cash is ranked #11 and was recently ousted from the top ten by the likes of Stellar (XLM) and Dogecoin (DOGE.). Unless something dramatic happens for BCH, it doesn’t seem likely that it will be able to overtake newer entrants such as Chainlink (LINK,) Binance Coin (BNB,) Polkadot (DOT,) or Cardano (ADA.)
BCH performance underscores that a fork isn’t necessarily a positive move for a cryptocurrency, a position that’s reinforced further when looking at the performance of the BSV fork. Splitting a community usually results in a lower level of support for both sides, and in the case of BCH and BSV, neither have been able to deliver the same performance as its predecessor.
Current and Future Developments of BCH
The Bitcoin Cash network has had a few notable developments recently. Developers can issue tokens on Bitcoin Cash in a similar way to Ethereum’s ERC-20 tokens, using its Simple Ledger Protocol (SLP) feature. Recently, the network announced that a game called Enter the Sphere would be launching a non-fungible token collectible RPG using the SLP.
The Bitcoin Cash roadmap lays out three critical objectives for the project: scaling to over 5 million transactions per second, improving the payment experience, and make the network extensible to minimize the disruption from future improvements.
Bitcoin Cash has a checkered history, but it remains a popular cryptocurrency with an extremely vocal and loyal supporter base. However, the platform has plenty of work to do if it’s going to stay ahead of the emerging competition, particularly in the smart contract space.