Many crypto fans, especially new ones, are confused about Bitcoin Cash Trading. Let this article guide you and help you decide to invest in Bitcoin Cash.
Most may not understand what Cryptocurrency is and how it works, but many have heard about Bitcoin, a word that became a buzzword during the pandemic period.
Although Bitcoin (BTC) is still favored and the most popular Cryptocurrency, it still is plagued by a few flaws. Most prominent is the low volume of transactions carried out per second, thus restricting its utility for payments.
To solve this problem, Bitcoin Cash (BCH) was the answer. It came into being in 2017, offering a cheaper and faster way to complete a transaction. It has steadily climbed ranks among 25 crypto coins since its inception.
Bitcoin Cash (BCH)
Bitcoin Cash is built upon the same Blockchain technology used by Bitcoin. Through the “hard-fork” of the Bitcoin Blockchain, Bitcoin cash came into existence on 1st August 2017.
Few in the Bitcoin community proposed altering the rules that allowed Bitcoin to process more significant transactional volumes. However, as most nodes were not in favor of this alteration resulting in the hard fork, thus; two Blockchain paths have a common origin, Bitcoin and Bitcoin Cash.
Henrik Gebbings co-founder and co-CEO of Finoa, a digital asset custodian, remarked that it felt like shattering a religion. Further continuing crypto exchanges had to decide whether to allow trading of this freshly forked currency, market players had to determine whether they were interested in the new currency, and miners had to pick which chain to focus their efforts on.
Working of Bitcoin Cash
Blocks, which are collections of transactions added to the Blockchain simultaneously, like in Bitcoin, have a larger size in Bitcoin Cash than in Bitcoin.
There can only be about 7 transactions per second in Bitcoin as blocks can only be 1 MB in size. However, with a block size increase from 8 MB to 32 MB, Bitcoin Cash can now handle more than 100 transactions per second.
Besides block size and transaction speed, Bitcoin Cash and Bitcoin operate in a very similar manner. A decentralized, open-source digital ledger is what it is. By employing cryptography to solve equations, miners verify and add transactions to the Blockchain and are rewarded with Bitcoin Cash coins for their efforts. Then, they can sell the coins to other people. Like Bitcoin, there will only ever be 21 million coins released.
Difference between Bitcoin and Bitcoin Cash.
As you consider Bitcoin Cash Trading, you must understand these differences, one of the most distinct differences is that Bitcoin Cash is faster and cheaper while completing transactions. Where Bitcoin transactions may cost roughly $60 on average, the same transaction is carried out in less than a penny with Bitcoin Cash.
However, faster transactions mean fewer miners are required to process and confirm the validity of transactions, thus compromising security.
While a larger purchase, like a car or house, may call for a slower and more secure cryptocurrency like Bitcoin, said Daniel R. Hill, head of Hill Wealth Strategies in Virginia, “Bitcoin cash would be preferable for something like a cup of coffee.”
Market size is another distinction. As of this writing, approximately $7.1 billion is the market capitalization of Bitcoin Cash. This is a tiny portion of Bitcoin’s $881 billion market capitalization.
Advantages and Disadvantages of Bitcoin Cash.
Although Bitcoin Cash is relatively new, there are some advantages and disadvantages you should be aware of before you indulge in Bitcoin Cash Trading.
- Cheaper, quicker transactions: Bitcoin Cash can handle over 100 transactions per second at less than one penny, making it a viable payment platform. The Visa network only supports 2,000 transactions per second, so Bitcoin Cash still has a long way to go.
- Scalability compared to Bitcoin: Larger blocks in Bitcoin Cash provide a Blockchain with more scalability, lowering user fees and increasing transaction volume.
- Decentralized currency: Bitcoin Cash offers a currency-like system that is decentralized and not controlled by any one body for those concerned about banks and central governments exerting too much-concentrated control over the financial system.
- Accessibility. In contrast to less well-known rivals, Bitcoin Cash is one of the more well-known Cryptocurrencies among the thousands of others available today and can be purchased through the most significant exchanges. Trying to purchase a single Bitcoin is more expensive than purchasing a BCH/USD pair because each coin costs just roughly $112.
- Adoption is rare: According to Russell Star, head of capital markets at DeFi Technologies, “While the majority of the argument has concentrated on such technological discourse concerning processing times and security, I think there is one significant element neglected but undoubtedly most crucial with developing technologies: adoption.” How every network, resource, or technology is used by its users defines its success. Because fewer people use Bitcoin Cash than Bitcoin, it might be challenging to become a popular investment or exchange.
- Inadequate security: Since Bitcoin Cash uses less mining power to verify new blocks, it processes transactions more rapidly and cheaper than Bitcoin. Compared to Bitcoin, the system is less secure as a result.
- Branding challenges: There was a competition to determine which coin would gain more popularity after the fork. Given that Bitcoin has been the clear winner, it is challenging for Bitcoin Cash to distinguish, particularly considering how identical their names are.
- Effect on the environment: The Blockchain proof-of-work technique that Bitcoin Cash uses requires miners to run computers to solve cryptographic equations, which consumes a lot of energy. Even though Bitcoin Cash consumes less energy than Bitcoin, this system still significantly negatively impacts the environment.
Choosing between Bitcoin and Bitcoin Cash
You should buy Bitcoin Cash or Bitcoin, depending on whether you want something to use for transactions or as a long-term investment.
“Bitcoin Cash value has been steadily declining since its origination once represented in Bitcoin. Therefore, it stands to reason that the original Bitcoin would be a more secure investment, “Commented, Gebbing.
The larger block size and lower chain utilization of BCH, on the other hand, “may be employed for near-zero expenses,” according to Gebbing. However, if choosing a Blockchain to trade with, BCH is accepted on many of the same platforms that accept BTC.
“Anyone contemplating investing in Bitcoin or Bitcoin Cash ought to ask themselves if they can withstand a volatile asset class like Cryptocurrencies,” advises Star. Use caution when investing in Cryptocurrencies, as always. However, he went on, anyone who wanted to learn more about Cryptocurrencies and cutting-edge technology might gain from veering away from the most well-liked choices, such as Bitcoin and Ethereum.
Even while the idea behind Bitcoin Cash has some promise, it hasn’t yet accomplished the ambitious objective of dislodging the original Bitcoin. Instead, it could give its elder, bigger sibling a rougher run if it starts to gain popularity as a more accepted form of exchange.
No matter what the market condition is, there is no such thing as “perfect timing” to enter a crypto market. Therefore, as you indulge in Bitcoin Cash Trading, you must invest in crypto the amount of money that you will not regret if the trade happens to be wrong.