Part 1: Introduction to Bitcoin Cash
Part 2: Investment Case for Bitcoin Cash
Part 3: Introducing BCHetc: ETC Group Physical Bitcoin Cash
Learn more about our Bitcoin Cash ETC.
It is our view that Bitcoin Cash (BCH) remains one of the most high-profile cryptocurrencies in the world, four years after its release on 1 August 2017. It began as a fork of the original cryptocurrency, Bitcoin, and in the intervening years has seen global merchant adoption as a cross-border payments protocol promising cheap, fast transactions, with all the security, transparency and tamper-resistant benefits of a world-leading blockchain.
October 2020 was a significant turning point for Bitcoin Cash, as it was chosen among only three other cryptocurrencies to form the backbone of Paypal’s crypto strategy. The same move was enacted by the payments service Venmo, putting Bitcoin Cash in reach of millions of new users in the US and across the world. When reports surfaced in July 2021 that e-commerce giant Amazon was ready to begin accepting cryptocurrencies from its 213 million monthly users, only four cryptocurrencies were mentioned: Bitcoin, Ethereum, Cardano and Bitcoin Cash.
One key usage point for Bitcoin Cash, and certainly one that its advocates have promoted since 2017, is as an alternative or replacement for central bank-issued currencies subject to hyperinflation.
As Reuters reported in June 2021, countries such as Zimbabwe and Venezuela whose citizens are hemmed in by hyperinflationary fiat currencies are increasingly turning to worldwide payment networks like Bitcoin Cash. With the prices of food, fuel, medicines and everyday goods and services triggered by an excessive increase in the M1 money supply, people are turning to non-central bank currencies with low fees in order to survive.
ETC Group (www.etc-group.com) is the issuer behind 2020’s most successful Bitcoin exchange traded product launch in Europe, namely the ETC Group Physical Bitcoin (“BTCetc” or commonly known under its primary ticker “BTCE”).
Through the recent launch of the ETC Group Bitcoin Cash ETC, with primary listing on Deutsche Börse XETRA, ETC Group decided to provide investors now with the opportunity to gain exposure to the cryptocurrency Bitcoin Cash.
Investors Guide to Bitcoin Cash
What is Bitcoin Cash?
Bitcoin Cash emerged out of a disagreement between Bitcoin developers as to how the original cryptocurrency should grow, move forward, and become more efficient at processing transactions.
In 2017, BCH was created as a hard fork of Bitcoin. Considering 1MB block size limit of the original Bitcoin, many of its developers were concerned that Bitcoin would not be able to scale effectively and become the global alternative payments network its creator Satoshi Nakamoto intended.
Accordingly, the Bitcoin blockchain split into two forks at block 478,558. Everyone who held 1 Bitcoin (BTC) also received 1 Bitcoin Cash (BCH).
Bitcoin Cash developers increased the size of blocks to allow more transactions to be processed and to improve scalability.
Supporters of Bitcoin Cash have relentlessly promoted the cryptocurrency as an alternative payment mechanism. The results of this campaign are starting to come to fruition. As of February 2020, some 4,300 merchants both on- and offline accepted Bitcoin Cash as an alternative payment mechanism. Various data trackers like AcceptBitcoin.Cash keep a real-time record of the online and brick-and-mortar stores that accept BCH alongside fiat currencies like the US dollar or Japanese Yen, and as of 16 August 2021, over 9,150 merchants across every industry and sector now accept BCH.
What is a blockchain?
Blockchains are digital ledgers that keep permanent incorruptible records of information. These records are continually verified by a network of computer nodes like servers, which are not centrally controlled by anyone. Bitcoin Cash is just one of many cryptocurrencies that use some form of blockchain technology, which was invented by Satoshi Nakamoto” when the bitcoin blockchain was released over a decade ago.
While several cryptocurrencies may rely on similar core concepts of blockchain technology, their use cases are different. Bitcoin - the cryptocurrency investors usually discover first - is optimized for security and anti-seizure, which enhances its use case to serve as digital gold.
What is a hard fork?
In blockchain, a fork is a change of its underlying protocol which means it is a split from its original path which represents a major change (hard fork) or a minor one (soft fork).
A hard fork can occur in any blockchain and leads to permanent chain separation. Token holder of the original blockchain is given tokens on the new chain due to the shared history.
How is Bitcoin Cash similar to Bitcoin?
There are still some technical similarities despite their different point of views.
BTC (Bitcoin) and BCH (Bitcoin Cash), both use of the same Proof of Work (PoW) consensus mechanism to mine coins. In both Blockchain, each block is generated every 10 minutes to ensure space and time between transactions. Bitcoin and Bitcoin Cash have both limited their supply to 21 million coins.
How is Bitcoin Cash different to Bitcoin?
Bitcoin’s current block size limit is 1MB whereas Bitcoin Cash’s blocks are up to 32MB.
Because of this continued blocksize limit, among other technical limitations, the Bitcoin blockchain tops out at a maximum of 7 transactions per second. Bitcoin Cash, by contrast, has scaled to a current level of around 100 transactions per second. There are plans ongoing for this theoretical limit to reach much higher, too.
The removal of Bitcoin Cash’s block size barrier enables to scale effectively and increase transaction throughput programmatically which leads also to lower energy consumption.
Using statistics sourced via blockchain explorer Blockchair, this overview suggests that Bitcoin Cash uses 97.3% less energy per transaction than Bitcoin.
Bitcoin Cash has lower transaction fees than Bitcoin. As of 16 August 2021, fees on the BCH network stand at $0.0035, with a median fee of $0.0015. To send or receive BTC costs $0.60 as per the latest data, with a median fee of $0.39
In 2019 Bitcoin Cash introduced the ability to process smart contracts.
Bitcoin Cash has Testnet4 and Scalenet that allow developers to run tests on new features, smart contract code and network upgrades before they go live.
These exist to stress-test BCH in advance of major development upgrades. Most decentralised applications, from DeFi to NFTs and many others, will leverage testnets to trial their software and its interactions with existing smart contracts to iron out bugs before the project goes live on the mainnet.
What is a smart contract and why is it useful?
Smart contracts are self-executing contracts with the terms of the agreement between e.g. buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.
Smart contracts are useful as they permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism.
For more information on exchange traded Bitcoin Cash, view our Bitcoin Cash ETC.