If you've taken a moment to browse the coins we have available here on cryptomonster, you'll have no doubt noticed Bitcoin Cash (BCH) – currently one of the most highly valued altcoins in the crypto markets.
BCH is still very new – and like most emerging currencies, people have a lot of questions:
If you're curious about these questions - or anything else related to Bitcoin Cash; you're in the right place. We've put together a quick guide that explains what it is, where it came from – and a handful of other interesting facts that potential Bitcoin Cash buyers might like to know...
The Blockchain works as a ledger, or record, of every transaction that has taken place using Bitcoin. If you know how and where to look, this digital ledger will eventually take you back to the very first transactions made with the currency.
You may have seen the Blockchain referred to as a 'decentralised ledger' – and that's because this record doesn't just appear on one central controlling computer system; it's copied and backed-up countless times on powerful computers around the world. So, when a Bitcoin transaction takes place, a check is done against the overall Blockchain network to ensure the transaction is possible – in essence, it has to 'make sense', based on every other transaction that has gone before.
While this Blockchain technology is extremely resistant to fraudsters, corruption, central control – and a host of other issues that apply to other, non-digital, currencies; it also relies on a network of 'node' computers around the world to continually scrutinise the Blockchain, checking each of these transactions – before your buying or selling is confirmed.
This verification, or 'mining', process takes a considerable amount of time – your transaction joins the back of a queue that processes the entire world's Bitcoin transactions at just 7 per second. To give that some context, the global Visa system is capable for processing upward of 20,000 transactions in the same time frame.
The result? Moving Bitcoin is seriously slow – and because of the huge amount of computing power needed to continually build the blockchain; the fees associated with buying and selling Bitcoin are high.
What does all this have to do with Bitcoin Cash we hear you say?!
Well, for a long time, some of the biggest brains involved with Bitcoin have been concerned about what these high fees and lengthy verification times meant to the scalability of the world's most popular cryptocurrency. There were solutions already proposed, but none of them were considered faithful to the original ethos of Bitcoin.
So; on 1 August 2017, some miners and developers initiated a 'hard fork' in the blockchain infrastructure. This essentially means they implemented changes to the original code underpinning the Blockchain – which only some of the network computers accepted, creating a new Blockchain. This altered code changed the way transactions are processed – and, in doing so, created a new currency: Bitcoin Cash.
The mining process needed to confirm a 'block' of Bitcoin transactions involves a series of complex mathematical problems that need to be solved by a computer, before the transaction can be confirmed as legitimate. As we now know, with Bitcoin, this process takes considerable time and CPU power – and there's no way around it, in fact, it will only become harder as the Blockchain grows.
So, is there a change to how BTC works that would create a solution?
Well, there are – and those changes boil down to two choices:
The decision from the BCH brains was to do a bit of both. The block size is increased (growing from 1mb to 8mb), and the complexity of the algorithm that needs to be solved to confirm Bitcoin Cash transactions is made variable – changing depending on the current number of transactions taking place; the more congested the network becomes, the simpler the mathematical problem is.
The result? Bitcoin Cash transactions are processed much more quickly when compared to Bitcoin transactions – meaning many people consider the currency a much more 'usable' version of Bitcoin.
As is often the case in cryptocurrency – whether the BCH approach to mining is a good thing or a bad thing depends who you speak to!
Bitcoin purists are likely to say it's negative – and that the complexity of the mining process and the hefty fees it creates was always an intentional part of the Bitcoin code, helping to establish and maintain a flawless security record.
Bitcoin Cash supporters have a different take on the issue – actually suggesting that the decentralised ethos of Bitcoin was becoming jeopardised by the increasing power needed to mine the currency; effectively centralising the control of BTC with an ever-decreasing number of people who had the considerable resources needed to administer the Blockchain.
With BTC and BCH as still relatively young currencies, there are arguments on both side of the matter that seem to make sense. For now, we are simply faced with a number of questions:
As with a great number of other cryptocurrency questions, it's likely only time will provide definite answers...
The fact that BCH was created with a view to improving the already exceptional BTC framework is seriously exciting – and has seen its value soar compared to many other altcoins, virtually from day one. It's easy and quick to send – with a possibility that transactions could be confirmed in less than 3 minutes (which is often hours – if not days quicker than BTC transactions!)
While all these things sound promising, this kind of excitement leads to significant fluctuations in BCH price – and overall questions about whether or not BCH is the answer to some of the potential problems BTC faces.
Where these two currencies go next is a point of great speculation in the cryptocurrency world; will BTC face growth problems? Will another solution present itself? Will the BTC community get behind any new solution?
Until answers to these questions become clear, the future holds equal amounts of excitement and uncertainty for Bitcoin Cash...