The content of this article is provided for informational purposes only. You should always obtain your own independent, tax, financial, and legal advice before making any material decision.
To a crypto novice, Bitcoin (BTC) and Bitcoin Cash (BCH) may seem like the same product, but they each serve different, fundamental purposes.
Bitcoin Cash was created as a peer-to-peer alternative to Bitcoin, in that it can be used in everyday transactions rather than as an investment, which Bitcoin is typically used for. It was first introduced in 2017 thanks to a hard fork in the Bitcoin blockchain.
A hard fork happens when an existing blockchain is divided in two, effectively altering how the entire network is managed. In the event of a hard fork, transactions that were once invalidated on the blockchain are now valid. Hard forks can also invalidate previously confirmed transactions. As with any updates that affect crypto networks, users are required to update and adhere to the network’s new protocol.
With this new system in place, users can initiate even more transactions within a single block than previously allowed, potentially leading to shorter transaction times and fewer fees. Bitcoin Cash is relatively cheaper than the value of standard Bitcoin, however, like Bitcoin, Bitcoin Cash has a circulation of 21 million coins.
Created by a group of Bitcoin miners, Bitcoin Cash was their solution to supporting the growing number of active Bitcoin users in the network and designed to be as seamless as exchanging a few dollars for common goods, like coffee. Although this idea wasn’t well received, incentives like shorter confirmation times and lower fees (compared to Bitcoin) would help alleviate the stress put on the miners and overall network.
While there are a few notable differences between Bitcoin and Bitcoin Cash, both fundamentally operate in the same way. Like Bitcoin, Bitcoin Cash validates transactions using nodes, miners confirm these transactions using the proof-of-work (PoW) mechanism before being added to the blockchain, and all of the activity within the blockchain is made public for transparency and security.
After their solution was met with little praise, the miners and developers behind Bitcoin Cash created their separate blockchain and software updates for this new process anyway, while others continued their work on the original blockchain. This is where the “fork” comes in. When a group of miners and developers can’t agree on how their software manages the crypto they’re responsible for handling, the blockchain is split in two — creating new systems entirely.
A major feature of the Bitcoin Cash blockchain is that each block can process and store more transactions compared to Bitcoin.
That means an influx of new Bitcoin users potentially won’t have to pay large fees to have a single transaction confirmed and validated, and miners aren’t overwhelmed with the number of transactions they have to individually confirm.
The other difference between Bitcoin and Bitcoin Cash is the processing times. The number of transactions that can be processed every second is an important measuring stick. For example, Visa credit cards process around 2000 transactions per second and are capable of handling a lot more. Bitcoin maxes out at about 7 transactions per second. Bitcoin Cash has the capacity to support more than 100 transactions per second.
Bitcoin Cash was created to decentralize “electronic cash” transactions between peers and everyday merchants, making it an option for everyday purchasing and peer-to-peer sending.
Bitcoin Cash wallets have become a tool of choice for many users since they’re tied directly to the Bitcoin Cash network. That means users can buy, sell, send, receive, store, and trade Bitcoin Cash in a specialized, secure network.
Bitcoin Cash can have long-term value. Identical to Bitcoin’s circulation, Bitcoin Cash’s protocol ensures there will never be more than 21 million coins in existence.
Bitcoin Cash can be purchased from the Bitcoin.com Wallet on a phone (if available and installed), through the Bitcoin website using a credit or debit card, centralized crypto exchanges, or through peer-to-peer transactions.
Before purchasing cryptocurrency, it is important to understand the associated risks and to learn about its volatile value.
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