Bitcoin Cash: reasons for creation and prospects

On August 1, 2017, the most popular cryptocurrency was divided into Bitcoin (BTC) and Bitcoin Cash (BCC). The new direction was supported by a group of miners who transferred part of their capacity to obtain new Bitcoin Cash blocks, as well as some exchangers and wallet developers. Why did this happen and what are the prospects for this fork?

The reason why the Bitcoin Cash developers made this decision is quite simple: in their opinion, increasing the speed of transactions in classic Bitcoin without making changes to the structure and configuration of the code is impossible.

They decided to correct this shortcoming by increasing the block size (the “storage” in which transaction data is “packed”). 

The creators of Bitcoin introduced a block size limit of 1024 KB. Initially, the number of transactions was relatively small, so there were no problems with operation and the speed of transactions suited everyone. However, with the growing popularity of this cryptocurrency, the number of transactions that were no longer “fitted” into the block and were delayed in the so-called “queue” increased. By May 2017, the situation became critical; many users had to wait several days to complete a money transfer. To increase the priority of a transaction, it was possible to increase the amount of the commission, but this would lead to the inexpediency of using the crypt, especially if the amount of transactions was small.

Bitcoin miners were the first to take the initiative to remove restrictions on the block size, since they were financially interested in having more transactions and, accordingly, the amount of commissions. The developers proposed moving some of the data outside the blockchain to free up space for transactions.

As a result, a compromise decision was made and a team of developers led by Amaury Sechet (a former engineer at the social network Facebook) created a new fork. It was decided not to change the structure of the blockchain, but to increase the block size by 8 times.

Those who had bitcoins before August 1, after the fork, found themselves the owners of two cryptocurrencies at once - regular Bitcoin and the same amount of Bitcoin Cash, that is, their wealth doubled in quantitative, but not in monetary terms. The Bitcoin Cash rate at the time of launch was $300, or 0.1 of the original bitcoin. True, just a week later its price reached almost $500; Bitcoin Cash took third place in terms of capitalization after Bitcoin and Ethereum.

Programs that process transactions from both the old and newly formed branches support previous block formats, but do not accept new ones from each other..

The Bitcoin Cash rate began to rise on December 18 - on the eve of the announcement of the largest American cryptocurrency exchange Coinbase about the start of work with BCH. It then cost a little more than $1,800. Within two days, its rate doubled. No one knows why this happened, but Coinbase, just in case, decided to stop operations with this cryptocurrency for now. At the same time, the exchanger began checking for insider trading: company employees were prohibited from participating in transactions with Bitcoin Cash for several weeks. This has not affected the price of the cryptocurrency - it is still worth twice as much as it was on December 18.

We cannot take the liberty of predicting the future of Bitcoin Cash. But one thing is clear - there is still too much connecting this sweet pair: BTC and BCC. The failures of one add interest to the other and vice versa. And if the main branch (BTC) successfully solves the scalability problem, then Bitcoin Cash will go down in the history of cryptocurrencies as a promising but stillborn project.

More details in our today's analysis