In four words or less: Bitcoin with bigger blocks.
Bitcoin Cash (BCH) was forked from Bitcoin on August 1st, 2017. The Bitcoin blockchain is open-source software so anyone is able to create their own crypto coin based on Bitcoin if they wish (the challenge is getting people to use it).
Because Bitcoin is not controlled by a central authority, changes to the code have to be supported by developers and miners. This consensus-driven approach means that changes can be slow.
A long running debate in the Bitcoin community is how to best scale Bitcoin so that it can process more transactions as more people use the network. Bitcoin’s block size is set at 1MB. In 2017 transaction fees soared and became delayed as the blocks reached maximum capacity. A majority of Bitcoin Core developers wanted to leave the block size at 1MB while other parts of the community were in favour of increasing the block size. The scaling debate intensified, eventually leading to a split in the community and the creation of Bitcoin Cash by a team who believed Bitcoin’s block size should be increased.
What problem does Bitcoin Cash solve:If Bitcoin is to be successful it will need to scale to be able to handle a much larger number of transactions. The original Bitcoin hopes to scale through the use of Segregated Witness (a code adjustment that reduces transaction size) and the Lightning Network (a second layer payment protocol that operates on top of the Bitcoin blockchain). Supporters of Bitcoin Cash support the original vision of Bitcoin as a “peer to peer currency.” Bitcoin Cash has removed SegWit and increased the block size to 8MB so each block can contain a larger number of transactions. It’s too early to know which chain will scale best.
Properties of Bitcoin Cash:
- Like Bitcoin, Bitcoin Cash has a limited supply. Only 21 million BCH will ever exist
- There is no way to counterfeit / create more of it
- BCH is divisible to 8 decimal places or $0.0000001
- Has a maximum block size of 8MB compared to Bitcoin’s 1MB
- Has a new Emergency Difficulty Adjustment (EDA) algorithm that can adapt to hash rate changes faster than the original Bitcoin
Management and governance:
No single authority controls Bitcoin Cash. Various developers contribute to maintaining and updating the code. No changes can be made without strong consensus. Bitcoin Cash has received vocal support from long time Bitcoin supporter Roger Ver, and head of Chinese Mining Giant, Bitmain, Jihan Wu.
Adoption and penetration:
When Bitcoin Cash forked from Bitcoin in August 2017, all existing Bitcoin holders were automatically given the same amount of Bitcoin Cash coins. This helped to bootstrap the network and gave BCH an instant community of potential users. BCH has been supported by a large number of crypto exchanges and venues.
Risks and limitations:
Critics are concerned that because more computing power is required to process BCH’s bigger blocks, this could lead to a more centralised network as smaller companies and miners will be priced out.