What is Bitcoin Cash (BCH)?

Bitcoin Cash (BCH) is a cryptocurrency that originally came from Bitcoin, but despite the confusingly similar name, it’s a totally separate cryptocurrency.

Back in 2017, Bitcoin had its first major price boom. As more and more people began buying and transacting with Bitcoin, the network became very congested, causing slower transactions and high fees.

The Bitcoin community couldn’t come to an agreement as to how best to solve this problem, so they split into two factions. This resulted in what is known as a fork in the blockchain: one group continued to use the Bitcoin blockchain, and the other group started to use a new blockchain with a new cryptocurrency: Bitcoin Cash.

A little bit more detail

To understand what Bitcoin Cash is, and how it differs from Bitcoin, you’ll first need to know some basics about the blockchain, and how it works.

The blockchain is essentially a huge record of transactions, but instead of being managed by a central authority like a bank or government, it’s run by a network of thousands of computers (known as nodes) all over the world. These nodes all run the same piece of software to access and verify this shared record of transactions.

Multiple transactions are grouped together in blocks, and all these blocks together form a long chain of transactions. An important thing to keep in mind here is that transactions are always processed (or “mined”) one block at a time.

In 2017, the public’s interest in Bitcoin skyrocketed. This meant there were a lot more blocks of transactions to process, which resulted in very long waiting times and high transaction fees. And because transactions are processed only one block at a time, the solution was clear: increase the number of transactions that could fit into each block.

However, the Bitcoin community became divided about the best approach to fit more transactions into a block:

• One group wanted to implement SegWit. This solution would change the way transaction information is structured, essentially decreasing the size of each transaction’s data, so that more transactions could fit into a block.

• Another group wanted to increase the block size, so that more transactions could fit into a block without changing the way transactional data was structured.

The two groups couldn’t reach a consensus and decided to part ways. The Bitcoin blockchain implemented the SegWit update, while on 1 August 2017, the other group started the Bitcoin Cash blockchain with an increased block size. From that date onwards, Bitcoin Cash transactions have been recorded on their own separate blockchain.