
A Bitcoin Cash Overview
By Masha Kaprian on ALTCOIN MAGAZINE
Since the publishing of the ground-breaking paper ‘Bitcoin: A Peer-To-Peer Electronic Cash System’ by Satoshi Nakamoto, the blockchain technology — and cryptocurrencies with it — have gained increasing attention. The technology enables the peer-to-peer exchange of digital money utilizing complex computer code, in this way ruling out the need for a trusted third party. However, the substantial increase in its use has uncovered several problems that are inherent to the technology, one being the scaling problem. This article will provide an overview of a recent cryptocurrency — Bitcoin Cash (BCH) –, it’s characteristics and how it can solve the scaling problem.

What Is Bitcoin Cash?
Bitcoin Cash is a peer-to-peer electronic cash system built on Blockchain technology. Because of this, Bitcoin Cash provides its users with a decentralized payment gateway, which requires no central bank and no trusted third parties to operate. However, to achieve a fully decentralized operation, cryptocurrencies have to make use of a so-called consensus mechanism: a protocol that is responsible for determining which node will add newly issued blocks to the blockchain and thereby provide the network with the most recent information. One of the most widely used consensus mechanisms — which is also used by Bitcoin Cash — is the Proof-of-Work protocol (PoW).
In the Proof-Of Work protocol, miners are actively trying to generate a new block (i.e., package) of transactions by performing complicated mathematical calculations by relying on a procedure called ‘hashing.’ The computational work provided by the miners, rewarding the miner with a certain number of Bitcoin Cash. In this way, Bitcoin Cash is very similar to the most well-known cryptocurrency: Bitcoin. The reason for this is that Bitcoin Cash was created on August 1st, 2017, by hard forking from the Bitcoin Blockchain.
What Is Hard Fork?
All the transactions that are carried out are stored in blocks and connected to form a chainlike structure called a Blockchain. Besides the working principles of the consensus mechanism, the transactional data is contained within the Blockchain. These working principles are agreed upon by all participants and miners connected to the coin’s network.
However, two significantly large groups of network participants disagree on these working principles and, subsequently, one group proposes to change them. Such disagreements usually result in a blockchain hard fork. A Hard Fork is an event where the coin’s blockchain split into two separate chains: the original, unchanged chain, and a second chain that has adopted the newly proposed working principles.
Bitcoin experienced its first hard fork on August 1, 2017, resulting in a new cryptocurrency called Bitcoin cash. Usually, the newly created cryptocurrency takes its own — often different — direction, leading to a few rivalries between the two currencies.
However, in the case of Bitcoin Cash, the reason for the hard fork was the so-called scalability issue of Bitcoin. With Bitcoin Cash trying to solve this scalability issue, it has proven to be a real competitor to Bitcoin, representing a real alternative to the most widely used cryptocurrency.
The Problem Bitcoin Cash Tries To Solve:
Scalability Problem
Bitcoin is, without a doubt, one of the most incredible innovations in the recent past. It has also come under a lot of criticism for its scalability issues that raise debates that are politically as well as ideologically motivated. Bitcoin faced pressure from community members on the topic of scalability. Specifically, that the size of blocks — set at 1 megabyte (MB), or a million bytes, in 2010 — would slow down transaction processing times, thus limiting the currency’s potential, just as it was gaining in popularity. The block size limit was added to the Bitcoin code to prevent spam attacks on the network at a time when the value of a Bitcoins was low. By 2015, the value of Bitcoins had increased substantially, and the average block size had reached 600 bytes, creating a scenario in which transaction times could run into delays as more blocks reached.
Thus, Bitcoin’s scaling problem refers to the fact that the Bitcoin Network is only capable of processing an average of 7 transactions per second. Compared to the Visa network — which can handle up to 65.000 transactions per second — this is low and not workable for a global payment service.
Block Size Problem
As discussed earlier, the leading cause of this scaling problem is Bitcoin’s block size: transactions get stored in so-called transactional blocks with a maximum capacity of 1 megabyte. Since Bitcoin’s blockchain is designed to process one block every 10 minutes, the number of transactions executed is severely limited.
Bitcoin Cash Solutions
In recent years, several solutions have been proposed to enhance the scalability of the network, with the three most important ones being:
- Increase Bitcoin’s Block Size: By increasing Bitcoin’s block size, one would be able to stack more transactions within one block, therefore increasing the processing capacity of the network.
- Segregated Witness (SegWit): Many argued that the format used to store transactional data was not optimal, allowing an increase in the network’s capacity by making the storage procedure more efficient. Segregated Witness — implemented on August 25, 2017 — is a storage protocol that allowed transactions to be stored on less storage space, therefore increasing the number of transactions that can be processed in a 1MB block.
- The Lightning Network: Proposed in 2016, the Lightning Network is a secondary network that operates on top of the Bitcoin blockchain and allows faster transaction times without putting an additional strain on the network.
The reason for Bitcoin’s hard fork was the dispute about how the scalability problem of Bitcoin could be solved. One group proposed to resolve the scalability problem by increasing Bitcoin’s block size from 1MB to 8MB, theoretically increasing the network’s capacity by a factor of 8. However, many argued that the increase in block size does not solve the core of the scalability problem and only poses a temporary solution. For example, the change from 1MB blocks to 8MB blocks would increase the network’s capacity from 7 to 61 transactions per second, which is still considerably less in comparison to other global payment services.
This dispute ultimately led to the hard fork resulting in Bitcoin (which would implement SegWit) and Bitcoin Cash (which would implement the increased block size).

What Are The Notable Differences Between Bitcoin And Bitcoin Cash?
▪ An increase in block size from 1MB to 8 MB
▪ Rejecting SegWit: the SegWit storage protocol is not active in Bitcoin Cash
▪ Bitcoin Cash does not adopt the ‘replace by fee’ feature: a feature which allows to modify and re-issue previous transactions by a new transaction
▪ Bitcoin Cash implements replay and wipeout protection
▪ Bitcoin Cash offers a way to adjust the proof-of-work difficulty quicker than the standard 2016 block difficulty adjustment interval found in Bitcoin.
Bitcoin Cash: Implementation And Further Hard Forks
Apart from increasing the block size from 1MB to 8MB, Bitcoin Cash also performed other changes to the core working principles of the original Bitcoin. First, Bitcoin Cash rejected the implementation of Segregated Witness (SegWit): a proposed code adjustment designed to free up block space by removing certain parts of the transaction.
As discussed earlier, many argued that increasing the block size would only pose a temporary solution, resulting in the need for additional block size increases as the number of transactions increases. In 2018, this led to a new dispute between two sides of the Bitcoin Cash network: Bitcoin ABC and Bitcoin SV. Every six months, the software of Bitcoin Cash is updated, resulting in a possible hard fork when a disagreement between different parties occurs.
When the Bitcoin ABC team announced the November 2018 updates, the Bitcoin SV team — led by Craig Wright — rejected the update and demanded an additional increase in the block size of BCH. This dispute led to another hard fork on November 16th, 2018, resulting in two separate blockchains: one for Bitcoin SV (using the increased block size) and one for Bitcoin ABC. After this hard fork, it appeared that most of the network’s community — including miners and participants –supported Bitcoin ABC and rejected the resized Bitcoin SV. The dispute caused Bitcoin ABC to become the dominant chain, allowing it to take over the original Bitcoin Cash ticker (BCH) and separating it from Bitcoin SV (BSV).
Conclusion
Bitcoin’s scaling problem has proven to be a problem that has led to many disputes on how to solve it. One of the possible solutions — implemented by Bitcoin Cash — was the increase in block size to fit more transactional data into one block. However, as expected, it turned that increasing the block size does not solve the core of the scalability problem and only poses a temporary solution. The scalability issue has led to disputes on how to further increase the capacity of the network as the number of transactions increases year over year.
