What is Bitcoin Cash?
Bitcoin Cash (BCH) is a hard fork of Bitcoin. The hard fork was the result of a debate over the block size limit of Bitcoin. In mid-2017, a group of developers proposed a code change to increse the block size. The change took effect on the first of August 2017. The Bitcoin blockchain split in two. The original Bitcoin with a block size of 1 MB and Bitcoin Cash with a block size of 8 MB. Anyone owning Bitcoin at the time of the fork also owns the same amount of Bitcoin Cash.
Block size controversy
The block size sets the limit for the amount of transactions that can fit into a block. This means that the transactions per second that a blockchain can process are limited. When there are more transactions to process than a blockchain can handle, the fees for transactions rise. Miners choose transactions with high fees first because the mining rewards are higher.
When Bitcoin reached its highest price in December of 2017, the transaction fees were also at an all-time high. One Bitcoin transaction cost 55 Dollars to process. That’s why in mid-2017 wanted to increase the block size to lower transaction fees. However, not all members of the community were in favor of the block size increase. Bitcoin proposed plans for SegWit, a soft fork which allows blocks to be bigger than 1 MB without chaning the block size limit. Some developers however were not happy with SegWit so Bitcoin Cash was created.
Bitcoin Cash features a block size of 8 MB instead of 1 MB like in the original Bitcoin. However there are not only advantages of increasing the block size. A block size increase offers more transactions per second and therefore less transaction fees. A big disadvantage of a block size increase is that it harms the decentral aspect of a blockchain. Larger blocks lead to less hashers running full nodes because they become more expensive to operate. This means that only a few big nodes have control over the entire network which makes the blockchain more centralized.