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Bitcoin Cash (BCH) is a new currency born out of bitcoin in August 2017. In just a few short months it has flourished and grown both in volume as well as value. Bitcoin cash is a fork (see Glossary) or a divergence and was created to solve the problem of the blocks in the bitcoin block chain being too small and slow and the transaction fees becoming more expensive. Bitcoin cash increases the size of the blocks allowing more transactions to be completed at a reduced cost.
A block can handle just so many transactions and once it is full a new block is then created. By increasing the size of the blocks one can continue to use a block for longer before a new one is created. This solves the problem of backlogs where transactions are being queued and awaiting new blocks rather like in waiting in a bus queue. One bus gets filled and you have to wait for the next one to come along. Bitcoin cash is like having a bigger bus which reduces the queue quicker.
The original block size was set at 1 megabyte (MB) or in other words a million bytes. At the time that size was thought sufficient and suitable to prevent spam attacks on the network. At the time the value of bitcoins was low and the volume and transaction times were low. Since then of course the value and number of transactions have increased substantially resulting in blocks reaching maximum capacity faster and causing delays in transaction times.
A number of different forks were proposed, mainly focusing on increasing the block size but failed to get the consensus need to be implemented (A consensus is rather like a democratic agreement where most of not all the miners agree to the proposal). Finally Bitcoin Cash was agreed to mainly because increased the block size from 1 MB to 8 MB among other factors. A much bigger bus and a dramatic reduction in the queue.
It is expected that bitcoin cash can easily compete now with such systems as PayPal and Visa with the increase in the block size. Whereas the number of transactions in a bitcoin block averages 2000, one can fit close to 40,000 transactions into a 8MB block depending on the size of each transaction. The drawback is that larger blocks require more computing power so this will potentially price out the smaller miners. It has been considered that this could lead to power being concentrated into fewer hands despite the decentralisation of blockchain. However smaller miners can pool and create a larger mining system that would compete successfully with the larger operations. Also with the increase in renewable energy the energy costs will eventually drop and mining bitcoin cash could still stay within the reach of the small miner.
Bitcoin cash has successfully survived the initial few months and grown into a healthy crypto currency that is decentralised, secure yet open and can be bought either peer to peer or through or from an exchange as well as kept in offline cold wallets. It is established as a currency in its own right now and likely to continue to expand in volume and probably value.
There has been another hard fork, Bitcoin Gold in October 2017 and three soft forks, Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited, but Bitcoin Cash currently remains the most successful fork.
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