- Bitcoin Cash (BCH) is a peer-to-peer electronic cash system, which aims to enable “new economies with low fee micro-transactions, large business transactions, and permissionless spending”.
- Bitcoin Cash originated from an upgrade proposal of Bitcoin, that increased the most block size from 1 megabyte to eight megabytes, which ultimately led to a hard-fork on August 1st, 2017 . Since then, additional changes are approved, like a replacement difficulty adjustment algorithm, the support of latest opcodes, Schnorr Signatures, and further extensions within the block size.
- Bitcoin Cash uses an equivalent SHA-256d-based Proof-of-Work consensus mechanism as Bitcoin. Bitcoin Cash also features a target block time of 10 minutes, and its total supply is capped at 21 million.
- On November 16th 2018, the Bitcoin Cash blockchain withstood another hard-fork, which resulted during a chain split into Bitcoin Cash SV and Bitcoin Cash ABC. Since then, Bitcoin Cash ABC has commonly used the BCH ticker and mentioned as Bitcoin Cash.
- The Bitcoin Cash network has protocol upgrades twice a year, on November 15th and should 15th. These upgrades are required for all node operators . as an example , on May 15th 2018, Bitcoin Cash upgraded to extend its block size to 32 megabytes.
Similar to Bitcoin, Bitcoin Cash is a blockchain secured by a Proof-of-Work algorithm:
- Bitcoin Cash is a peer-to-peer cryptocurrency powered by SHA-256dProof-of-Work (PoW) algorithm. it’s forked from the first Bitcoin protocol to extend the network block size from 1 megabyte to eight megabytes.
- A Proof-of-Work algorithm creates a computational challenge to be solved by the network of computers to verify a block of transactions: this process is named mining. Miners are rewarded by transaction fees (paid by participants for network operations) and therefore the block rewards, which are generated from inflation.
- Bitcoin Cash features a target block time of 10 minutes and a complete maximum supply of 21 million. BCH tokens are produced when the block producer generates a replacement valid block.
- Bitcoin Cash’s emission rate halves every 210,000 blocks, or approximately every 4 years. Bitcoin Cash’s block mining reward has been 6.25 BCH per block since April 9th 2020.
However, unlike Bitcoin, it’s evolved and features specific functions and extra applications:
- Dynamic difficulty adjustment: unlike Bitcoin’s difficulty adjustment (~14 days), Bitcoin Cash relies on a dynamic difficulty adjustment algorithm that re-assesses the problem at every block.
- Smart-contract support: it’s possible to deploy smart contracts on the blockchain.
- Token issuance support: with the straightforward Ledger Protocol (SLP), it’s possible to issue and transfer fungible & non-fungible tokens, which are secured by the Bitcoin Cash blockchain.
2. Bitcoin Cash’s key features
2.1 Nakamoto consensus (shared with Bitcoin)
Bitcoin Cash uses an equivalent consensus mechanism as Bitcoin, during which anyone can join the network and become a bookkeeping service provider, or validator. All validators are allowed within the race to become the block producer for subsequent block, yet only the primary to finish a computationally heavy task will win. This feature is named Proof-of-Work (“PoW”).
The probability of any single validator to end the task first is adequate to the share of the entire network computation power (or hash-power ) the validator has. as an example , a validator with 5% of the whole network computation power features a 5% chance of completing the task first and thus becoming subsequent block producer.
Since anyone can join the race, competition isn’t fixed. within the youth , Bitcoin mining was mostly done by pc CPUs. Yet today, most bitcoin validators, or miners, have opted for dedicated and more powerful devices like ASIC-based machines. the thought behind PoW is that the one who produces a block must have spent resources external to the network (i.e., money to pay electricity) and may provide proof to other participants that they did so. With various miners competing for block rewards, it becomes difficult for one single malicious party to realize network majority (defined as quite 51% within the Nakamoto consensus mechanism). the power to rearrange transactions (alter the immutability of the blockchain) via 51% attacks indicates another feature of each Nakamoto consensus: the finality of transactions is merely probabilistic.
Once a block is produced, it’s then propagated by the block producer to all or any other validators to see on the validity of all transactions therein block. The block producer will receive rewards within the network’s native currency (i.e., bitcoin) as all validators approve the block and update their ledgers. Since April 9th 2020, the present block mining reward has been 6.25 BCH/block.
2.2 UTXO model (shared with Bitcoin)
A UTXO transaction works like cash payment between two parties: Alice gives money to Bob and receives change (i.e., unspent amount). as compared , blockchains like Ethereum believe the account model
2.3 Schnorr signatures
Elliptic Curve Digital Signature Algorithm (“ECDSA”) signatures have historically been wont to sign transactions on the Bitcoin protocol.
However, many developers have advocated for replacing ECDSA with Schnorr Signatures. This has been approved on Bitcoin Cash since May 2019 while it remains in discussion for Bitcoin.
Schnorr Signatures allow multiple parties to collaborate in producing a signature that’s validfor the sum of their public keys, making it particularly beneficial for the general network scalability.
With ECDSA, when multiple addresses wish to conduct transactions to one address, each transaction requires their own signature.
With the utilization of a Schnorr Signature mechanism, of these signatures are often combined into one. Therefore, the network during a position is ready in a position to store more transactions in a single block.
In addition, the reduced size in signatures implies a reduced cost of transaction fees. The group of senders can split the transaction fees for that one group signature, rather than paying for one personal signature individually.
Schnorr Signatures also improve on the network’s privacy and token fungibility. as an example , a third-party observer isn’t ready to detect if a user were sending a multi-signature transaction since the signature would be within the same format as a single-signature transaction.
2.4 Adjusted difficulty adjustment algorithm (DAA)
Unlike Bitcoin, Bitcoin Cash’s difficulty adjustment algorithm (DAA) has been changed since August 1st 2017.
Prior to the hard-fork, most of the hashpower was pointed at Bitcoin, leading to Bitcoin Cash having a minority of the entire initial hashrate. As a consequence, Bitcoin Cash developers introduced the Emergency Difficulty Adjustment (EDA) algorithm to stop block times from being very long, which might render the network inoperable (slow to use). With the mining difficulty being re-adjusted every 14 days for the initial bitcoin protocol, the hashpower dedicated to Bitcoin Cash would are too low so as to mine blocks at bitcoin’s initial difficulty level within an inexpensive amount of your time (compared to the target block time of 10 minutes).
The Emergency Difficulty Adjustment (EDA) algorithm reduced the problem of Bitcoin Cash by -20% if the time difference between the previous 6th block and therefore the previous 12th block was quite 12 hours.
While the EDA initially solved the matter of long block times, it introduced large oscillations in difficulty, causing the Bitcoin Cash blockchain to run ahead by thousands of blocks relative to Bitcoin.
As a response, the initial Emergency Difficulty Adjustment was discontinued and replaced by a replacement difficulty adjustment algorithm (DAA) on November 13rd 2017 to deal with this “difficulty volatility”.
Unlike Bitcoin’s DAA, Bitcoin Cash’s DAA adjusts the mining difficulty after each block. It calculates the problem at each new block supported a moving average window of the last 144 blocks.
2.5 Smart-contract and token support layers
Smart contracts (Cashscript)
Companies backing Bitcoin Cash (e.g., Bitcoin.com) are expanding Bitcoin Cash’s scope of supported services. as an example , Bitcoin Cash developers can utilize smart contract languages to support more complex functions than simply basic transactions on the network.
One smart contract language available to developers is Cashscript. Cashscript is inspired by Ethereum’s Solidity, and aims to permit users to “write Cash Contracts during a straightforward and familiar way”.
Token issuance (Simple Ledger Protocol)
The Simple Ledger Protocol has been the foremost popular protocol to issue tokens.
SLP transactions exist within a specific output referred to as OP_RETURN, which may be a a part of a typical transaction within the bitcoin protocol. If Alice wants to send Bob some tokens, she must send a minimal amount of BCH: the transaction also will contain the info required to transfer the tokens from Alice to Bob.
Token addresses are called “SLP Addr”, which are almost like CashAddr (an alternative way of displaying Bitcoin Cash addresses to stop confusion from Bitcoin addresses).
The Simple Ledger Protocol supports both fungible and non-fungible tokens with different degrees of decimal precision, fixed supply, and whether it’s mintable after the issuance.
The genesis transaction to issue a replacement token must include properties, metadata, and therefore the initial mint quantity of the token. In short, the SLP supports multiple sorts of transactions: genesis, mint, send, and commit operations.
While the straightforward Ledger Protocol remains in its early stage, Tether, the most important stablecoin issuer, announced its plans to issue new USDT on the straightforward Ledger Protocol, heightening its support to new blockchains.
3. Economics and provide distribution
As discussed previously, Bitcoin Cash utilizes the Nakamoto consensus and nodes validate blocks via Proof-of-Work mining. From the attitude of miners, fees are a mixture of transaction fees and block reward fees (generated from inflation).
Bitcoin Cash features a maximum supply of 21 million. After the hard-fork in August 2017, owners of Bitcoin were ready to claim BCH at a pro-rata rate of their holdings. Similarly, other chain splits such (as the BCH/BSV hard-fork) allowed miners to say their holdings on both chains.
Bitcoin Cash follows an equivalent block reward halving schedule as Bitcoin. Since the target time for block production on the Bitcoin Cash blockchain is 10 minutes, it implies that Bitcoin Cash block reward halvings are sure to happen every ~4 years. As a result, the last new BCH ever mined will likely be around 2140. then , transaction fees are going to be the sole direct revenue source for miners.
Due to their distinct patterns in past difficulty adjustments, halvings amongst Bitcoin forks don’t occur at an equivalent time. as an example , Bitcoin Cash’s 2020 halving occurred much before Bitcoin’s third halving.