Blockchains 101: Bitcoin Cash

4 min readDec 20, 2020

Forking Bitcoin: First Community Split over Scalability

Introduction

Bitcoin Cash is a fork (chain split) of Bitcoin which happened after debates among the Bitcoin community over scalability concerns. BCH partisans wanted Bitcoin to meet the demand for a more optimized global payment system rather than being a digital investment.

BCH has been modified to have a blocksize of 8MB instead of 1MB allowing BCH to handle significantly more transactions per seconds than Bitcoin at lower fees (Bitcoin’s lightning network was later proposed to catch up with scalability issues). A 8x bigger block size involves that the BCH blockchain will tend to become 8x more heavy (size) than the BTC Ledger overtime. Since 2018, BCH block size is of 32MB.

Description

The Bitcoin’s community was regularly debating about its scalability issues off and online since 2014 and on the need for Bitcoin to process more transactions per second (tps), in order to make it a transactional currency rather than a digital investment.

The debate amplified early 2017 over the introduction of the Segwit upgrade. It was designed to allow a size reduction by manipulating the “witness” segment of the transactions, therefore reducing the size of this portion by 1/4, slightly improving the amount of transactions that could be processed in each block.

A part of the community judged it wasn’t a sufficient solution (+20% tps) and was pushing for an increase of the block size from 1MB to 8MB (+800%).

In July 2017, the Segwit upgrade BIP91 (Bitcoin Improvement Protocol 91) was officially decided to be implemented at block 477,120. Soon after, the Bitcoin Cash name was proposed by the mining pool ViaBTC.

The chain split, called a fork, took effect on 1 August 2017. Miners (validators) had to either upgrade their mining algorithms for the Segwit upgrade or for the Bitcoin Cash one. It led to a “Hrate war” among miners whom had to choose a side by allocating their machine toward one or the other part of the chain/network.

Bitcoin ABC is the full node implementation of the Bitcoin Cash protocol.

In May 2018, the Bitcoin Cash protocol quadrupled its block size from 8MB to 32MB, even though the 8MB threshold had never been reached yet.

Farm of ASICS machines mining Bitcoin (Cash)

Mining and supply model

Bitcoin Cash has the same supply model than the one of Bitcoin.

Current block reward is of 6.25BCH.

Smart contracts

Bitcoin Cash has started implementing smart contracts on top of the bitcoin Cash blockchain using a protocol called CashScript (there is also a second implementation called wormhole based on Omni Layer protocol). While the success of these smart contracts is mitigated, they have reproduced the main characteristics of Ethereum smart contracts including ERC20 — ERC721 and NFT standards.

Storage and wallets:

Bitcoin CASH Core wallet (Full node ABC)

There a plenty of way to store Bitcoin Cash. The safest being to store it in a cold wallet (offline wallets such as paper wallet or hardware wallets) or hot wallet (such as mobile or desktop wallets) or by using a custody service that will store it on their own cold wallet/vault (thus limits the benefit of decentralization by involving a third party).

Keeping cryptocurrencies on centralized crypto exchanges and other selling platforms being considered the riskiest since the large volumes of bitcoin stored may attract hackers’ interest.

Official BCH wallets: https://www.bitcoincash.org/wallets/