Bitcoin’s original mission was to provide a global peer-to-peer electronic cash system. Because of the Bitcoin Core network’s scaling failure, the BTC coin is no longer a useful currency due to climbing fees and slowing transaction times.
Bitcoin Cash is the version of Bitcoin in which the original properties of the digital money have been retained as outlined in the Bitcoin Whitepaper.
What is Bitcoin Cash?
Bitcoin Cash (BCH) is an upgraded version of the Bitcoin Core software launched on August 1st, 2017.
Bitcoin Cash increases the blocksize limit to 8mb allowing miners on the BCH chain to process more payments per second. The results are faster, cheaper transactions and a much smoother experience all around.
Why was Bitcoin Cash Created?
Bitcoin Cash was created to revive the essential qualities of money intrinsic to the original Bitcoin software. Over the past almost decade, these qualities have diminished to nothing for Bitcoin Core with progress stifled by various entities involved in Bitcoin protocol development. As a result, Bitcoin Core is currently not useful as currency thanks to increasingly high fees and transfer times taking hours or even days each. This all stems from Bitcoin Core’s blocks being full.
Blocks are groupings of new transactions added to the blockchain. In Bitcoin, transactions are processed individually, one block at a time. Bitcoin was designed to process 6 blocks per hour, (one per ten minutes). Early in its development, an artificial limit to the size of blocks was made part of the Bitcoin Core code so as to prevent an attack vector where a mass number of transactions could weaken the network. Then processing transactions were free, so an attacker could send a huge number of transactions between his own wallets forcing everyone else on the network to download and store massive amounts of data. The block size limit was arbitrarily set at 1MB like a 1980s floppy disk. Back then, this was still thousands of times greater than the actual usage required of the network. Although intended as a defence against a theoretical attack vector, the block size limit has inadvertently stifled network growth.
Usage of Bitcoin grew slowly in the early years; it wasn’t until 2012 that the blockchain was processing 250 transactions per block, or approximately 1,500 transactions per hour. It took two more years to double this number so that by 2014 the Bitcoin network was processing 500 transactions per block. Now, the Bitcoin Core network is at maximum capacity processing approximately 2,500 transactions per block.
This artificially small blocksize has led to network congestion as demand for bitcoin transactions has continued to grow but capacity remains the same much like a highway with too many cars. In order to be verified and processed, a bitcoin transaction needs to be included in a block so if blocks are full, your transaction will have to wait to be included in the next block, but the next block is likely already full because others paid a higher fee. This congestion has led to an ever increasing “fee market” in which users pay extra to move their transactions to the top of the list of pending transactions known as the mempool. As of December 21, 2017, there are more than 280,000 unconfirmed Bitcoin Core transactions.
Furthermore, the developers of Bitcoin Core did not increase the blocksize to scale Bitcoin to its demand. In their own words, the Bitcoin Core developers view this “fee market” and backlog of transactions as a good thing.
This has caused many cryptocurrency enthusiasts to develop alternative forms of cryptocurrency as frustration with Bitcoin Core grew due to larger fees and longer transaction times. As a result of new digital coins on the market, Bitcoin Core has gone from nearly 100% market share in the crypto space to below 50% as of late December, 2017.
All these issues are why Bitcoin Cash was created. It is a community-activated upgrade, also known as a hard fork, of Bitcoin that increased the block size to 8MB in order to solve the scaling issues that plague Bitcoin Core currently.
Blocksize? What is That Again?
Let’s use a simple but effective analogy to relate how the block size limit affects the speed and cost of transactions on the blockchain.
It’s the weekend and you head out to the coolest club in town. Before this club got well known, it was a tiny venue with a small, local crowd and reasonable (or non existent) cover charge.Then the club suddenly got trendy after a viral social media post but the building can still only hold 2,500 people.
In this analogy, the club represents a block but with limited storage capacity to represent max occupancy. Each clubgoer represents a bitcoin transaction. In Bitcoin Core, the mempool is the line of people outside the club and the transaction fees are the cover charge.
When the club (block) is full at 2,500 people (transactions), the bouncer (server) is forced to form a line and start charging an increased cover charges (transaction fees). Despite the line, even more people keep coming to the club until there are approximately 270,000 people waiting with the average cover charge as high as $140. Although you’ve been waiting patiently for hours to get in, people who pay more than you keep jumping to the front of the line and are keeping the club at max capacity. Worse still, each patron (transaction) can only bid on their cover charge one time. When you got in line, $20 would be enough to get you in quickly, but now several thousand more people have joined the line and will pay more money than you. There is nothing to do but wait until everyone paying more gets in and your turn comes around.
Despite the untenableness of the situation and much ensuing criticism, the management has refused to move or build a larger building, instead insisting that a full club and extra long line outside is not only good for business but that it’s utterly impossible to expand their building to accommodate more patrons.
At an average cost of $140 per transaction and a line of over 270,000 unconfirmed transactions, Bitcoin Core, a system that was intended as a “peer-to-peer-electronic cash system” has become unusable for merchants. It has priced out the majority of users in developed countries, nevertheless the entirety of users in smaller, developing countries.
Is Bitcoin Cash Cheaper to Use than Bitcoin Core?
Yes; transaction fees in both versions of Bitcoin are measured in satoshis-per-byte. Each unit of Bitcoin is divisible by 8 decimal places and the smallest unit is called a “satoshi”; the way to accurately measure Bitcoin fees is not in dollars, but satoshis.
Because Bitcoin Core blocks are always full with many users waiting, the “bouncer” is charging more than 900 satoshis per byte for inclusion into a block. In December 2017, it cost over $30 per each Bitcoin transaction.
By comparison, Bitcoin Cash has an average fee of only 19 satoshis per byte. With Bitcoin Cash, one can set fees manually as low as 2 satoshis per byte. Users can always be included in the next block since there is abundant room.
As of December 21, 2017, Bitcoin Core fees are over $30 which means that an address with less than $30 in it can’t even be used given the requisite fee to broadcast the transaction. Even an address with $100 on it will lose a huge thirty percent of its money just to this transaction fee.
Is Bitcoin Core Still Useful?
Supporters of Bitcoin Core often say that Bitcoin Core was never meant to be a currency but a store of value, basically a type of “digital gold.” As a result, they extol the virtues of high-fees and slow transaction times; the harder it is to mine real gold, the greater its value.
Apart from the fact that this approach is antithetical to the spirit of the Bitcoin whitepaper, Bitcoin: A Peer-to-Peer Electronic Cash System, something can only be a store of value in relation to its ability to store and recall utility. If you lose more than $30 of value every time you try to use BTC, are you storing value or losing value each time? Bitcoin Core, as of late 2017, is more accurately classified and treated as a volatile, speculative asset that is not reliably useful as a store of value, much less a currency.
Both Bitcoin Core and Bitcoin Cash are demand-backed currencies. What gives Bitcoin its value is the combination of utility as a currency and consumer demand.
Bitcoin Core can no longer function as a currency because of growing fees and confirmation times. However, so long as there is demand, Bitcoin Core will continue to have a market.
Is Bitcoin Cash an Altcoin?
Bitcoin Cash is Bitcoin, it is not an altcoin nor a copycat of Bitcoin Core. Bitcoin Cash is a hard fork of Bitcoin Core, meaning it shares the same transaction ledger and history of Bitcoin Core; it remained true to the Bitcoin Core codebase until diverging on August 1st, 2017.
The reality is that Bitcoin Cash is Bitcoin as it was first meant to be: an electronic peer-to-peer cash system. This does not mean that BCH is BTC, however; these two versions of Bitcoin are different networks with different ticker symbols that trade at different prices. However, Bitcoin Cash essentially functions as Bitcoin, the digital cash system people all over the world first adopted that led to the worldwide phenomenon of Bitcoin we now know. This peer-to-peer spirit stays alive in Bitcoin Cash while entirely absent from Bitcoin Core which has become a “store of value.”
Low transaction fees and quick confirmation times mean that both merchants and users can confidently use and adopt Bitcoin Cash to the benefit of themselves and local economies around the world.
The challenge is now for Bitcoin Core to justify its nearly $15,000 price tag when compared against the affordable, upgraded version that is Bitcoin Cash.
What Are the Advantages of Bitcoin Cash?
Average Bitcoin Cash transactions cost pennies or even less while confirming in an average of 10 minutes because the mempool of pending transactions is cleared with each new block. This means that Bitcoin Cash operates not unlike cash.
Where Can I Buy Bitcoin Cash?
Coinbase and its exchange GDAX recently announced they offer full buy and sell support for Bitcoin Cash so one can create an account with them to make a BCH purchase. One can also find a list of local buyers and sellers through the LocalBitcoinCash platform if that is important. Instant crypto-to-crypto exchanges such as Shapeshift and Changelly also support converting BTC to BCH. Furthermore, the Bitcoin.com Wallet will have ShapeShift integration in early 2018. For Canadian citizens, nTrust is another an option available. For a full list of websites to buy and sell Bitcoin Cash check out the exchange listings on BitcoinCash.org
What Are People Doing With Bitcoin Cash?
Bitcoin Cash has a variety of uses like e-commerce, gaming, publishing, micro-transactions, and online payments. Some popular sites and services where you can use Bitcoin Cash include:
- The Accept Bitcoin Cash Initiative — a list of sites/merchants that accept Bitcoin Cash as curated by the community itself
- Yours.org — a popular publication platform where you can get paid and pay others for quality content
- Tippr — A tipbot for Reddit and Twitter
- Bitpay — A leading payment solution offering a Visa debit card that can be loaded with Bitcoin Cash
- Awesome Bitcoin Cash — a page listing merchants, information, and other Bitcoin Cash projects
Why Do Some People Call Bitcoin Cash “bcash”?
Some see BCH as a threat to their preferred form of cryptocurrency; they oppose Bitcoin Cash’s existence and wish to undermine it as a viable alternative to Bitcoin. These types refer to Bitcoin Cash as “bcash” on social media in hopes of creating enough confusion to hinder its adoption.
If your wallet or exchange uses the term “bcash” they are likely mean Bitcoin Cash, but “bcash” is neither the proper name, nor a commonly used abbreviation of Bitcoin Cash. Rather it is a hostile attempt to confuse users. Anyone using the term “bcash” instead of the currency’s actual name, Bitcoin Cash, should be treated with caution.
How Can I Get Involved with Bitcoin Cash?
Join the discussion: Join the online conversation swirling around Bitcoin Cash on Twitter, Reddit, the Bitcoin.com forum, or start the discussion in a community of your choice!
Attend a meetup: Many major cities around the world already host Bitcoin Cash meetups: Tokyo, Oslo, San Francisco, Seattle, Seoul, London, and Helsinki. You can start your own page on Meetup.com and reach out to The Bitcoin Cash Fund for marketing support.
Help with merchant adoption: A healthy ecosystem of businesses supporting Bitcoin Cash is crucial so if you run a business, consider accepting it! Or ask your favorite local businesses about accepting Bitcoin Cash.