What Is Bitcoin Cash And What Is It Used For?

What Is Bitcoin Cash

Bitcoin is the world’s largest and most popular cryptocurrency and has many use cases and advantages, chief among them being decentralization. While decentralization has several advantages, things can get a little messy when there are serious disagreements within the community about the project’s direction or other important matters. These disagreements often lead to forks, and Bitcoin has undergone over a hundred such forks. Not all forks have resulted in a new blockchain network. However, out of those that have, one of the most prominent ones is Bitcoin Cash (BCH). 

This article will take a closer look at Bitcoin Cash, understand how it works, and what it can be used for. 

Key Points 

  • Bitcoin Cash was created in 2017 through a hard fork of the Bitcoin blockchain. 
  • Bitcoin and Bitcoin Cash share several technical similarities, despite their philosophical differences. For example, both use the same consensus mechanism (Proof-of-Work) and have their supply capped at 21 million. 
  • Bitcoin Cash enables more transactions in a single block, leading to faster transactions at a lesser cost. 
  • Bitcoin Cash underwent a hard fork in 2018, splitting into Bitcoin Cash ABC and Bitcoin Cash SV. 

What Is Bitcoin Cash? 

In August 2017, a section of the Bitcoin community initiated a hard fork to break away from the original Bitcoin blockchain. This was the event that led to the creation of Bitcoin Cash. The catalyst behind the move was Bitcoin’s lingering scalability issues that had divided the community. The community could tackle the scalability in one of two ways: either reduce the amount of data in each block or increase the block size. While both methods would make transactions faster and cheaper, the community could not reach a consensus on which approach would be ideal, leading to the hard fork. 

Bitcoin Cash is a decentralized, Proof-of-Work blockchain that describes itself as a peer-to-peer electronic cash for the internet. It removes third parties, such as banks and financial institutions, from transactions. The community believes that Bitcoin has become more of a store of value rather than a medium of payment. On the other hand, Bitcoin Cash has been designed to be a quick and inexpensive payment medium. Several features set it apart from Bitcoin. 

  • Bitcoin Cash has a larger block size of 8MB, which was increased to 32MB in 2018. 
  • Bitcoin Cash does not use SegWit (Segregated Witnesses) 
  • Bitcoin Cash has dropped the “Replace by fee” feature. 
  • It is capable of processing significantly more transactions per second than Bitcoin. 


Because Bitcoin Cash was created through a hard fork of the Bitcoin blockchain, any BTC user would get an equal amount of BCH as long as they did not hold their currency in an exchange and possessed their private keys. 

How Does Bitcoin Cash Work? 

As mentioned, the primary reason behind the creation of Bitcoin Cash was to address Bitcoin’s scalability problem. It tackled this issue by increasing the block size to 8MB, enabling the faster processing of transactions at far lower costs. In 2018, the block size was further increased to 32MB, allowing it to process up to 32 times more information per block than Bitcoin. From a technical point of view, Bitcoin Cash and Bitcoin are very similar. Let’s look at how. Both have a hard cap of 21 million. Both use nodes to validate transactions and use the same Proof-of-Work consensus mechanism to validate transactions. In Proof-of-Work, miners use computers to validate transactions and are rewarded with BCH for their contributions. 

Because of its larger block size, Bitcoin Cash is considerably faster and offers far lower transaction fees than Bitcoin, making it ideal for smaller transactions. You could go to Starbucks, pick up your favorite coffee, and pay using BCH. It also supports smart contracts and applications, including CashShuffle and CashFusion. BCH holders can use CashShuffle, a mixing protocol that shuffles your BCH with other BCH holders before initiating a transaction, making the transactions harder to trace. 

However, coin mixing is not ideal because it requires you to trust a third party. It also involves a fee, which could be expensive for frequent users. On the other hand, CashFusion places your BCH in a transaction consisting of BCH from other CashFusion users. Your BCH is then sent back to your wallet, but since an unimaginable number of other transactions have mixed with your transaction, your holdings become almost impossible to trace. 

Bitcoin Cash: History 

Bitcoin’s scalability debate goes back to 2010 when Jeff Garzik brought it up. He stated that if Bitcoin could support more transactions per second, it could generate considerable interest. He proposed patching the network and improving the scalability of the protocol. However, the Bitcoin community rejected the proposal at the time, with Satoshi Nakamoto suggesting the proposal be kept on ice. Satoshi left Bitcoin soon after, and with no solution offered, the block size debate was relegated from memory. 

However, the debate was reignited, with Bitcoin’s scalability issues impossible to ignore. This is where Bitcoin Cash came into the picture, first mooted in 2017 as a solution to Bitcoin’s scalability issues. The Bitcoin Cash hard fork was initiated at block 478,558, invalidating previous blocks and requiring nodes to upgrade to the new chain. According to supporters, the hard fork was needed to address Bitcoin’s limitations, help it achieve mainstream appeal, and enable its use as a medium of exchange, not as a store of value that Bitcoin had become. 

However, there was significant opposition to the hard fork as well. Critics argued that the larger block size would require a more complex mining process, putting miners without access to large amounts of processing power at a disadvantage, leading to centralization among bigger miners. However, these claims were countered by Bitcoin Cash proponents such as Roger Ver, an early Bitcoin investor and a huge advocate for BCH. Ver believed the larger block size would make it  far more usable than Bitcoin. 

Further Bitcoin Cash Forks

Bitcoin Cash has undergone a couple of prominent hard forks of its own, Bitcoin ABC and Bitcoin SV. Bitcoin ABC is quite similar to Bitcoin Cash and features only minor differences. The protocol reinvests 8% of each block reward back into the network. This acts as an incentive for open-source developers. The protocol was rebranded to eCash in 2021. Bitcoin SV references the original whitepaper, which does not advocate off-chain solutions like the Lightning Network. Instead, it focuses on stability by proposing even bigger blocks than those of Bitcoin Cash, proposing sizes of 128 MB. Eventually, the community decided not to put a cap until a significant number (billions) of transactions were made, at which point the community would vote on block size. 

What Can Bitcoin Cash Be Used For? 

Long-Term Store Of Value 

Bitcoin Cash’s total supply is capped at 21 million. Theoretically, users could vote to change this limit, but because it is not in their best interest to dilute their holdings, the 21 million limit is likely to be in place. Additionally, the rate at which new coins are added decreases, halving every four years. The most recent halving saw the rate of issuance drop from 12.50 to 6.25. 

Effective Medium Of Exchange 

Bitcoin Cash is also a highly effective medium of exchange. The protocol enables inexpensive transactions at high speeds. Settlements are almost instant, making it ideal for remittances and cross-border trades. Additionally, low transaction costs make it ideal for daily transactions, such as purchasing groceries, and microtransactions, such as tipping content creators. 

Avenue To Economic Freedom 

Economic freedom is critical for individuals and is considered a vital component of human dignity. Bitcoin Cash provides an alternate form of money, giving users economic freedom and protection against censorship, monetary confiscation, and devaluation through inflation.

Features Of Bitcoin Cash 

Some of the core features of Bitcoin Cash are as follows. 

  • Open And Decentralized – Bitcoin Cash is highly decentralized and open in nature. This means any single entity does not control the platform, and anyone can start using the platform. 
  • Anonymity – Transactions on Bitcoin Cash are private, ensuring users’ privacy. 
  • Transparent – All transactions are recorded on a public ledger that is accessible to anyone wishing to verify the transactions’ history. This ensures complete transparency and eliminates the potential for fraud. 
  • Immutability – Transactions, once completed, cannot be reversed or modified. 
  • Rule-Based System – All nodes on Bitcoin Cash follow a set of rules enabling them to achieve consensus. The protocol can also evolve based on the community’s needs, although it requires a high level of consensus. 

In Closing 

Compared to Bitcoin, you can say that Bitcoin Cash is still finding its feet. While the protocol may not be as popular, it retains several advantages, such as a larger block size that facilitates faster transactions and lower fees. However, there are questions about the security of the network. Additionally, with the advent of the Lightning Network, fast transactions and low fees are possible on the Bitcoin blockchain as well. However, supporters point out that it does not need a layer-2 solution to achieve faster transactions and low fees. For now, Bitcoin Cash needs to ensure mainstream adoption to ensure its success. 

If you wish to learn more about Bitcoin Cash, head to CoinSmart, Canada’s most trusted cryptocurrency exchange. 

Disclaimer: The content of this email is strictly for information purposes only. All of the opinions expressed in this email are not connected to CoinSmart and are not intended to provide you with investment advice. It is important that you do your personal research and/or consult an investment advisor to determine what is right for you.