The History of Bitcoin Cash (BCH)
We continue our series “The History of Cryptocurrencies,” and today’s episode focuses on Bitcoin Cash (BCH). Check the previous one about Bitcoin here.
Bitcoin is rather a straightforward cryptocurrency, well, aside from the mystery about its Creator (or, Godfather, if you prefer a cinematic association). Now, Bitcoin Cash may seem a bit tricky. Words like “fork,” “split in two,” “war of words” come to mind. Don’t worry, though. We will explain everything in this article.
How It All Began
BCH is a steady member of the top 10 cryptocurrencies by a market cap list. But what is Bitcoin Cash exactly? It was created in 2017 during the major fork of Bitcoin and as an alternative solution to BTC problems. Those problems stemmed from the following fact: BTC became too popular to handle an ever-growing number of its users. The original restrictions applied to Bitcoin functionality became outdated. Those limitations were designed with good intentions, really, but their developers couldn’t imagine the skyrocketing growth pace.
Those restrictions prioritized the security of the system (a.k.a. blockchain) over its efficiency (transaction speed). When Bitcoin was in its infancy, the number of users was small. Therefore the speed was not an issue. And the grand idea about total security for everyone — one of the core philosophies of Bitcoin — was indeed more important. With the increase of transactions, the necessity to scale Bitcoin down emerged. The “war of words” commenced as early as 2010.
Two Solutions — One Big Philosophical Debate
There were two groups of developers — and their fan bases — at the core of the debate. The first one mainly consisted of Bitcoin’s authentic creators, the second one united believers in the original purposes of cryptocurrency. Therefore, aside from technological issues, there was a philosophical debate as well. To put it simply, the second group firmly believed in the dominance of ideology over-commercialization. Mind you, they never denied the commercial potential of Bitcoin. They just saw it differently.
The first group offered the following solution: to exclude parts of transactions, thus allowing more data fitting into the blockchain. The proposed exclusion part was a signature used to verify a transaction. The second group was really against the idea of separation, they went as far as calling it a “hack.” Their solution was to increase the average size of a block to process more transactions without a drastic change of the Bitcoin core (and its philosophy, of course).
The first solution is also known as SegWit2x, which included two components:
1) enablement of the code optimization Segregated Witness (SegWit) to change the storage of some data on the network;
2) setting the timeline for a gradual increase of block size.
As we’re talking about a huge debate here, inevitably, there were opponents to this approach — for example, the mining powerhouse Bitmain. SegWit implementation made Bitcoin mining with Bitmain’s AsicBoost machine more expensive. Therefore, Bitmain lent its support to the newly created (or, forked) cryptocurrency — Bitcoin Cash. In revenge, some big crypto exchanges refused to list the newly born coin on their platforms.
Before we’ll go further into the history of BCH, here is a quick explanation about forking.
Bitcoin Cash was created as a result of Bitcoin’s hard fork. It means that it split from the main blockchain, leaving the latter to continue its chosen direction (namely, to implement the much-debatable SegWit2x). Therefore, BCH was not created from scratch as billion other cryptos were. It has its own blockchain, yes, but it shares lots of similarities with Bitcoin. The main difference is this: BCH allows much quicker transaction speed thanks to a larger block size. The other side of this coin (pan intended): security may be compromised.
What Happened Next
At the end of the day, Bitcoin Cash failed to serve its main purpose: scalability vs transaction speed vs security dilemma persisted. As a result, Bitcoin Cash experienced its own hard fork in 2018. And yes, there were the same ol’ reasons behind this new derivation. And another coin saw the light of the day — Bitcoin SV. This new incarnation of the “original” Bitcoin promised to stick to the authentic Satoshi Vision of cryptocurrency, engraved in Bitcoin’s whitepaper. Bitcoin Cash, meanwhile, has yet to overcome one of its most significant setbacks: there is no clearly defined protocol of governance (or voting rights).
Another hard fork took place in 2020, resulting in the emergence of the Bitcoin Cash ABC (BCH ABC) chain. Blockchain.com announced in December that it would support Bitcoin Cash Node (BCH). This new fork happened as a result of the community disagreement regarding future rules of the network.
What’s Happening Now
Despite its rollercoaster journey, Bitcoin Cash remains the most successful hard fork of Bitcoin, at least within the cryptocurrency community. Its market cap is slightly above $8B as of now. Crypto holders can perform all cryptocurrency-related operations with BCH, including depositing assets and receiving interest on it. Take a look at the CoinLoan platform for details and options. Now, in addition to standard trading and selling, cryptocurrency holders can make money by just that — holding their coins.