What is Bitcoin Cash (BCH)?
Lto cryptocurrency Bitcoin Cash (BCH), was the first great hard fork Bitcoin. This fork took place in the past August 1, 2017 at 13:36 UTC. The reasons for this bifurcation is due to a profound change in the structure of the blockchain and the protocols of Bitcoin Cash with respect to Bitcoin. These changes caused a new blockchain starting from the block # 478558 Bitcoin, from there begins the history of Bitcoin Cash.
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With the changes proposed, it was expected to overcome some problems that Bitcoin could not overcome by design. These problems include:
- Blocks of limited size. Bitcoin has its block size limited to 1 MB, which is deficient in the eyes of those who develop Bitcoin Cash. To overcome this, they decide to do a hard fork and limit the amount to 8 MB. With this change, they hope to include more transactions per block and improve scalability.
- Very high transaction fees. Due to Bitcoin's low scalability, there are times when transaction fees are very high. From the point of view of the developers of Bitcoin Cash this attempts against the massification and the use of micro-payments. For that other reason they promote the hard fork in order to improve this situation.
Both situations are well known in Bitcoin and in fact there are many proposals or BIP
to improve this, however, they were all rejected. This is due to the profound and incompatible changes that originate in the blockchain and that would lead to a hard fork of Bitcoin, something that its Core Team and community did not want.
The most media figures within the Bitcoin and cryptocurrency ecosystem that supported these changes and the fork are:
- Roger Ver, also known as "Bitcoin Jesus" for promoting the use of Bitcoin since its inception. He developed Bitcoinstore.com in 2012 the first digital store where you could buy products for Bitcoin. He also participated as an early-stage investor in some of the most recognized 'Bitcoin companies' today.
- Jihan Wu, a Chinese investor who also supported Bitcoin from the start. He is one of Bitmain's co-founders and Bitcoin's largest mining pool, Antpool.
- Craig Wright, a well-known and controversial figure within Bitcoin. This Australian computer scientist and businessman was part of Bitcoin Core and has been an important figure in this market. The problems started when he said publicly that it was Satoshi Nakamoto after an investigation by Wired and Gizmodo hinted at this possibility. The evidence presented by Wright was rejected, among many others, by Dan Kaminsky (computer security researcher), Vitalik Buterin (Founder and main developer of Ethereum) and Jeff Garzik (major Bitcoin developer). Craig Wright is currently separated from Bitcoin Cash and has created his own cryptocurrency called Bitcoin Cash SV (Satoshi Vision). With it he plans to present his own vision of what Bitcoin should really be, although many specialists have great points of mistrust for this project.
The changes introduced by Bitcoin Cash (BCH) have not been without controversy throughout the crypto world. This has led to a strong confrontation between users, miners and developers of Bitcoin and Bitcoin Cash. Certainly Bitcoin has fairly serious scalability issues but its developers believe that they need to be fixed by other means. This goes beyond breaking compatibility and introducing drastic changes to the code. For their part, the developers and the Bitcoin Cash community accuse developers of Bitcoin Core of having a development monopoly and not proposing concrete solutions.
The result of this, extreme and completely divergent views on who is right or wrong. A situation that occurs when the inability to reach agreement arises in a human group. This gives rise to friction that can get bigger and divide the group into two or more groups depending on the positions they take. A situation that was fueled by the existence of evidence and half truths both within Bitcoin and Bitcoin Cash. This crossing of accusations, between the main actors and defenders of both cryptocurrencies, inevitably caused the polarization of both communities.
Ultimately, what happened in Bitcoin was a lack of consensus on which way to go. The minority group that disagreed with the roadmap voted by the majority of the network, activated a plan to carry out a hard fork and create their own blockchain with their own currency in the image and likeness of Bitcoin but with the changes they considered the best for Bitcoin to scale as optimally as possible.
Technical characteristics of Bitcoin Cash
Because Bitcoin Cash is a hard fork of Bitcoin without major modifications, its mining is identical to that of Bitcoin. For the mining process, the consensus protocol of Proof of Work (PoW) next to the hash SHA-256. This means that Bitcoin mining equipment is used to mine Bitcoin Cash with some simple modifications. This in principle was striking for those who started mining in Bitcoin Cash. The decrease in mining power in the network meant a decrease in the mining difficulty that many took advantage of to obtain quick profits.
However, in 2018 this situation changed dramatically. At that time, BCH mining turned out to be very expensive with respect to the profits obtained from it. This led to the mining difficulty being readjusted again to maintain the level of the miners' profits. Despite this, the mining of Bitcoin Cash continues to give few benefits, this as a consequence of the low commissions that the low value of BCH with respect to Bitcoin is charged.
Bitcoin Cash has undergone throughout its existence changes in the limit size of the blocks of its blockchain. Firstly, the block limit was set to 8 MB. With this block size, more than 8 times Bitcoin's transaction capacity, about 20.000 transactions, could be processed per block. This would have a strong impact on scalability. Later, in May 2018, another change in the size of the blocks would come that would take it up to a limit of 32 MB. With this, each block could hold up to 40.000 transactions.
But despite these numbers, the reality of Scalability it is very different. Bitcoin Cash that produces each block at 10-minute intervals is certainly faster than Bitcoin, but its network usage is also much less. In addition to this, despite the enormous size of the blocks, most of that space is empty. The average capacity occupied in each BCH block is only about 240 KB. This means that each block is barely used in 2-3% of its full capacity. Another problem associated with these features is that blocks cost more to transmit on low-bandwidth networks. If the network grows rapidly, the network bandwidth can become saturated and lead to denial of service episodes due to lack of resources.
One of the most vociferous features of BCH is its ability to accept 0-conf transactions. These make mention of transactions that are taken as made without having confirmations in the blockchain. This is an option that was possible to use in Bitcoin Core, you just had to issue a transaction and accept it without confirmation.
However, this poses a significant risk of double spending. Given this situation, Bitcoin Core and BCH have diverged at this point and have created tools to handle this situation. In the case of Bitcoin Core, the function has been created RBF (Replace by Fee), but Bitcoin Cash regards this as an unnecessary risk. In that case, Bitcoin Cash's response has been to allow miners to keep mempool transactions with unique identifiers that are handled by nodes and miners. This prevents, for example, that a Bitcoin Cash user can send a transaction and replace it with another using the same currencies. With this they would seek to invalidate the first and make a double expense.
However, the functionality of 0-conf transactions has proven to be certainly risky and manipulable. In fact, Bitcoin Cash SV also has this functionality and the same flaw, as we will see in the next video.
This teaches us that although Bitcoin Cash supports these types of transactions, they are not entirely safe and it is always better to wait for them to have real confirmations, instead of fully relying on 0-conf.
Additionally, work is being done on the development of different elements in order to improve the platform and make the platform faster, although there is no planned implementation date:
- Scalable block processing to ensure better scalability.
- Add support for using Schnorr firms and improve the security and optimization of cryptographic signatures.
- Improve the commission system to make it cheaper.
- Include a pre-consensus system capable of improving the security of the entire system.
- An improved network protocol, to make blocks spread quickly throughout the network (Graphene or other improvements)
- Increase the level of fractions within the system (known as fractional satoshis). This aims to make transactions cheaper, although it puts the economic sustainability of the network at risk.
- Implement the enhancement powered by Jeff Garzik and Bitcoin XT, to enable adjustable size blocks up to 1GB. This will allow miners to choose the best block size based on network usage. The problem with this is that it can lead to centralization of the network.
As you see the development of Bitcoin Cash, keep building yourself and making progress towards creating a highly scalable and secure cryptocurrency for everyone.