How Bitcoin Cash (BCH) Works and What's Special About It

Bitcoin Cash (BCH) was created to solve Bitcoin’s scalability problem, making it more efficient for everyday transactions. While Bitcoin is often seen as a store of value, BCH aims to function as digital cash, enabling fast, low-cost payments. 

Understanding how Bitcoin Cash works is key to appreciating its role in the evolving cryptocurrency landscape.

Source: Gemini.com

Bitcoin’s Scalability Challenge and Segregated Witness 

Bitcoin, the first cryptocurrency, introduced a revolutionary decentralized payment system. However, its design limitations became evident as transaction volumes grew. 

Bitcoin processes a block approximately every 10 minutes, with a 1MB block size cap, allowing only about seven transactions per second. In contrast, traditional payment networks like Visa handle tens of thousands of transactions per second.

To address these bottlenecks, two approaches emerged: small-block solutions like Segregated Witness (SegWit) and large-block alternatives. 

SegWit, implemented on Bitcoin, separates transaction data from digital signatures, effectively doubling the block size to 2MB without requiring a network-wide hard fork. Despite its potential, SegWit adoption remains limited.

Bitcoin Cash and Block Size Advantage 

Bitcoin Cash was created in 2017 through a hard fork from Bitcoin. It adopted a different solution to scalability—increasing block size to 8MB. 

This change significantly boosted BCH’s transaction capacity to approximately 116 transactions per second, making it faster and cheaper than Bitcoin.

The tradeoff, however, lies in decentralization. Larger blocks require more computing power, limiting who can operate full nodes. 

This raises concerns about potential centralization, where fewer entities control network validation, affecting blockchain security. Despite these challenges, BCH’s larger blocks make it more practical for real-time transactions.

Read also: Bitcoin Cash (BCH) Price Prediction 2025-2050

How Bitcoin Cash Works 

Bitcoin Cash operates similarly to Bitcoin but with structural modifications. Key features include:

Larger Block Sizes: BCH’s blocks can store more data, enabling faster processing of transactions.

Lower Fees: Reduced transaction costs make BCH suitable for microtransactions.

Proof of Work (PoW) Consensus: Like Bitcoin, BCH relies on miners to validate transactions and secure the network.

Use Cases 

Bitcoin Cash is designed for everyday payments. You can use it to pay for small purchases, like coffee, without the delays or high fees typical of Bitcoin. For large, secure transactions, BTC may still be preferable.

Comparison to Bitcoin

Transaction Speed: BCH processes transactions faster than BTC.

Fees: BCH offers lower transaction costs.

Utility: BTC is favored as a store of value, while BCH focuses on payments.

Conclusion 

Bitcoin Cash provides a compelling alternative to Bitcoin by prioritizing speed and cost efficiency. 

While its adoption as digital cash grows, debates over decentralization and scalability persist. 

BCH remains a vital player in the cryptocurrency ecosystem, bridging the gap between blockchain technology and everyday usability.

FAQ

What makes Bitcoin Cash different from Bitcoin? 

Bitcoin Cash features larger block sizes, allowing faster transactions and lower fees compared to Bitcoin.

Is Bitcoin Cash faster than Bitcoin? 

Yes, BCH processes more transactions per second due to its increased block size.

What are the main use cases for Bitcoin Cash? 

Bitcoin Cash is designed for everyday purchases and real-time payments.

Is Bitcoin Cash decentralized? 

While BCH remains decentralized, larger block sizes require more computing power, raising centralization concerns.