This digital asset is a result of bitcoin’s split on August 1, 2017. After bitcoin reached a record-high of $3,018.66 on June 12, 2017 bitcoin investors were worried about the currency’s high transaction fees and slow processing time.
This bitcoin community sought to resolve bitcoin’s underlying problems by initiating a hard fork in bitcoin that would increase transaction speeds and decrease transaction fees. This bitcoin hard fork led to the creation of bitcoin cash.
Differences Between Bitcoin and Bitcoin Cash
Bitcoin was the first digital asset to market, gaining popularity over time. As bitcoin became more popular, bitcoin cash was created to allow for an increase in transaction speeds and decreased transaction fees.
According to bch.io, “One of the most important qualities of Bitcoin Cash is that it keeps the same properties as bitcoin, but does not have SegWit.” SegWit is a bitcoin code that enables a soft fork to decrease bitcoin’s block size.
How Does Bitcoin Cash Works?
According to bitcoin.org, bitcoin cash is “a hard fork of bitcoin core.” This means that bitcoin cash was able to copy bitcoin’s code and create a new currency.
Bitcoin cash works in the same way bitcoin does with some differences: The block size limit was made adjustable by SegWit, allowing for an increase in transaction speeds. The bitcoin cash transaction fees are cut to half or less of bitcoin’s.
Advantages of Bitcoin Cash
According to bitcoin.com, bitcoin cash was created “to keep bitcoin fast, cheap, and reliable.” There are many reasons why bitcoin cash is preferable among its other cryptocurrency counterparts:
Bitcoin transactions take up to an hour or more, bitcoin cash transactions take about 10 minutes.
Low Transaction Fees
Bitcoin transactions have been seen as high as $20 per bitcoin transaction. While bitcoin cash was created to decrease this cost, bitcoin itself has reduced its transaction fees from .99% to .39%.
Bitcoin cash is mined more fairly than bitcoin since bitcoin uses a more centralized mining system.
Bigger Transaction Capacity
Bitcoin cash has increased bitcoin’s capacity to process transactions from 7 to 8 transactions per second to 24 to 50 transactions per second.
How to Buy, Sell, and Trade Bitcoin Cash?
There are many different ways bitcoin cash can be bought, sold, and traded. According to bitcoin.com, bitcoin cash is “mined on the original bitcoin chain as bitcoin cash blocks have a 21 million coin limit.”
Many reputable online exchanges allow bitcoin owners to convert their bitcoin into bitcoin cash. From there they can withdraw the converted bitcoin cash to their bitcoin cash wallet.
Bitcoin Cash can also be bought, sold, and traded in person. According to bitcoin.com, bitcoin cash is “available for purchase on online exchanges.”
There are marketplaces such as LocalBitcoins where bitcoin owners can meet up with bitcoin buyers and sellers face-to-face and exchange bitcoin for cash.
Risk in Investing in Bitcoin Cash
Like any digital currencies, Bitcoin Cash is not spared from the following risks:
Bitcoin cash is still a relatively new concept to the population and bitcoin investors. This means that bitcoin cash has not been banned by any legal authorities, but it can be subject to laws in the future.
The bitcoin code was copied to create bitcoin cash and thus carries bitcoin’s technology risks. According to bitcoin.com, bitcoin cash is “vulnerable to bitcoin’s old security problems.”
New security risks might also arise as bitcoin cash is further developed over time.
For example, bitcoin cash is “very cheap to bitcoin at the moment,” but bitcoin can go from cheap to expensive in a flip of a switch.
Common Myths About Bitcoin Cash
Because Bitcoin Cash was derived from Bitcoin, various myths surround the said digital currency. These are:
- Bitcoin Cash is bitcoin’s clone and bitcoin will eventually take over bitcoin cash.
- The bitcoin market could crash due to bitcoin cash.
- People invest in bitcoin to make quick money from bitcoin cash, but bitcoin owners will now have twice as much currency as people now have less incentive to trade their bitcoin for bitcoin cash.
The Bottom Line
Bitcoin cash was created to provide bitcoin owners with a fast, cheap, and reliable way to invest their bitcoin in the bitcoin market.
Owners can also convert bitcoin to bitcoin cash for easy withdrawals.
The various ways of buying, selling, and trading bitcoin cash provide investors with flexibility in terms of how they spend or invest bitcoin cash.
Investors should take the time to consider bitcoin cash as an investment, not just bitcoin.
The bitcoin market is volatile and can drop or rise in a matter of minutes, but bitcoin cash offers investors the opportunity to see their investment grow over time.
According to bitcoin.com, bitcoin cash is “a natural progression.”
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.