Bitcoin Cash Guide: What Is This All About?

Bitcoin Cash Guide: What Is This All About?

in Cryptocurrency, Newbie, Altcoins
Bitcoin Cash is peer-to-peer electronic cash for the Internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate. 
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Extra Features
On Chain Scalability - Bitcoin Cash follows the Nakamoto roadmap of global adoption with on-chain scaling. As a first step, the block size limit has been made adjustable, with an increased default of 8MB. Research is underway to allow massive future increases.
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New Transaction Signatures - A new SigHash type provides replay protection, improved hardware wallet security, and elimination of the quadratic hashing problem. New Difficulty Adjustment Algorithm (DAA) - Responsive Proof-of-Work difficulty adjustment allows miners to migrate from the legacy Bitcoin chain as desired, while providing protection against hashrate fluctuations. Decentralized Development - With multiple independent teams of developers providing software implementations, the future is secure. Bitcoin Cash is resistant to political and social attacks on protocol development. No single group or project can control it. The bitcoin-ml mailing list is a good venue for making proposals for changes that require coordination across development teams.  
Bitcoin Cash History
Bitcoin Cash was created when the Bitcoin blockchain as we know it split into two: one continued as Bitcoin, and the other became Bitcoin Cash, a brand new cryptocurrency. This process is called a “fork”, and we’ve seen it happen before.
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Ethereum went through a hard fork when the network had disagreements on what to do after the vulnerability exploitation that happened with The DAO project. Ethereum decided to delete The DAO completely and refund all the coins, while some other members of the community were not happy with this decision. At this point, those who disagreed decided to continue the Ethereum blockchain unchanged, arguing that the nature of the blockchain is to be immutable, and called this branch Ethereum Classic. Ethereum, on the other hand, performed the changes. The two blockchains are the same up until the point of the split, and after that, there are two different chains. The same thing happened with Bitcoin on the first of August 2017, when a group of people were not happy with the upcoming changes that were going to be performed to the network. These changes focused on the blockchain size limit, and they lead to integrating the SegWit method to the blockchain. This method, which was already tested on Litecoin, means that each block would have a second block attached to it, like an appendix. This second block contains all the code behind every transaction, while the primary block only publishes to the blockchain the receiver of the transaction. This is done to reduce significantly the content of every block so that the 1 MB can hold a lot more transactions.
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The implementation of SegWit to the Bitcoin network was a long way coming. This was a somewhat controversial decision, as it was proposed back in 2015, and it hasn’t been officially implemented until now. All of the debate around this decision comes from the fact that it disrupts the nature of the blockchain, the base of what Bitcoin is. So, the decision to finally incorporate SegWit into Bitcoin provoked disagreement in the community. A group of people that were not happy with this change, and thought they could solve the problem of the block size limit a different way, performed a fork of Bitcoin Core, introducing Bitcoin Cash to the world. People who had bitcoin on private wallets at the time of the fork, now have the same amount in Bitcoin Cash’s currency, the BCH. This is not the case for people who had their bitcoins in an exchange, as it depends on the service provider whether or not to follow the new blockchain. As of right now, the exchanges that support Bitcoin Cash include Kraken, CoinOne, and Korbit.  
How Bitcoin Cash Differs from Bitcoin
When the concept of Bitcoin was revealed in the now famous Satoshi Nakamoto white paper, it was positioned essentially the same as Bitcoin Cash describes itself.
“A purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another…” - Satoshi Nakamoto white paper, 31 October 2008
While Nakamoto did not explicitly call for almost instant or little to no cost transactions in his original white paper, we can infer that because Bitcoin is intended to be electronic cash, the notion was for it to act the same as cash, which does not draw much in the way of cost or time.
This can also be deduced by the following extract:
“The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions… These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party. What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” - Satoshi Nakamoto white paper, 31 October 2008
And in its early years, Bitcoin fulfilled these promises. It offered quick, cost-effective transactions, irrespective of whether you wanted to send £0.10 or £1,000,000.00.
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This utility, together with its qualities of being permissionless, borderless, durable as well as limited in supply, saw Bitcoin gain steady traction in the marketplace. Consumers and merchants alike were hungry to take their money out of environments of central control and demand for bitcoin transactions started climbing. Whether making an international payment or paying for a morning coffee, transacting in bitcoin was a breeze. While this greater adoption and acceptance was fantastic for Bitcoin enthusiasts,  it soon started to present as an issue for the network.
Bitcoin’s block size is set to 1MB.  
As the number of transactions surged, blocks started to reach capacity. The network could not process as many transactions per second as was demanded, and therefore the transaction processing time rose from a few minutes, to hours and - in the most drastic scenario - days. At the same time, as a means to ‘leapfrog’ the backlog of transactions, users started paying higher and higher fees to incentivise miners to add their transactions into the next available block. This merely convoluted the problem as those who wanted to transact with small amounts, and pay less in fees, saw their transactions sitting for ages for confirmation. In the case of a merchant and a buyer, bitcoin payments became less effective, and Bitcoin slowly became a more suitable store of value than an electronic version of cash.  
So, from an ideological perspective we can say that the key differences are that:
  • Bitcoin Cash acts as electronic cash, enabling quick, cost-effective and direct payments between two parties over the Internet;
  • Bitcoin is now being viewed rather as store of value, for those not wanting to use it for simple everyday transactions that require speedy settlement;
Bitcoin has also implemented an update called SegWit (Segregated Witness) which was essentially their chosen solution to the scaling problem. SegWit changed the way that transactional data was categorised and calculated in the blocks, providing more capacity to transactional data. Moreover, SegWit-based transactions are not vulnerable to transaction malleability. With transaction malleability resolved, it allows the Bitcoin blockchain to be compatible with the Lightning Network, which introduces the concept of payment agents who serve as middlemen to facilitate bi-directional payment channels.   It was for this reason that the Bitcoin Cash group were particularly against the implementation of SegWit. They believed, inter alia, that this would ‘break’ the principle of peer-to-peer transactions. Some miners also expressed concern over potential losses in fees should transactions be handled ‘off-chain’. These were some of the driving forces behind Bitcoin Cash hard-forking from the Bitcoin blockchain prior to the introduction of SegWit; to create a coin that was technically (and philosophically) in line with the original vision of Bitcoin.
From a technical perspective, Bitcoin Cash differs from Bitcoin in that it:
  • Does not support SegWit;
  • Has a 8MB block size (with room to grow);
  • Has an emergency difficulty adjustment algorithm (EDA) that kicks in should the hash power drop too low;
This EDA, while necessary for the survival of the chain during periods of low mining activity, has unfortunately caused wild fluctuations in the network stability and coin issuance. In an announcement fortnight ago, Bitcoin Cash revealed that they would be tweaking their difficulty adjustment algorithm to ease these economic swings, by way of a hard-fork on 13 November 2017. All miners, exchanges and wallets have been notified of the availability of the updated software and they are not anticipating any setbacks on the network. (Note: This hard-fork is purely a technical upgrade, and no duplicate coins will be issued to Bitcoin Cash addresses.)
Bitcoin Cash Market Cap
 
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Bitcoin Cash Wallets
There are a wide range of different wallet options available for storing your Bitcoin cash which you can view on the website here. You can choose between software, paper, mobile and hardware wallets.  
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How to Buy Bitcoin Cash
There are a large number of exchanges which you can purchase Bitcoin Cash at, you can use CEX.io if you wish to purchase with Fiat currency. Or if you have some Bitcoin, you can trade it on the following exchanges:
  • Binance
  • Poloniex
  • Kraken
  • Bittrex
  • Bitfinex
 
Conclusion
The legacy Bitcoin community’s critique against Bitcoin Cash is that raising the block size to 8MB is a security risk. They maintain that such an increase poses centralization risks, and they point to the original drivers of the BCH hard fork, namely Bitmain and ViaBTC, Chinese mining companies, as wanting to consolidate control over the community. For now, it’s clear that the disdain between hardline BTC users and hardline BCH users isn’t going anywhere any time soon. And that’s unfortunate in general, as there’s an incredible of new users to the space that will be dastardly confused upon trying to make sense of the political quagmire that is the ongoing scaling debates. Both on-chain and off-chain scaling solutions have their merits. But the Bitcoin community is now fractured in two, as both sides believe they have the right answers. We’ll have to wait and see how the debates shape up from here.  
What is your attention to Bitcoin Cash? Share your thoughts in the comments below.
   

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