Still on a roll: where the cryptocurrency Bitcoin Cash (BCH) is going
It is not easy to change the rules of an existing blockchain, so developers resort to creating a separate network — a hardfork. Bitcoin Cash was one of the first and most famous hardforks of the first blockchain protocol. We will talk about it in this article.
The path of Bitcoin Cash's formation
Bitcoin Cash appeared on August 1, 2017 and became the first hardfork of the Bitcoin network. All BTC cryptocurrency owners who stored coins in their wallets before this date received BCH coins in a 1:1 ratio. Such cryptocurrencies are also called splitcoins, although users rarely use this term.
Developers often resort to hardforks if disagreements between them — this is a kind of compromise, in which each team can go its own way. This is how Ethereum was split in 2016, for example.
In the case of Bitcoin, the reason for the split in the development team was not only the low performance of the blockchain but also the controversial SegWit update (BIP91), which implied the use of second-level solutions to scale the network. As a result, developers and large miners developed an alternative option in case SegWit was activated. The Bitcoin Cash hardfork was supported by Bitmain, a well-known mining equipment manufacturer, and ViaBTC, a large mining pool.
The Bitcoin Cash protocol was also one of the early attempts to fix performance issues with the Bitcoin blockchain. Bitcoin Cash developers increased the block size by 8 to 8MB to achieve higher throughput. This made it possible to accommodate more transactions. In May 2018, an update was released in which the block size was increased another 4 times to 32 MB.
It also shortened the complexity recalculation period from 2016 blocks to 144 blocks — in Bitcoin Cash, it happens every 24 hours instead of Bitcoin's two weeks.
However, there was also a split in the Bitcoin Cash team, and in November 2018, the network was split into two blockchains — Bitcoin ABC and Bitcoin SV. Most miners supported the former protocol, which was later renamed Bitcoin Cash.
What has become of the BCH exchange rate
Although Bitcoin Cash is very similar to Bitcoin, it is not even close in demand compared to the first cryptocurrency. In 2021, amid the hype surrounding cryptocurrencies, the BCH exchange rate failed to reach a new all-time high (ATH).
In December 2017, the price of Bitcoin Cash reached ATH at $4355, and in May 2021, it only rose to $1549, although many altcoins from CoinMarketCap's top 100 have updated their highs. The situation was the same with other "old generation" altcoins such as:
This is probably due to the growing competition among blockchains, as new generation blockchains like Polkadot, Solana, Avalanche and Cosmos, including Ethereum's second layer scaling networks like:
Challenges hindering Bitcoin Cash's development
If we abstract and look at the project from the outside, everything looks like its developers pursued only speculative interests. Interestingly, one of the supporters of the Bitcoin Cash project, Roger Ver, stated that speculative interest in Bitcoin levelled its value as a digital asset.
To identify one of Bitcoin Cash's significant shortcomings, it is enough to visit GitHub with its source code, which gives the impression of the project's abandonment. No Bitcoin Cash update, even a minor one, has been released in the last year. The profile has only one follower on GitHub, meaning almost no one follows the project. Bitcoin Cash lacks any development, one of the primary growth factors for many blockchain projects. To see this, you can compare Bitcoin Cash's profile with GitHub, like Polkadot or Solana, where updates are released almost daily.
Another problem with Bitcoin Cash has been the rapidly growing size of the blockchain. According to observers, the size of each copy of the blockchain is 195 GB, which is about 2.7 times smaller than Bitcoin, but due to the increased block size, the data growth rate is 32 times higher.
All this does not mean that Bitcoin Cash and similar altcoins will disappear, at least shortly. At the previous peak of cryptocurrency popularity in 2017, Bitcoin Cash and Litecoin were the leading projects. They have significantly lost ground but are still among the top 20 largest cryptocurrencies in the CoinMarketCap ranking. They will likely continue to grow in a bull market following the leading cryptocurrency. Still, not as much as during the first global bullrun, and it is unlikely that they will return to the top ten assets by capitalization.
Bitcoin Cash growth factors
Despite Bitcoin Cash's shortcomings and the lack of developer activity, signs of future growth remain. In particular, this is indicated by key on-chain metrics, but let's go through them all in order.
In June 2023, EDX Markets (EDXM), a platform for trading cryptocurrency and other digital assets, was launched, targeting major Wall Street players such as Fidelity and Citadel.
Only four assets were listed on the platform:
- Bitcoin (BTC),
- Ethereum (ETH),
- Litecoin (LTC),
- Bitcoin Cash (BCH).
They were not recognized as securities by SEC Chairman Gary Gensler himself.
After the launch of EDXM, the activity of large players and all other investors increased, and the number of daily transactions with BCH worth more than $100,000 increased more than 7 times from 102 to 766, according to Santiment analytics service. All this indicates that interest in Bitcoin Cash among investors remains high and continues to grow despite all its shortcomings.