Bitcoin Cash (BCH) emerged from a years-long debate within the cryptocurrency community about the best path forward for Bitcoin. This article explores the background of its creation, compares it with Bitcoin and other fork-based coins, and examines the key controversies and arguments from both supporters and critics.
The Birth of Bitcoin Cash (BCH)
Bitcoin Cash, often abbreviated as BCH, was originally known as BCC. However, due to a naming conflict with another project (BitConnect), it was officially renamed BCH. Some exchanges, though, continued using the initial BCC abbreviation.
The creation of BCH was a direct result of the Bitcoin scaling debate. Increasing network congestion and high transaction fees had long been contentious issues. On May 23, 2017, a group of 56 blockchain companies from 21 countries signed the New York Agreement, which proposed Segregated Witness (SegWit) combined with a 2MB block size increase. This agreement received support from 83.28% of the network’s hash rate. However, over the following six months, the agreement was not implemented, leaving the scaling issue unresolved.
According to Bitcoin Cash advocates, soaring fees and multi-day transaction confirmation times were making Bitcoin unreliable. They noted that Bitcoin’s market dominance had fallen from 95% to 40%, partly due to these limitations. While increasing the block size beyond the original 1MB limit was technically straightforward, the community couldn’t reach a consensus. To preserve Bitcoin’s original vision of low fees and fast transactions, BCH increased the block size limit to 8MB, positioning itself as the true heir to Bitcoin’s legacy.
The first Bitcoin Cash block was mined on August 1, 2017, at block height 478559 by ViaBTC, a mining pool founded by outspoken big-block advocate Yang Haipo. This block contained 6,985 transactions and was 1.915 MB in size—nearly double Bitcoin’s limit—processing about 3,000 more transactions than a typical Bitcoin block.
BCH gained support from several top mining pools and was developed by multiple teams, including BitcoinABC, Bitcoin Unlimited, and BitcoinXT. Prominent figures like Gavin Andresen, a former lead Bitcoin developer, became vocal supporters. Andresen stated that BCH was closer to Satoshi Nakamoto’s original vision and expressed concern that high fees were undermining Bitcoin’s utility as a medium of exchange.
BCH was distributed through an Initial Fork Offering (IFO), a new model at the time. IFO allowed anyone holding Bitcoin at the fork’s block height to receive an equal amount of BCH. This approach helped BCH quickly gain a user base and list on major exchanges. Other fork-based coins, such as BCG and SBTC, later adopted similar distribution methods.
Key technical differences between BCH and Bitcoin include:
- An 8MB block size limit.
- No support for Segregated Witness.
- The implementation of two-way replay protection.
- A unique difficulty adjustment algorithm.
BCH’s original difficulty adjustment mechanism, the Emergency Difficulty Adjustment (EDA), was designed to ensure its survival. If fewer than six blocks were mined in 12 hours, the difficulty would drop by 20%. This led to miners switching between BTC and BCH based on profitability, causing significant hash rate volatility. While EDA helped BCH initially, it resulted in inconsistent block times and a poor user experience.
On November 13, 2017, BCH underwent a hard fork to implement a new Difficulty Adjustment Algorithm (DAA). The goal was to stabilize block times to around 10 minutes and create a more balanced response to hash rate changes, improving consistency for users and miners.
Core Controversies and Debates
Since its inception, Bitcoin Cash has been at the center of intense debate. Below, we examine three major controversies.
Centralization Concerns
Critics argue that BCH is overly centralized, pointing to the influence of Bitmain and its CEO, Jihan Wu, along with other prominent figures like Craig Wright and Roger Ver. Bitmain, a major mining hardware producer, controls significant hash rate through its Antpool operation. The concentration of mining power in a few pools—including unknown pools, Bitcoin.com, and ViaBTC—raises questions about the risk of 51% attacks and centralized control.
Supporters counter that influential backing is common in cryptocurrency projects and often viewed positively. They note that more than 50% of Bitcoin’s hash rate is also based in China, yet this hasn’t led to widespread concern about centralization or attacks.
Competitive Strength vs. Bitcoin
Skeptics question whether BCH can truly compete with Bitcoin. They highlight Bitcoin’s first-mover advantage, brand recognition, and widespread exchange support. While virtually all exchanges list BTC, many do not support BCH. Bitcoin’s market credibility, built over many years, is seen as a formidable barrier.
Proponents argue that BCH better fulfills Bitcoin’s original purpose as “electronic cash.” They believe Bitcoin’s scalability issues will limit its utility, while BCH’s low fees and fast transactions make it more suitable for everyday use. Some supporters see both coins evolving for different purposes: BTC as a store of value and BCH for daily transactions.
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Hash Rate and Long-Term Viability
After the DAA implementation, BCH’s hash rate declined, leading to concerns about its security and sustainability. Critics worry that without the profit incentives provided by EDA, miners will prioritize Bitcoin due to its higher price and transaction fees, gradually draining hash rate from BCH.
Advocates believe that miners will ultimately follow profitability, and users will prefer networks with lower fees and faster transactions—areas where BCH excels. They argue that user adoption will drive long-term value and network security.
Frequently Asked Questions
What is the main difference between Bitcoin and Bitcoin Cash?
Bitcoin Cash features an 8MB block size, allowing more transactions per block and lower fees. It does not implement Segregated Witness and uses a different difficulty adjustment algorithm to stabilize block times.
How was Bitcoin Cash distributed to users?
Through an Initial Fork Offering (IFO), Bitcoin holders at the time of the fork received an equal amount of BCH. This allowed rapid distribution and exchange listings.
Why was the difficulty adjustment algorithm changed?
The original EDA mechanism caused extreme hash rate volatility, leading to unpredictable block times. The new DAA aims for consistent 10-minute block intervals and better aligns with network hash rate.
Is Bitcoin Cash more centralized than Bitcoin?
Critics point to influential individuals and concentrated mining pools, but supporters argue that all cryptocurrencies experience some degree of centralization in mining and development.
What is the future of Bitcoin Cash?
Supporters believe its utility for daily transactions will drive adoption, while critics see challenges in competing with Bitcoin’s established network effect and security.
Can Bitcoin Cash coexist with Bitcoin?
Many in the community believe both can serve different purposes—Bitcoin as a store of value and Bitcoin Cash for everyday payments.
Conclusion
Bitcoin Cash emerged from a fundamental disagreement about Bitcoin’s future. Its design and distribution were strategically savvy, leveraging Bitcoin’s user base and addressing scalability with larger blocks. Despite ongoing debates about centralization, competition, and hash rate stability, BCH quickly became a top-tier cryptocurrency by market capitalization. Its ability to maintain a strong position reflects both robust support and ongoing interest in its vision for electronic cash.
Note: This article is for informational purposes only and is not intended as investment advice. Always conduct your own research and consult with a financial professional before making investment decisions.