Bitcoin Cash was born in August 2017 as an alternative to Bitcoin. But what is it used for?
Bitcoin (BTC) still has blocks with a maximum size of 1 MB, which are mined every about 10 minutes and which are able to contain a limited number of transactions, usually less than 3,000.
Therefore, with an average of about 300,000 on-chain transactions per day, Bitcoin currently does not allow the recording on the blockchain of a very large number of transactions, due to structural limitations, which also results in relatively high transaction costs.
In 2017, as there was no Lightning Network yet, it was proposed to significantly increase the maximum block size. This led to a fork and the birth of Bitcoin Cash (BCH).
The goal was to allow the recording on the blockchain of a much higher number of transactions, at a lower cost.
As a result, Bitcoin Cash is used primarily for very low-cost on-chain transactions, given that the average fee to date is less than one-hundredth of a dollar.
It is worth noting that Lightning Network, the scalability solution for BTC, does not record all transactions on the blockchain, so it cannot be used to perform low-cost blockchain transactions, but only for fast and inexpensive BTC transactions.
To date, LN allows faster and cheaper transactions compared to BCH’s on-chain transactions. And its use is not yet widespread.
And so, as the name itself suggests, Bitcoin Cash was born as a transactional alternative to Bitcoin, which is considered primarily as an investment or store of value.
Nevertheless, BCH has in common with BTC the volatility of its value, so although it is a better transactional currency than Bitcoin, it is certainly not as good as a stablecoin, for example.
This does not detract from the fact that it is a fairly accepted means of payment, precisely because of its low transaction costs, and that it is also quite widespread, as demonstrated by the hundreds of BCH ATMs scattered around the world.
In addition to being a means of payment, it is also used to record information on the blockchain at a low cost. In fact, its main strength is precisely the low fees for recording transactions on the public and decentralised blockchain, despite the fact that the consensus algorithm is still the very solid proof-of-work, which is also used by Bitcoin. In fact, many of the low-cost alternatives do not use PoW, so the BCH blockchain maintains a high level of security, but with very low costs of use.