What Is Bitcoin Cash (BCH)?
Updated: March 8, 2022
Bitcoin Cash (BCH) is a cryptocurrency developed from a fork of the Bitcoin blockchain. BCH launched in 2017 to address emerging issues with Bitcoin’s transaction speed and its prospects for long-term growth and scalability.
Bitcoin Cash was built on its own blockchain, and like Bitcoin (BTC) it employs a proof-of-work consensus system, whereby global networks of computers compete to verify transactions in order to earn BTC. The chief difference between Bitcoin Cash vs. Bitcoin is the size of each block of transactions: A Bitcoin block is 1MB, while a Bitcoin Cash block is 32MB — a significant increase designed to boost the number of transactions per second.
By launching BCH, the hope was that its bigger block size and transaction capacity could help move the platform closer to its goal of becoming accepted as a form of payment. So far that use case has not yet seen widespread consumer adoption. Keep reading to learn more about how and why Bitcoin Cash emerged from Bitcoin, and what that might mean for investors.
How Does Bitcoin Cash (BCH) Work?
In order to understand the significance of BTC, it helps to know the history of Bitcoin itself.
As the oldest and by far the largest form of cryptocurrency, Bitcoin can take credit for many innovations. It established the use of blockchain technology as a critical underpinning for cryptocurrencies; it established the viability of a decentralized network of miners (or nodes) that could verify network transactions without the need for a third party or governing body like a bank or regulator.
From the outset, though, Bitcoin suffered from questions of scalability. Over time, as Bitcoin grew in popularity, and competition from other cryptocurrencies also accelerated, the number of transactions increased and that surge in demand created a bottleneck effect on the Bitcoin platform. Also, as the average confirmation time rose, so did the cost, which eroded Bitcoin’s status as a promising payment alternative to, say, credit cards.
As an example, the Bitcoin blockchain can process about 4.43 transactions per second (estimates vary), versus the Visa network which can process thousands per second.
Bitcoin vs. Bitcoin Cash
Two main solutions were proposed to solve Bitcoin’s scalability problem. The first idea was to increase the size of each block, and the second to limit the amount of data appended to each block (using a protocol called Segregated Witness, or SegWit), thus allowing bitcoin miners to add more transactions per block.
Combined, these two options — bigger blocks, and more transactions per block — became known as SegWit2x.
However, a group of developers who opposed the SegWit2x proposal decided to create a hard fork of their own that would establish a new blockchain and a new form of crypto with a larger block size to facilitate more transactions. Bitcoin Cash (BCH) launched in August 2017 with a block size of 8MB, which was increased to 32MB in October 2021.
(Ultimately the SegWit2x upgrade proposed for Bitcoin was dropped anyway, with some users arguing that such a profound change ran counter to the original vision of Bitcoin as decentralized, democratic, and transparent.)
Bitcoin ABC and SV
BCH wasn’t the end of the forking process, however. The Bitcoin Cash network had its own hard fork in November of 2018. This led to the creation of Bitcoin ABC and Bitcoin SV (Satoshi Vision), whose backers say is more faithful to Bitcoin founder Satoshi Nakamoto’s ideas.
The main difference between Bitcoin, Bitcoin Cash, and Bitcoin SV is their block size and to some degree their transaction speed — but also the underlying philosophy of each. And while Bitcoin is the original cryptocurrency, Bitcoin Cash and Bitcoin SV are considered altcoins.
Despite their differences, Bitcoin Cash and Bitcoin still share important similarities. They use the same proof-of-work (PoW) consensus mechanism and have capped their supply at 21 million.
Advantages and Disadvantages of Bitcoin Cash (BCH)
For investors curious about investing in BCH, there are some pros and cons to consider.
Thanks to its larger block size, Bitcoin Cash is able to process transactions more quickly than the Bitcoin network. This means that wait times are shorter and transaction processing fees tend to be lower. The Bitcoin Cash network can handle many more transactions per second than the Bitcoin network.
Similar to cash (but digital and encrypted) BCH enables P2P payments. Also the fees for sending Bitcoin Cash are typically a fraction of a cent, and settlement occurs almost instantly, regardless of the geographic location of the participants. These features may help Bitcoin Cash become more widely used for day-to-day transactions (and micro-transactions).
There are, however, potential security issues with the larger block size that may make the network more vulnerable compared with Bitcoin. The increased block size also means that the cost of running a full node on BCH is higher.
There have been some difficulties with the Bitcoin Cash mining algorithm.
Also, owing to its smaller size relative to Bitcoin, it’s possible that BCH’s liquidity and real-world usability can present challenges.
• 32MB block size allows more transactions per second vs. Bitcoin
• Larger block size could pose security risk
• Lower wait times, lower fees
• Block size has increased node costs
• BCH developers are adding smart contract functionality
• Network facing some technical hurdles
• Unfortunately, BTC has not seen the widespread adoption among users that was hoped for.
Who Created Bitcoin Cash (BCH)?
Unlike some other types of crypto, there wasn’t a single person behind the creation of BCH. Rather, Bitcoin Cash was the result of a hard fork of the Bitcoin blockchain back in 2017.
Both hard and soft forks occasionally happen when either there’s a need for a change in the network (for example, after a security breach), or when part of the community wants a certain upgrade or change to the protocol.
Why Does Bitcoin Cash (BCH) Have Value?
Whereas Bitcoin itself is considered a store of value, similar to gold, Bitcoin Cash is viewed as a medium for payments. Since BCH transactions are cheaper, the logic goes, consumers may begin to opt for BCH when making online transactions — a shift that could increase the value of BCH.
Bitcoin Cash shares some features with Bitcoin, including its proof-of-work model and the scarcity of its coins. Meaning: only 21 million BCH can be created, and that the amount of new BCH miners can mint declines at regular intervals (known as halving).
Since BCH transactions are cheaper, the logic goes, consumers may begin to opt for BCH when making online transactions. However, that adoption has not ocurred in any siginifcant way. And BCH has yet to approach the market capitalization of established crypto like BTC.
Price of Bitcoin Cash (BCH)
The price of BCH is $311 as of Feb. 17, 2022. Bitcoin Cash has a market capitalization of $5.9 billion and a total circulating supply of 18.98 BCH. The total supply of BCH is capped at 21 million, just like BTC.
Why Use Bitcoin Cash (BCH)?
Basically, Bitcoin Cash operates in a similar way to Bitcoin. Both have a cap of 21 million coins, use nodes to validate transactions, and use a PoW consensus algorithm. (PoW means that miners validate transactions utilizing computer power and are rewarded in BCH for their contributions.)
However, BCH operates faster and has lower transaction fees than BTC, thanks to the larger block size. It’s much better suited for smaller transactions, such as buying a cup of coffee with cryptocurrency. In addition, Bitcoin Cash supports smart contracts and apps, which Bitcoin does not — Bitcoin is chiefly used as a store of value.
How Can I Buy Bitcoin Cash (BCH)?
You can buy BCH on many crypto exchanges and investing apps. Here’s how to buy BCH on SoFi Invest®.
Step 1. Open an account.
Start by opening an Active Invest account and setting up a crypto account. You can trade BCH — and dozens of other cryptocurrencies — on SoFi Invest, 24/7. And you can get started with as little as $10.
Verify that the app or exchange carries the crypto you want to trade; there can be geographic restrictions on certain types of crypto.
Step 2. Fund the account.
Fund your SoFi Invest account using a secure bank or wire transfer. The buying power in your account can be used to trade crypto as well as stocks or ETFs.
Step 3. Trade BCH
Select BCH from the list of cryptocurrencies. Go to the quote page. Click “Buy” and enter the amount (in either dollars or coins), and finalize your transaction. (Note: You can only buy BCH with the buying power in your Invest account. Currently SoFi doesn’t offer the option to trade one type of crypto for another.)
How to Sell Bitcoin Cash (BCH)
When you’re ready, here’s how to sell BCH on the SoFi Invest app.
Step 1. Select the crypto you want to sell.
From your Invest account, select BCH. From the quote page, click “Sell” to submit your trade in either dollars or BCH. Remember, SoFi doesn’t yet have the option to trade one type of crypto for another.
Step 2. Make the trade.
Finish your transaction.
Step 3. Keep taxes in mind.
Trading crypto is similar to trading other investments: Your gains are subject to taxes. So be sure to consider the tax angle of selling your crypto, and consult a professional when you need one.💡 Recommended: What Is Crypto Tax-Loss Harvesting?.
Does Bitcoin Cash (BCH) Have Staking?
No. Bitcoin Cash uses a proof-of-work protocol. Proof-of-work is a more energy-intensive use of high-powered computer networks which compete to solve complex calculations in order to earn more coin.
Bitcoin Cash (BCH) is a proof-of-work blockchain network and cryptocurrency that’s faster and cheaper to use than Bitcoin (BTC). Bitcoin Cash was created via a hard fork of the Bitcoin blockchain in 2017, as an effort to solve some of Bitcoin’s persistent problems: e.g. higher transaction times and costs that impact its ability to scale.
The main difference between Bitcoin Cash vs. Bitcoin is the size of each block of transactions: A Bitcoin block is 1MB, while a Bitcoin Cash block is 32MB — which enables a higher number of transactions per second. But the BCH platform is also adding smart contract functionality as it continues to evolve. All that taken into account, Bitcoin Cash hasn’t seen significant adoption or growth, and its price continues to be volatile, like most of its crypto peers.
Interested in trading BCH? It’s easy when you open an online brokerage account with SoFi Invest®. You can start trading crypto with as little as $10. SoFi offers dozens of different crypto to trade; SoFi does not offer staking or come with a crypto wallet.
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