How Bitcoin Cash Works?

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The Bitcoin Cash fork is seen as a simple copy of Bitcoin , the “enhancements” of which contribute rather little. We will explain to you what this cryptocurrency is, what it offers us and the different conflicts that reduce the credibility of this project.

Index of contents

  • What is Bitcoin Cash
  • Who created Bitcoin Cash
    • Developer war
  • How Bitcoin Cash works
  • What is the scalability of Bitcoin Cash
  • Bitcoin Cash Features
  • What is the difference between Bitcoin and Bitcoin Cash
  • What can be bought with Bitcoin Cash
  • The shadows of Bitcoin Cash
  • Important updates to Bitcoin Cash
    • Changing the size of the blocks. May 2018
    • Modification of the protocol. November 2018
    • Schnorr implementation. May 2019
    • Schnorr and malleability. November 2019
    • Modification of the difficulty setting. November 2020
    • No limit of transactions to be confirmed. May 2021
  • Final words on Bitcoin Cash

What is Bitcoin Cash

Roger Ver, one of those who supported the development of BCH

It is a cryptocurrency that was born in August 2017 as a fork of Bitcoin . It emerges as a more literal “interpretation” than indicated in the Bitcoin whitepaper. The idea would be that it is once again a peer-to-peer electronic cash system, lowering commissions and facilitating the validation of transactions.

Bitcoin Cash (BCH) wants a bit to return to the idea of ​​the origin of the Bitcoin whitepaper , after some describe BTC as a store of value or investment vehicle. Although this interpretation is from third parties, usually people who are dedicated to investment or conventional banking.

We can say that Bitcoin Cash is born with a more philosophical sense . According to the developers, Bitcoin has become a store of value, it is no longer used as was the initial idea. Among the differences of both cryptocurrencies, there is the size of the blocks, the speed of validation of the transactions or the cost of the commissions of each transaction.

Who created Bitcoin Cash

The origin of Bitcoin Cash is a bit more complex than that of other cryptocurrencies. On the one hand, there is a group of developers, some paid and others who help selflessly. On the other hand, we have the ideologues and main initial supports of BCH, these being:

  • Roger Ver: Hewas one of the main popularizers of Bitcoin, being known for quite some time as “Bitcoin Jesus”. In 2011 he created the digital store Bitcoinstore.com, where you could buy products and you could pay with Bitcoin. He was also an early investor in Bitcoin-focused companies and some
  • Jihan Wu: Heis known for being one of the founders of Bitmain, a manufacturer of ASICs for Bitcoin and other cryptocurrencies, and of the Antpool mining pool . He supported the development of this cryptocurrency because of its philosophical meaning.
  • Craig Wright:Quite controversial Australian computer scientist and businessman in the cryptocurrency segment. He was a member of Bitcoin Core, although he was kicked out when he decided to support BCH. He later left the project, after announcing that he is Satoshi Nakamoto and that BCH does not correspond to his vision . Wright has forked BCH to create Bitcoin Cash Satoshi Vision (BSV) , based on his interpretation of what Bitcoin is. He has not yet presented any proof of the claim that he is Satoshi.
  • Calvin Ayre: Founder of CoinGeek, decided to publicly support the development of BCHfor philosophical reasons. It later parted ways with BCH to join Wright in the development of BSV. Both Ayre and Wright are disowned by much of the crypto community.

Developer war

The development of BCH was carried out by the Bicoin Cash ABC (BCHA) and Bicoin Cash Node (BCHN) teams . But a proposal from one of the most important members of BCHA, ended in an internal war and a spin-off of the developers.

Amaury Sechet , one of BCHA’s development leaders, proposed a kind of blanket tax. Their proposal stated that 8% of the BCH generated by each new block would go to BCHA to continue development . This did not please the development group BCHN and ended up generating an internal war.

Bitcoin Cash Node was head-on against the mining tax and caused BCHA to quit development. Thus, BCHN was left with the denomination Bitcoin Cash (BCH) and they were left with control of the domain Bitcoincash.org.

After this, BCHA has decided to start a project on its own , which is announced on July 1, 2021 and is called eCash . They propose an alternative to Bitcoin Cash.

How Bitcoin Cash works

Bitcoin Cash is a hard fork (or forced fork) of the original source code of Bitcoin.Both blockchains have many similarities, or rather, BCH is exactly the same as BTC, but with a few slight changes.

These two blockchains are based on proof-of-work consensus and being open source, anyone can propose improvements or create solutions on top of them. Note that anyone who had a Bitcoin wallet with bitcoins inside before the fork, can claim the same amount in BCH.

Like Bitcoin, BHC has a block time of 10 minutes (roughly) and a maximum supply of 21 million coins. As with Bitcoin, in BCH every 210,000 blocks (about 4 years) the reward per block is reduced by half, in the process called halving.

One of the most notable differences is in the size of the blocks. BTC maintains the size of 1MB per block, being able to reach 2MB if necessary. Instead, BCH raised it directly to 8MB, but in 2018 they updated it so that the blocks were 32MB. Note that the 1MB size in BCH blocks has barely been exceeded a handful of times in 2017.

They also differ in the mining difficulty upgrade. Bitcoin updates the difficulty every 2016 blocks (about 14 days) while BCH adjusts the mining difficulty after each block.

To adjust the difficulty after each block, the emergency difficulty adjustment (EDA) algorithm was implemented . This served as an incentive for miners to switch to BCH and stop mining BTC. EDA was quite an unstable system and was discontinued. It should be noted that thanks to EDA, the number of BCH blocks is much higher than that of BTC.

Finally, BCH implemented the Schnorr signatures in 2019 , leaving behind the ECDSA signature scheme. Bitcoin has recently approved this change, which will be implemented with Taproot . Schnorr signatures are simpler, take up less space in block size, offer greater security and privacy, and greater scalability.

What is the scalability of Bitcoin Cash

The biggest problem with Bitcoin is that it has a capacity to process 5-8 transactions per second . It is speculated that with Taproot it could go up to about 12 transactions per second, although it is not clear. Visa in 2010 handled about 1,750 transactions per second with a theoretical limit of 24,000 transactions per second.

Scalability is the ability of a network to adapt to the growth of transactions within it.

Bitcoin supports, thanks to SegWit2x, 2MB blocks , if necessary, but normally the blocks are 1MB, more or less. Supporting higher capacity blocks was rejected on the grounds that it put security at risk. This caused quite a bit of conflict between miners, developers, and the community.

This is one of the main reasons why BCH was created. The BCH blocks initially were up to 8MB, thinking of increasing the number of transactions per second bearable. It is currently 32MB , thinking about smart contracts and decentralized finance.

Bitcoin Cash Features

We are going to make a small summary of the main characteristics of BCH:

  • Bitcoin Cash is based on the source code of Bitcoin, with some slight changes.
  • The supplyis also limited to 21 million BCH. It should be noted that the issuance did not start from zero, but continued from the bifurcation point. Those who had BTC before the fork can claim their BCH at no cost.
  • It is based on the proof-of-work consensus, like Bitcoin.
  • The blocksare now 32MB in size.
  • Some allege that BCH aligns itself with the idea raised by Satoshiin his whitepaper.
  • The difficulty of Bitcoin Cash mining is adjusted after each blockusing the difficulty adjustment algorithm.
  • Bitcoin Cash does not implement SegWit.
  • Bitcoin Cash in 2019 implemented the Schnorr firms (which have recently come to Bitcoin via Taproot).
  • They want to implement smart contracts in future updates.

What is the difference between Bitcoin and Bitcoin Cash

We can say that Bitcoin is the same as Bitcoin Cash, since BCH uses the same code as BTC. Both share the same consensus, the same encryption algorithms or the time of emission of blocks.

But there are some small differences between the two projects. BCH switched from the ECDSA firms to the Schnorr firms, to improve security, scalability, and reduce the size of transactions. Taproot is expected to be deployed in Bitcoin in the coming weeks, after being accepted this past summer.

The other big difference is in the size of the blocks. Bitcoin supports blocks of up to 2MB, in the case of Bitcoin Cash the blocks can be up to 32MB. Among other things, this should allow transactions to be validated earlier and costs per transaction to be lower.

It is also differentiated by the cost of transactions or commission. Transactions in Bitcoin within the blockchain are usually expensive, while in BCH they are cheaper. We must emphasize that BTC allows the use of the Lightning Network , whose transactions have no cost.

There are some differences, but with some nuances. The low commissions BCH are marked by little use , while BTC has much more use. Initially, transactions in BTC could be made with zero commission.

What can be bought with Bitcoin Cash

There are currently two mechanisms to be able to use Bitcoin Cash (and other cryptocurrencies) to make payments. The most comfortable is to obtain a debit card based on cryptocurrencies , such as the one offered by Binance. This mechanism is the simplest, since we must forget about conversions and others, simply swipe the card and that’s it.

Then we have the option of paying in establishments that accept BCH for making payments. The Bitcoin.com website has a very interesting map that shows the establishments that theoretically accept BCH for payments. We leave you a link so that you can consult the establishments that, in theory, allow payments with BCH.

The shadows of Bitcoin Cash

The idea behind the creation of BCH is to offer a faster blockchain, with greater scalability and with lower commissions. But has any of this been fulfilled?

Currently the BCH blockchain is very little used , if we compare it with Bitcoin, despite the fact that the latter has higher commissions. This means that BCH blocks store fewer transactions, so they are smaller in size than BTC blocks. So it has not been possible to prove one of the precepts by which it was separated from Bitcoin. In addition, BCH must deal with the Lightning Network, a second-layer BTC solution that enables commission-free or virtually commission-free transactions.

For the record, BCH has failed to close a large deal with a company, organization, or state. Bitcoin is currently accepted by El Salvador as legal tender. Ethereum has partnerships with major tech companies and would have even advised several states on the creation of CBDC. Litecoin would have been associated with different professional associations and with different events.

BCH is very little known outside of the crypto community for lack of notable announcements. This makes the use of the BCH blockchain much less than the use of BTC.

Craig Wright, self-described Satoshi Nakamoto without passing the slightest verifiable test

But without a doubt the biggest problem has been the damage generated by Bitcoin Satoshi Vision. This fork, generated by Craig Wright for his own interests, weakens BCH. This event has caused much damage to the credibility of this project, raising doubts about whether in the future there could be more bifurcations due to internal clashes.

For an update to be accepted in Bitcoin, acceptance by more than 80% of the mining nodes is required. Taproot was accepted with a signaling greater than 90% of the blocks generated within an epoch. BCH , for its part, is a centralized system whose updates are imposed by the developers. They do not have a governance system, something that displeases much of the community.

Important updates to Bitcoin Cash

The Bitcoin Cash network receives two protocol updates annually, one on May 15 and one on November 15. All mining nodes on the network must be updated in order to continue operating normally. Some of these updates generate a hard fork, when fundamental aspects of the protocol are changed.

Changing the size of the blocks. May 2018

It was in May 2018 that an update was released that modified the maximum size of the blocks. In this case, it went from 8MB to 32MB, to add functionalities that would allow the deployment of smart contracts and oracles on the BCH blockchain.

Modification of the protocol. November 2018

What this update did is add new features, such as the Canonical Transaction Order Route (CTOR). CTOR adds greater efficiency to the network and its scripts. This allows oracle data to be more easily aggregated on the blockchain.

It should be noted that it was at this time that the Bitcoin SV fork appeared, created by Craig Wright. In this case BSV was created simply because Wright indicated that his vision (self-proclaimed Satoshi Nakamoto without proof) included 128MB blocks. It would be the reason why the blockchain was divided.

Schnorr implementation. May 2019

We can highlight two actions of the protocol, in this case. The first is the implementation of Schnorr signatures, which improves privacy and makes transactions easier to validate.

Additionally, a protocol update was added that applies the CLEANSTACK rule. This update makes it impossible to recover funds from SegWit transactions.

Schnorr and malleability. November 2019

The update in this case enables Schnoor signatures for OP_CHECKMULTISIG (VERIFY) . It was thus implemented that all signature checks supported Schnorr signatures. Additionally, MINIMALDATA was added in the script, which eliminates the malleability of BCH transactions. In other words, these can be modified before being validated.

Modification of the difficulty setting. November 2020

Changes are made to the BCH Difficulty Adjustment Algorithm (DAA), which will be replaced by the new ASERT algorithm. This change happens for the following reasons:

  • Eliminate oscillations between difficulty and hashrate.
  • Reduce the difference in profitability betweenstable miners and those who switch to other blockchains.
  • Keep the average time between blocks close to 10 minutes.
  • Approximate the average time of the transactions to the target time.

This update is controversial due to the introduction of a new Coinbase rule. It is the second attempt to add a kind of tax to the network for the financing of development. Although this has been flatly discarded by the community.

No limit of transactions to be confirmed. May 2021

What the latest update implements is the removal of the limit of transactions to be committed. Now users can perform more than 50 concurrent non-conforming transactions at the same time.

The OP_RETURN multi-exit transaction mapping is also added. It allows programmers to use this space for multiple purposes, as well as minimizing the impact and risks for nodes and miners.

Final words on Bitcoin Cash

We cannot say that Bitcoin Cash is a new cryptocurrency as it is a simple copy of Bitcoin. The difference is in the large size of the blocks, which does not contribute much due to the reduced use of it. Highlight the internal problems, with the split of the two development groups and the split by one of the “creators” of this bifurcation.

We explain what cryptocurrencies are and how they work

The first big problem of Bitcoin Cash is in one of the figures that supports it, such as Roger Ver, who in recent years has been involved in several controversies. Craig Wright has turned into a buffoon claiming to be Satoshi Nakamoto without proof… with how easy it is to sign a transaction with the same signature as the genesis block. The only one saved is Jihan Wu, who keeps a low profile.

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