What is Bitcoin Cash? A Simple Guide for Cautious Investors

Did you know? In 2017, a Bitcoin Cash transaction cost under a penny. Meanwhile, a Bitcoin transaction cost over $50. Moreover, someone once paid a $30 fee for a $4 coffee with Bitcoin. Indeed, these examples show why Bitcoin Cash exists.

Exploring crypto but confused by jargon? You’re not alone. Today, we’re explaining what is Bitcoin Cash (BCH) simply. Therefore, anyone can understand it. Whether you’re new to crypto or an experienced financial professional, this guide is for you.

What Exactly Is Bitcoin Cash?

The short answer: Bitcoin Cash is a cryptocurrency. It was created in 2017. It’s an offshoot (or “fork”) of Bitcoin. Furthermore, it was designed for everyday purchases.

Think of Bitcoin Cash as Bitcoin’s cousin. However, it addresses Bitcoin’s limitations. Although they share history, they function separately today.

Fascinating fact: When Bitcoin Cash launched, Bitcoin owners received equal amounts of Bitcoin Cash. In other words, they got free money! For instance, people with just 10 Bitcoin suddenly had Bitcoin Cash worth thousands. Consequently, many early adopters benefited greatly.

Why Was Bitcoin Cash Created?

To understand Bitcoin Cash, it helps to know the problem it aimed to solve.

Bitcoin, the original cryptocurrency, became a victim of its own success. Consequently, as more people used it, the network became congested. In fact, imagine a highway during rush hour. Transactions moved slowly. Furthermore, they cost more in fees.

The Bitcoin community disagreed about how to solve this problem:

• One group wanted to keep things mostly the same (the current Bitcoin)
• Another group wanted to increase capacity by enlarging the “blocks” of transaction data (this became Bitcoin Cash)

When the two sides couldn’t agree, the blockchain split on August 1, 2017, and Bitcoin Cash was born.

The drama behind the scenes: This split wasn’t just technical – it was highly political. Prominent Bitcoin personalities engaged in heated Twitter battles, with some even receiving death threats! The debate was so intense that it’s often referred to as the “Bitcoin Civil War,” showing just how passionate people can be about cryptocurrency governance.

The Key Differences Between Bitcoin and Bitcoin Cash

For investors asking “what is Bitcoin Cash compared to Bitcoin”, here are key differences. Also, these points show practical considerations:

1. Transaction Speed: Bitcoin Cash handles more transactions per second. Thus, it works better for daily purchases. While Bitcoin processes 7 transactions per second, BCH handles 116.
2. Transaction Fees: Bitcoin Cash has lower fees. Often just pennies. In contrast, Bitcoin fees can reach $20-$50 during busy times.
3. Block Size: Bitcoin Cash has larger “blocks” (8MB vs 1MB). This is like having wider highway lanes. The Bitcoin Cash Association emphasizes this technical advantage.
4. Market Position: Bitcoin remains the most recognized crypto. It has the highest market value. Nevertheless, Bitcoin Cash ranks lower in market cap.

Real-world impact: In December 2017, Bitcoin fees peaked. As a result, Stripe stopped accepting Bitcoin payments. Meanwhile, Newegg and Microsoft paused Bitcoin payments. However, they continued accepting Bitcoin Cash. Therefore, some businesses clearly prefer BCH for commerce. Check our Crypto Payment Adoption article for more examples.

The Potential Advantages of Bitcoin Cash for Cautious Investors

Considering crypto but wondering what is Bitcoin Cash good for? It offers benefits. Additionally, it addresses practicality:

• Established History: Unlike newer cryptocurrencies, Bitcoin Cash dates to 2017. Hence, you can evaluate its track record.
• Real-World Utility: Lower fees make Bitcoin Cash useful for commerce. Faster transactions help too. As a result, these features support long-term value.
• Name Recognition: Not as famous as Bitcoin. Nonetheless, it has brand familiarity many alternatives lack.
• Accessibility: Available on most crypto exchanges like Coinbase and Binance. Therefore, it’s easy to buy and sell. Learn more about getting started in our Beginner’s Guide to Cryptocurrency.

The Risks to Be Aware Of When Investing in Bitcoin Cash

As a prudent investor researching what is Bitcoin Cash investment risk, consider these downsides. Still, understanding risks remains essential:

• Volatility: Like all cryptocurrencies, Bitcoin Cash has price swings. For example, it might gain or lose 20% in one day.
• Regulatory Uncertainty: U.S. regulations continue evolving. Consequently, this could affect future value.
• Competition: Bitcoin Cash faces rivals. Not just Bitcoin but many other cryptocurrencies and payment systems.
• Security Needs: While the network is secure, your holdings need protection. Otherwise, theft becomes possible. The Cryptocurrency Security Alliance provides valuable security resources.

How Bitcoin Cash Fits Into a Diversified Investment Strategy

Looking to try crypto while staying conservative? For those asking what is Bitcoin Cash’s role in a portfolio, consider this approach:

• Allocate only a small portfolio percentage. Many advisors suggest 1-5% maximum for all crypto.
• View Bitcoin Cash as one element. Include it alongside Bitcoin and other established options.
• Consider crypto as long-term holdings. This helps manage volatility.

For more detailed investment strategies, visit our Cryptocurrency Portfolio Management guide.

Getting Started with Bitcoin Cash

Now that you understand what is Bitcoin Cash, want to add it to your portfolio? Here’s how to begin. First, follow these steps:

1. Choose a Reputable Exchange: Use platforms like Coinbase, Kraken, or Gemini. They let you buy with U.S. dollars.
2. Create a Secure Account: Use strong passwords. Also, enable two-factor authentication for safety.
3. Start Small: Begin with a modest investment. This helps you learn the process.
4. Consider a Secure Wallet: For larger amounts, try hardware wallets like Ledger or Trezor that store crypto offline. Our Hardware Wallet Comparison can help you choose.

The Bottom Line on What is Bitcoin Cash

Bitcoin Cash offers an interesting option for investors. Above all, it has practical applications. Though it carries risks, its history is established. Indeed, its advantages make it worth considering in a balanced strategy.

If you’re still asking “what is Bitcoin Cash worth investing in?”, remember that education and caution are vital. Hence, study before investing. Finally, consider talking to a financial advisor familiar with digital assets.

Disclaimer: This article provides information only. It is not investment advice. Crypto investments involve significant risks. Always research thoroughly and consider your financial situation before investing.