Bitcoin Cash is an offshoot of Bitcoin that quickly became a valuable cryptocurrency in its own right. But many people have a hard time understanding how or why this crypto coin came to be. Why was it necessary, what’s its purpose, and what does the hard fork event that created it mean?
A hard fork in the crypto sphere is an extreme alteration to a network’s protocol that changes how transactions on the blockchain get recognised. This usually also implies that all nodes in the network get the newest edition of the protocol’s software.
Any cryptocurrency network can have a hard fork, so this isn’t something that only relates to Bitcoin. Case in point, the Ethereum network also had a hard fork which resulted in two crypto currencies, Ethereum (ETH) and Ethereum Classic (ETC).
Creating a new crypto currency as a result of a hard fork isn’t always the case. But in the case of Bitcoin, it was.
The main reason why the Bitcoin hard fork happened was a disagreement between developers and miners. Some developers preferred the idea of having slower transfer speeds and high transaction fees because both were used as a compromise to improve network security.
Miners, on the other hand, along with other developers, were in favour of speeding up the network and eliminating high transaction fees in order to make processing transactions much faster. Whether one group had better arguments than the other is still up for debate.
What’s certain is that in August of 2017, a new cryptocurrency emerged in the form of Bitcoin Cash as it split from Bitcoin Core (BTC). The result of the hard fork and protocol upgrade was a new cryptocurrency, easily among the most valuable on the market, with a higher block capacity.
Bitcoin Cash was the result of just one of many hard forks that Bitcoin dealt with over the years. This hard fork happened just months after the Bitcoin Cash hard fork. Its purpose was to bring back GPU mining efficiency.
Was it necessary? Probably not.But it was an exciting idea and one that could draw in a new wave of crypto miners. Given the expensive nature of specialized ASIC miners. The result? Another cryptocurrency, less valuable than Bitcoin Core or Cash, but one that works on a different proof-of-work algorithm.
An algorithm suitable for solving with GPU cards where the entry-level investment cost is lower. This alt coin also follows most of the early principles of traditional Bitcoin.
A hard fork, as already mentioned, is an extreme and radical change in protocol. But developers don’t implement hard forks just to create new cryptocurrencies. Some hard forks, like the one on the Ethereum network was done in order to roll back transactions that were hacked.
In other situations, a hard fork doesn’t spawn a new valid cryptocurrency.Instead, it does an overhaul of the network’s security. This is the main difference between a hard fork and a soft fork.
With a hard fork, essentially two blockchains exist, the old one and the new one. With a soft fork, only one blockchain remains and one crypto coin. Hard forks also rely on new software updates for the new blockchain to behave according to the new set of rules.
That said, a hard fork is often preferred. Between the immense computing power needed for redoing the blocks in the blockchain, and the extra privacy and security that it provides, a hard fork is a more likely event when things drastically need to change.
Bitcoin Cash is a very valuable cryptocurrency. It’s usually on par with Ethereum for the number two spot after Bitcoin, in terms of market value. It can be a valuable investment and much more accessible for small investors that want to accumulate a decent amount of crypto assets.
It’s also an interesting choice for miners. Bitcoin Cash is mined with the same equipment as BTC. Yet there is potential for a bigger reward per block as Bitcoin Cash blocks hold many more transaction fees. Even if they are smaller than BTC fees.
Availability is not an issue either as all popular wallets allow you to store the crypto and all exchange markets that feature Bitcoin, feature Bitcoin Cash as well.
Given Bitcoin’s track record, it shouldn’t surprise you that more hard forks will happen in the future. From security upgrades to improving the software, to even changing the block capacity – anything can warrant a hard fork at some point as long as it provides a significant overhaul of the network.
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