This post was originally contributed by Williams Mugwagwa.
Bitcoin Cash is a spin-off of the popular Bitcoin cryptocurrency. The altcoin’s proponents allege that Bitcoin Cash (BCH) carries the original idea of bitcoin of being a transactional currency. Bitcoin Cash inherits most of its properties from its parent cryptocurrency.
The people who held BTC at the time of the bitcoin fork held an equivalent amount of BCH as the new altcoin became a standalone digital asset. For all intentions and purposes, it is supposed to perform better than BTC in terms of scaling and low and fast transaction fees.
It has also been the subject of a controversial fork at the height of the 2018 “Great cryptocurrency crash” and was widely referred to as a civil war due to the negative effects on the entire industry. Bitcoin Cash is now one of the leading digital currencies by market capitalization and is used for fast transactions.
Is it really a better version of Bitcoin or just another altcoin trying to preserve its existence by pointing out the flaws in Bitcoin?
What is Bitcoin Cash?
Bitcoin Cash is an altcoin that favours on-chain scaling and utility with the aim of becoming the digital money of the world. The BCH community has several developers working around the clock to make it the best money in the world.
However, its history is intertwined with bitcoin and its flaws. Bitcoin is the first and original cryptocurrency created by the anonymous Satoshi Nakamoto. The groundbreaking digital asset faced fundamental technical difficulties that resulted in slower transactions, high transaction cost, delays, and general challenges in using bitcoin as a daily medium of exchange.
The longer processing time meant that people could not buy their usual cups of coffee with BTC in the morning on their way to work.
This had to be addressed and there were several proposals to go about it such as implementing second layers solutions that are currently in development at the moment. The group that supported this idea wanted to maintain Bitcoin’s block size at 1MB.
A second group, in opposition to a second layer solution, was in favour of increasing the block size to 8MB. The Bitcoin network was hard forked on August 1, 2017, and claims to have restored “peer-to-peer electronic cash as a feature of bitcoin by eliminating high fees and unreliable transactions.”
Bitcoin fork leading to BCH
There are two kinds of forks in the cryptocurrency industry – a soft and a hard fork. A soft fork is a software upgrade in which the old and new software are compatible. It is more like updating an app.
A hard fork on the hand is a software upgrade that leaves the new blockchain incompatible with the old one.
A Hong Kong newspaper likened the new ‘bitcoin version to a new Microsoft word processor.
“Bitcoin cash is like a new version of Microsoft Word, which generates documents that can no longer be opened via the older versions.”
The plan to push for Bitcoin Cash was mainly spearheaded by a group of Chinese-based miners, entrepreneurs, investors, and developers. This plan would eventually succeed because Chinese miners have a bigger say in the cryptocurrency industry and at one point, China produced about 70 percent of all the bitcoins mined in the world. China had greater influence on the bitcoin at the time.
The initial name suggested for the new bitcoin fork was Bitcoin ABC. However, its current name Bitcoin Cash was proposed by the mining pool ViaBTC.
Bitcoin Cash price analysis
Bitcoin Cash is currently the fourth largest cryptocurrency with a market capitalization of nearly $6 billion. Has BCH been a good investment so far, assuming you had invested in it from the start?
I have bad news for you to begin with. The digital asset is down 40 percent since August 2017. It was trading around $555 at the time but its price has fallen to the region of $320.
The price of BCH reached a peak of $4,091 at the height of the 2017 bull run. Things took a turn for the worst in 2018 as bearish sentiments took its toll on the market. The digital asset lost 90 percent of its value within a year.
You don’t have to worry much if you got BCH courtesy of holding bitcoin. On the bright side, BCH has performed brilliantly well since the beginning of the year as its price has appreciated from $160 to $329.
How to buy bitcoin cash
Bitcoin Cash is a cryptocurrency like any other and the same principles apply when you want to buy it. You can buy it from a cryptocurrency exchange and transfer it to your personal wallet.
You need to have a secure and BCH compatible wallet before owning the asset. The second most important thing is to identify your payment method. You can buy BCH using:
- Credit card
- PayPal
- Fiat
- Digital assets
Different exchanges support different payment methods and it is up to you to find the exchanges that work best for you. Some of the most reliable bitcoin marketplaces include Binance, OKEx, Huobi Global, and more.
Your preferred payment method also depends on whether you own cryptocurrency or not. In most cases, it is very easy to buy any cryptocurrency if you own bitcoin.
You can follow these steps if this is your first time to buy BCH:
- Get a BCH wallet. Copy both your private and public keys. You cannot send or receive your digital assets without them.
- Register an account at an exchange and fund your account. You can use a credit card, bank transfer, or digital wallets such as PayPal, Skrill, Neteller, etc.
- Buy your desired amount of BCH.
- Your digital asset would be stored on the exchange but it is wise to immediately transfer them to your private wallet.
As a word of advice, keep your digital asset away from exchanges and only transfer your BCH when you want to trade. This is because exchanges are prone to hacks and you may lose your BCH.
Here are two more ways of buying BCH with cash:
- Peer-to-peer – you can use peer-to-peer platforms like Localbitcoins.com or Paxful to find people selling BCH. You have various options such as meeting the seller in person and exchanging cash in hands. This may be convenient for you but it comes with some risk as the chances of being scammed are very high.
- Bitcoin ATM – this is the simplest. All you have to do is to deposit money into the machine and it will send BCH to your wallet.
How to convert Bitcoin Cash to cash
One of the most important things to realize about digital assets such as bitcoin or BCH is that they are used as investment assets. Investors hold these assets for quite a period of time before selling them.
Before you liquidate your assets, you have what is known as paper gains or paper losses. They denote either the profits or gains you will only incur if you sell your digital assets or exchange them for cash.
This process is more like the reverse of buying Bitcoin Cash. Move your assets from your personal wallet to your exchange wallet. This is the only you can trade with other investors unless you know someone who wants to buy it from you.
- Sell on an exchange – Depending on the exchange and its user interface, enter the amount of BCH you want to sell and press the sell button. You can then withdraw the money to your bank account.
- Bitcoin ATM – use a bitcoin ATM to convert your BTC to hard cash.
- Bitcoin debit card – you can sell your bitcoin to some marketplaces and receive a debit card that you can use to make purchases.
There are two things you have to remember when cashing out your digital assets:
- Taxes – You have probably heard that death and taxes are the two certainties of life. Depending on your jurisdiction, you are taxed on the profit you make when you convert your bitcoin to cash. You may choose to ignore this but your exchange will likely report you.
- Trading fees – always opt for an exchange with lower trading fees so that you can have more money in your pocket.
How to cash out bitcoin
Bitcoin is the most popular cryptocurrency. You may need to cash it out so that you can buy other cryptocurrencies or have cash in your pocket. There are several ways to do this but first, you need to consider the following:
- Transaction fees and the easiness of the method chosen.
- How much you want to withdraw. Some exchanges require you to complete KYC if you want to withdraw large amounts.
- The final destination of your cash – either PayPal or bank account.
- How long the money takes to reach your account.
- Local laws
- Currency of your money
A peer-to-peer exchange is a good option to cash out your bitcoin because it gives you a number of options.
- Cash deposit – You can direct the buyer to deposit the money into your account. Remember to ask for identification and make sure that the money has reached your account before sending out your bitcoin.
- Bank transfer
- Meet in person
Differences between Bitcoin and Bitcoin Cash
Bitcoin Cash takes the majority of its properties from bitcoin. However, it had to be forked due to scalability issues. There are notable differences between the two.
- Block size – BCH has a larger block size (8MB) which allows it to process more transactions.
- Mining pools – bitcoin has several mining pools. This reduces the possibility of a single miner gaining more than 50 percent of the network.
- BCH is centralized as a few mining pools make up more 50 percent of the network. This leads to centralization.
BCH is aware of its weakness and has put in place measures to counteract them. The new features are:
- Scalability – BCH increased its block size to 8MB for on-chain scalability. The block size can be increased in the future.
- Emergency Difficult Adjustment (EDA) algorithm – the protocol added an algorithm that allows the chain to work well even if the number of miners dramatically drops. The algorithm gives stability to the network.
- Transaction signatures – implements a different transaction signature to show its distinction from bitcoin.
Who uses or buys Bitcoin Cash?
Bitcoin Cash is a digital asset mainly bought by long term investors as well as people looking for normal transactions because it scales better than bitcoin. Merchants can also accept BCH as a form of payment. The benefits include:
- Low fees
- No chargebacks
- Free marketing
BCH in summary
Bitcoin Cash is an altcoin designed to address the flaws in bitcoin through a number of improvements such as increased block size. Bitcoin has long suffered from scalability issues and is one of the reasons why it can’t compete with the likes of Visa to be a transactional currency.
BCH is still a long way from being as decentralized as bitcoin but it is growing in popularity. One important question for an investor is how good it is as an investment asset. You may not be impressed with its all-time return on investment but this will likely improve with more time. The silver lining is that BCH has made huge gains since the beginning of the year.
I don’t see BCH overtaking bitcoin but it will continue to rub shoulders with the top 10 cryptocurrencies by market capitalization.
Do you think BCH is a better investment choice than bitcoin? Tell us in the comments below.