Should you invest in Bitcoin Cash? Pros and Cons

The cryptocurrency market includes a lot of various coins – 1878 to be exact. Bitcoin, or BTC, is the first ever cryptocurrency and has the largest market capitalization, as well as the price (as of August 23, one BTC is valued at $6,445.49). The second most valued cryptocurrency is BCH, which acts as the major competitor to Bitcoin, and not only in terms of price. So, what exactly is Bitcoin Cash and why investors buy into it?

Younger Bitcoin’s brother

The coin came into existence as a spinoff of Bitcoin. It may sound tricky but the overall idea of the split is simple and straightforward. 

Bitcoin has a limited size of the block – no more than 1 MB. The key issue with the BTC blockchain is the more transactions are processed, the slower the network becomes. This is known as a scalability problem that has been looming over Bitcoin since its inception. It encountered the scaling crisis in 2017 when the number of transactions increased dramatically due to wider adoption of cryptocurrency. For faster deals, users were forced to pay higher miner fees. Slow network speed with about 7 transactions per second (compare it to 20,000 for Visa) and significant fees nullified the main idea of Bitcoin as a better alternative to fiat money. In response to all these issues a group of key members of the Bitcoin community initiated an upgrade and created Bitcoin Cash that is now capable of processing 32 MB blocks. 

Where to buy and store BCH?

Now that you understand what BCH is, it’s high time to find out what to do next. Here are some helpful notes. 

First, find an exchange which allows for buying BCH:

  • Coinbase – the largest fiat-to-crypto exchange service that supports USD, EUR, and GBP.
  • Bitfinex – old and trusted exchange which trades BCH for USD, BTC, and ETH. 
  • Kraken – advanced trading platform with both fiat and crypto pairs, it exchanges BCH for EUR, USD, and BTC. 

If you are looking for more specific instructions, you can refer to comprehensive guides like that on how to buy Bitcoin Cash explained by Katie Wager.

Then, get the cryptocurrency wallet to store coins. The options are various: 

  • Online Wallets – BTC.com, Bitcoin.com, Coinbase. 
  • Desktop and Mobile Wallets – Electron Cash, Exodus, Jaxx, BitPay.
  • Hardware Wallets – Ledger and Trezor (the most trusted and reliable wallets). 

The full list of supported wallets is on the official site of Bitcoin Cash. 

Is BCH a good choice for investment?

Pros

  1. Higher network speed and lower fees. 

The initial block size in the BCH network was 8 MB which was 8x more than a single Bitcoin block. Recently Bitcoin Cash has scaled to the 32MB blocks when Bitcoin upgraded only to 2 MB.

The increased block size allows miners to process a larger number of transactions faster and thus earn more in terms of transaction fees and rewards. It’s also obvious that miners charge lower fees for their work so far as it takes less time and power. 

As of June 21, the average transaction fee for Bitcoin Cash is $0.08. Compare it to Bitcoin’s $6.85 and the advantage of Bitcoin Cash will become apparent. However, Bitcoin Cash isn’t the fastest or the cheapest crypto system so far. 

  1. Mining difficulty adjustments. 

Right after the original split, leaders of Bitcoin Cash tried to take new miners away from Bitcoin’s network. The EDA principle was introduced to let the fresh and still small chain of Bitcoin Cash survive. However, EDA resulted in major hashrate and difficulty fluctuations.

Then the community developed a new algorithm called DAA. It stabilized difficulty, so blocks are mined regularly now. With the new algorithm, miners prefer to produce only BCH instead of frequent switching between BCH and BTC. Additionally, Bitcoin Cash with its DAA principle is protected from timestamp attacks. 

Bitcoin Cash has slightly lower mining profitability – 0.34 USD/day for 1 THash/s than that of Bitcoin – 0.36 USD/day. Despite this, mining BCH is more convenient for solo users and pools due to its difficulty adjustment algorithm. 

  1. Wide acceptance. 

With the main idea of BCH as the new global electronic cash, it slowly conquers the market. Many merchants including BitPay accept this cryptocurrency thanks to the network’s speed and low fees. It’s simple: Bitcoin Cash is relatively cheap with its price of $870, so it’s more suitable for various financial operations than Bitcoin with its $6,700 value.

Thanks to BitPay support, more companies start accepting Bitcoin Cash. As the brightest example, it’s Microsoft which enabled BCH payments for products and services. Also, there is CoinGate that allows websites to accept donations in BCH via their API integration. 

Another proof of acceptance is the 4th place in the list of the largest cryptocurrencies by market capitalization.

Cons

  1. Centralization. 

Centralization is the main drawback of Bitcoin Cash which contradicts the overall blockchain’s idea. According to Coin Dance, four large mining pools are in control of over 51% of the total network power. It’s not the real central power, surely. But theoretically these four big players may perform a 51% attack to rule the blockchain system by accepting or declining transactions in sole discretion. 

  1. Real leaders.

This problem is closely tied to the previous one. Decentralization means that there is no particular person who can dictate the pace of the network development. But this is not the case with Bitcoin Cash that is highly centralized in terms of leadership. 

The promoters and inspirers of BCH are Roger Ver and Jihan Wu. 

  1. Huge blockchain. 

Large blocks can be seen as a disadvantage as well. With larger blocks miners are required to have more hardware storage capacity to hold the entire blockchain. This means, users should invest substantial sums in upgrading their mining equipment in order to match the needs of the increasing network. 

This submission was a guest post, if you would like to submit a guest post to bitguru, get in touch at contact@bitguru.co.uk

By | 2018-09-04T13:58:04+00:00 September 4th, 2018|Bitcoin Cash|0 Comments

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