A Journey to the Top-50 Cryptocurrencies on Coinmarketcap and Coingecko — An Introduction to Bitcoin Cash (BCH): The Peer-to-Peer Electronic Cash

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Coinmonks

7 min readDec 30, 2023

Bitcoin Cash (BCH) is a prominent peer-to-peer electronic cash system that originated as a hard fork of the original Bitcoin blockchain. With its increased block size limit and commitment to on-chain scaling rather than off-chain solutions, BCH aims to become a globally adopted decentralized digital currency used for everyday payments.

In this beginner’s guide, we will explore the origins, characteristics, uses and future outlook of Bitcoin Cash. By the end, you should have a solid understanding of this popular cryptocurrency.

Origins of Bitcoin Cash: A Controversial Bitcoin Hard Fork

Bitcoin Cash came into existence in August 2017 due to one of the most controversial hard forks in cryptocurrency history. At that time, the Bitcoin community intensely debated the best approach to scaling Bitcoin to accommodate more transactions.

While one camp pushed for Segregated Witness (SegWit) and Lightning Network as scaling solutions, the other strongly advocated for simply increasing Bitcoin’s block size limit on-chain. Both sides were adamant that their way was best for Bitcoin’s future success.

After years of debate without compromise, the latter faction moved forward with a hard fork on August 1, 2017. They increased Bitcoin’s block size from 1 megabyte (MB) to 8 MB and removed SegWit, giving birth to Bitcoin Cash.

Key proponents of Bitcoin Cash like Roger Ver and Jihan Wu wanted on-chain scalability without SegWit as part of Satoshi Nakamoto’s original vision for Bitcoin as peer-to-peer electronic cash. However, Bitcoin Core developers saw SegWit and second layer solutions as more aligned with Bitcoin as decentralized digital gold.

This philosophical divide remains to this day and is at the heart of the lingering rivalry between the Bitcoin and Bitcoin Cash communities.

Technical Features and Characteristics of Bitcoin Cash

As a hard fork, Bitcoin Cash shares the transaction history of the Bitcoin blockchain up until August 1, 2017. But from there, the two cryptocurrencies diverge completely into separate networks.

Here are some key technical features and characteristics that set Bitcoin Cash apart:

Larger Block Size Limit

The defining feature of Bitcoin Cash is its increased maximum block size limit of 8 MB compared to Bitcoin’s 1 MB. This allows the network to process significantly more transactions per second, enabling faster payments with lower fees.

However, critics argue that larger blocks lead to more centralized mining due to increased hardware requirements and propagation times across nodes. But so far, Bitcoin Cash has functioned reliably despite its larger blocks.

No SegWit Implementation

As mentioned earlier, Bitcoin Cash purposefully does not implement SegWit, which saves space in blocks by removing signature data. Instead, Bitcoin Cash maintains Bitcoin’s original transaction format in line with Satoshi Nakamoto’s whitepaper.

The lack of SegWit allows any software to send funds from addresses without needing special integrations. But it also means Bitcoin Cash does not benefit from SegWit’s malleability fix, which improves support for second layer scaling solutions.

New Transaction Signature Scheme

Bitcoin Cash utilizes a different digital signature scheme than Bitcoin (Elliptic Curve Digital Signature Algorithm instead of OpenSSL’s secp256k1 scheme). This provides an extra layer of protection against transaction malleability but also forces all SegWit-enabled software to break when dealing with Bitcoin Cash.

New Mining Difficulty Adjustment Algorithm

Given its rule differences, Bitcoin Cash uses a unique difficulty adjustment algorithm to maintain an average block interval of 10 minutes. By rapidly adjusting based on hash rate rather than waiting 2016 blocks, this system aims to minimize volatility in Bitcoin Cash’s mining profitability.

Decentralized Development Culture

A key tenet within the Bitcoin Cash community is decentralized protocol development to avoid too much control by any single or small group of developers. This stands in sharp contrast to Bitcoin’s relatively centralized development culture around Bitcoin Core.

There are several independent teams working on Bitcoin Cash node software implementations, including Bitcoin ABC, Bitcoin Unlimited, BCHD, Bitcoin Verde, Knuth, and Bitcoin Cash Node. By encouraging multi-party participation, the aim is to keep Bitcoin Cash development open and flexible to community feedback.

Current Use Cases and Adoption of Bitcoin Cash

Years after its founding, Bitcoin Cash serves a variety of real-world use cases today as electronic cash. Its fast and low-cost payments make it popular in places where traditional financial services struggle with accessibility or fees.

Micropayments and Tipping

Bitcoin Cash’s sub-cent transaction fees open up the potential for micropayments, allowing users to tip small amounts to content creators. Apps like Tipestry provide this exact functionality across various social media platforms. Compared to Bitcoin, Bitcoin Cash is far better suited for sending tiny transaction amounts without being eaten away by network fees.

Peer-to-Peer Marketplaces

Decentralized marketplaces like OpenBazaar have integrated Bitcoin Cash alongside Bitcoin to power payments between buyers and sellers directly. By combining an open market with fast cryptocurrency settlements, both shopping and selling become cheaper and more accessible without centralized intermediaries.

Gaming & Gambling

Online gambling sites disproportionately benefit from cryptocurrencies due to payment censorship from traditional providers. Bitcoin Cash’s reliability and microscopic fees make it a popular option on gaming sites to deposit, play, and cash out instantly.

The combination of anonymity and quick blockchain confirmations provides a better user experience compared to traditional fiat currency gambling. Beyond gambling, Bitcoin Cash also powers in-game crypto economies in certain video games and virtual worlds.

Global Commerce & Remittances

According to Bitcoin.com research, Bitcoin Cash is accepted at over 23,500 locations worldwide across over 100 countries. Real-world usage spans from restaurants, bars, hotels to even lawyers, doctors, and dentists. Bitcoin Cash brings digital payments without cards to people across continents.

Particularly, developing nations benefit the most from using Bitcoin Cash for remittances and commerce. Outdated financial infrastructure coupled with volatile national currencies make cheap cryptocurrency transactions through Bitcoin Cash extremely useful. Remittance payments reach intended recipients faster without any facilitating middlemen.

Humanitarian Aid & Disaster Relief

Following natural disasters when infrastructure breaks down, delivering humanitarian aid can become difficult. Without electronic payments, cash distribution is often inefficient and prone to theft and misdirection. Bitcoin Cash offers a lifeline in these situations.

In 2019, the nonprofit Eatbch directly used Bitcoin Cash donations to feed over 200,000 Venezuelan refugees on the Colombia border during a nationwide blackout and banking shutdown. Without relying on traditional money transfer services, Bitcoin Cash enabled rapid delivery of food through its network at a critical moment of need.

Future Outlook and Scalability for Bitcoin Cash

Given its origins and a relatively staunch ideological community, Bitcoin Cash looks poised to continue its mission of becoming peer-to-peer electronic cash for the world. Both on-chain and off-chain developments aim to build immense payment capacity over the coming years across various layers.

Terabyte+ Blocks via Graphene

Graphene is a block propagation technology that minimizes bandwidth required to transmit Bitcoin Cash blocks by as much as 97% — even for large gigabyte-sized blocks in the future. By combining Graphene with massive storage and parallel validation, proponents argue that terabyte-sized blocks are eventually achievable for Bitcoin Cash in a fully decentralized manner.

Increased Privacy Through Schnorr Signatures

The Schnorr signature scheme under development for Bitcoin Cash not only improves aspects of network scalability but also enhances privacy for users. By utilizing signature aggregation, Schnorr signatures allow multi-party transactions to appear indistinguishable from regular ones. This prevents unnecessary information leakage down the road when coins get spent.

SmartBCH Sidechain for Decentralized Apps

As a Layer 2 scaling solution, Smart Bitcoin Cash (SmartBCH) applies EVM bytecode compatibility to enable running full-fledged decentralized applications on Bitcoin Cash. SmartBCH essentially functions as a sidechain anchored to the main BCH chain for security while executing complex smart contract logic. This circumvents blockchain space limitations and congestion to scale dApps.

Atomic Multi-Lane & Hyperscaling

The Hyperscaling technique builds on emerging mining block templates called Atomic Multi-Lane (AML) to enable simultaneous mining of multiple valid block solutions every 600 seconds. By parallelizing block production and removing communication delays, Hyperscaling could theoretically allow for unlimited transaction capacity with no maximum block size limit on the network.

With such ambitious scaling roadmaps combined with real-world utility today, the future continues looking bright for Bitcoin Cash to fulfill its destiny. Powerful financial infrastructure gets built when communities come together around a shared vision.

Conclusion

Bitcoin Cash has come a long way since its controversial beginnings in 2017. Over the years, ongoing developments have evolved BCH far beyond a simple payment rail into a sophisticated decentralized financial network with unique capabilities.

With great capacity for growth ahead, Bitcoin Cash remains focused on its goal of becoming fast, private, low fee cash for the entire world. This vision is what continues propelling it forward as one of the top cryptocurrencies and blockchain payment platforms well into the future.