BCH 101 – Everything You Need To Know About Bitcoin Cash
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Hate to break it to you, but Bitcoin Cash (BCH) is not the cash version of Bitcoin.
If you’re one of those people that believe it is, this is the article for you.
BCH is a cryptocurrency forked from Bitcoin (yeah, we know that sounds weird, but you’ll get the gist later on).
Come along, grab something to feed your mouth with, and let’s show you all you need to know about Bitcoin Cash (BCH).
Shall we?
An Introduction to Bitcoin Cash (BCH)
We can’t talk about BCH without taking a step back into its origin — which steers from the evolution of Bitcoin.
So, here we go.
You see…at some point in the Bitcoin community, there was a heated debate over the stability of Bitcoin’s network.
A particular group believed that an increased block size limit would facilitate more transactions, thereby increasing the overall scalability and efficiency of the network.
This raged on for a while, and at some point, this “group of people” who believed in a larger block size, decided to create a different cryptocurrency.
The main proponent and leader of this idea was Roger Ver, an early investor in Bitcoin.
In August 2017, the “Bitcoin Cash hard fork” took place, and BCH was created as a distinct cryptocurrency.
BCH is a decentralized, peer-to-peer, electronic cash system — designed to correct the limitations of Bitcoin.
BCH has a block size of 32 MB, which is larger than Bitcoin’s. This block size enables the Bitcoin Cash network to handle more transactions — in a cost-effective and scalable way.
Using BCH: How Does it Work?
BCH has its unique systems, different from other cryptocurrencies. If you’re curious enough to know how BCH works, keep reading.
BCH Blockchain Network
BCH has its own blockchain network, which records and verifies all Bitcoin Cash transactions, while enabling a transparent and secure peer-to-peer transfer network.
No central authority controls this blockchain network, and all transactions are validated through a consensus mechanism (more on that later).
BCH’s Consensus Mechanism: Proof-of-Work
Remember, the concept behind blockchain is that — it’s a decentralized platform that executes and validates transactions without the need for a central authority.
Now, instead of a “central authority,” validation is done through a consensus mechanism. That is, many people (nodes) come together to validate transactions.
This consensus mechanism is known as Proof of Work (PoW), where miners compete to validate transactions on the BCH blockchain platform.
BCH Mining
Mining is the process of creating new BCH coins and validating transactions on the Bitcoin Cash blockchain, through the PoW consensus mechanism.
PoW is the process of solving complex mathematical problems to confirm transactions. Once successfully solved, the miner adds a new block of transactions to the blockchain. The first miner to solve the complex mathematical problem is rewarded with new BCH coins.
And this, our dear reader, is how BCH is created.
However, mining requires special hardware (mining rigs) to solve complex computations efficiently. Hence, miners often join mining pools to combine their computing power and boost their chances of successfully mining a block.
Bitcoin Cash mining has three main purposes:
- To create new BCH coins.
- To secure transactions and validate their authenticity.
- To maintain the security and integrity of the BCH blockchain network.
BCH Transactions
BCH transactions happen when users transfer BCH coins from one BCH wallet to another, on the Bitcoin Cash blockchain. These transactions help users exchange value and grow the Bitcoin Cash ecosystem.
However, before a BCH transaction is deemed valid and added to the blockchain, it has to be verified by a consensus mechanism. This is where miners come in – to verify and add these transactions to the blockchain network.
BCH transactions include transaction fees, usually paid by the sender, so the transaction can be processed and validated securely within the Bitcoin Cash network.
BCH Wallets
Bitcoin Cash wallets are digital wallets that allow you to store, send, and receive Bitcoin Cash.
These wallets are like your fiat bank accounts that enable you to receive fiat. You can manage all your BCH coins and transactions on the Bitcoin cash network — with a BCH wallet.
Popular types of BCH wallets include:
- Software wallets: usually digital applications installed on mobile devices and computers.
With a software wallet, you can manage your BCH coins from anywhere. All you need is an internet connection. Software wallets also include desktop wallets (installed on a computer) and mobile wallets (designed for smartphones).
- Hardware wallets: physical or offline crypto wallets specifically designed for more secure storage. They often come in the form of USB plugs and chips.
Investing in Bitcoin Cash: What You Need to Know
Is BCH catching your eye like the hot neighbor next door? Here’s what you should look out for before saying yes – or no, to investing in BCH.
Investing in BCH: What Are the Benefits Involved?
But first… here are the pros to using BCH or investing in it.
1. Huge Growth Potential
Bitcoin Cash has gained massive adoption and infrastructure support since its inception. It is traded and listed on several cryptocurrency exchanges, making it easier for users to buy, sell, and trade BCH.
With this, BCH has much potential for further growth and development. The fast transactions, efficiency, and scalability make it valuable to financial enterprises. With increased adoption and usage, BCH would skyrocket in value.
2. Decentralization
Like Bitcoin and any other cryptocurrency, BCH is built based on decentralization and financial sovereignty.
By using BCH, users have direct control over their funds — without the need for central power. This enables users to carry out transactions securely, while maintaining their financial autonomy and privacy.
3. Lower Transaction Fees
Thanks to its large block size, Bitcoin Cash can accommodate several transactions per block. This reduces congestion and makes the blockchain network easier for users.
As a result, transaction fees on the Bitcoin Cash network are significantly lower than Bitcoin’s.
4. Scalability and Transaction Speed
Bitcoin Cash has a larger block size than Bitcoin, allowing more transactions to be processed in each block.
This equates to faster transaction confirmations and increased scalability, making BCH more suitable for everyday transactions. The increased transaction capacity contributes to a smoother user experience within the BCH ecosystem.
Investing in BCH: What Are the Risks Involved?
Hold your cash. Take a look at the risks of investing or using BCH.
- Limited Universal Acceptance
Although BCH has gained widespread adoption in the crypto ecosystem, it is yet to be adopted in mainstream industries — compared to Bitcoin. This limited universal acceptance may reduce the coin’s usability across the globe.
- Market Volatility
BCH’s value is liable to market instability and the forces of demand and supply. These fluctuations can make BCH volatile, making market gains difficult to predict.
- Attachment to Bitcoin
BCH’s existence will always be attached to Bitcoin. While this can be a good thing, it can also be bad. Unfavorable market dynamics in the Bitcoin ecosystem will affect BCH adversely.
- Regulatory Uncertainty
Cryptocurrency generally faces a lot of regulatory uncertainty, and BCH isn’t exempted. This poses a significant threat to investors, as some regulations can make the crypto market go haywire and leave investors in the red.
A Step-by-Step Guide to Buying BCH
If you’re ready to start investing in BCH, you’ll need to know how to buy. Follow these steps religiously, to buy BCH from a crypto exchange platform.
1. Consider Your Risk Appetite:
Generally, before you begin investing in crypto, you should consider your risk appetite.
How much can you invest? Specifically, what amount are you comfortable with? A general rule of investment is only to invest an amount you’re willing to lose.
Once you’ve determined the amount you’re willing to invest in BCH, you can proceed to buy.
2. Choose A Reputable Crypto Exchange Platform
Crypto exchange platforms provide you the opportunity to invest in any cryptocurrency.
Popular ones include Binance, Coinbase, BitFinex, Kraken, etc. Some platforms also come with wallets to help you store your crypto.
3. Fund Your Crypto Exchange Account With Fiat
Seen a crypto exchange platform you like? Awesome.
The next step is to fund the crypto exchange platform with fiat. Most crypto exchange platforms come with a fiat wallet, enabling you to transfer money to the platform and buy your preferred cryptocurrency.
4. Buy BCH
After funding your crypto wallet with the amount you’re willing to invest, proceed to buy.
Navigate to the market section and search for BCH. However, if buying directly from the platform, search for the BCH trading pair instead.
Common pairs include; BCH/USDT, BCH/ETH, BCH/BTC, etc. You can also convert the fiat in your account into BTC, ETH, USDT, or your preferred opposite pair.
5. Place a Buy Order
This next step only applies if you buy on p2p or directly from the crypto platform.
If so, choose a market order (buying at the current market price) or a limit order (setting your desired price).
6. Store your BCH
Once your buy order is confirmed, the BCH will be deposited into your BCH wallet on the platform. You can leave it on the platform or transfer it to a more secure wallet.
A Step-by-Step Guide to Selling BCH
Want to sell your BCH for fiat or another cryptocurrency? Here are the steps to follow.
P.S: You can sell BCH through p2p (peer-to-peer), i.e., within users in the platform, or sell to the crypto exchange itself. If you want to sell on a different platform, you must first transfer your BCH to the platform’s BCH wallet.
Now let’s get into the process.
1. Choose A Reputable Crypto Exchange
You need a crypto exchange platform to sell your BCH. Choose your preferred platform and move on to the next step.
2. Connect Your Fiat Bank Account
If you aren’t selling for fiat, skip this step.
If you’re selling your BCH for fiat, you must link a fiat account to the crypto platform. The account is where your fiat will be deposited into. However, if you’re selling through p2p, you can send the buyer your fiat bank account details.
3. Sell Your BCH for Fiat
Selling directly to the crypto exchange? Then navigate to the “market” or “sell section” to sell BCH for your preferred currency. Confirm the amount of BCH you want to sell, and review the order details.
If selling via p2p, navigate to the p2p section.
4. Withdraw your Funds
Once your sell order is confirmed, the fiat will be deposited into either your fiat wallet or your given account details. If deposited in a fiat wallet, you can withdraw the fiat into your preferred bank account.
P.S: These steps are general guidelines, and the exact steps may differ from platform to platform.
Conclusion: What Does the Future Hold For BCH?
BCH has come a long way from where it started.
In a short while, it has gained massive user adoption in the crypto ecosystem, established a strong user base, and many more. Its large block size and low fees also make it alluring to financial corporations and investors.
While Bitcoin Cash has come far, its future success will depend on crucial factors like global crypto regulations, merchant adoption, and community growth.
BCH has huge potential to become a globally accepted form of digital cash — as long as it remains decentralized, efficient, and accessible.
As the crypto ecosystem evolves, the future of BCH remains a must-keep-tabs-on. And if you want to keep tabs on other coins too, check here.