Bitcoin Cash comes from Bitcoin. It’s based on the same technology and it’s used the same way, but it’s a unique variation that is separate from the world’s first and most famous cryptocurrency. Here’s what you need to know.
Bitcoin Cash is a cryptocurrency that was created in 2017 from a “fork” in the original Bitcoin blockchain. Think of it as a branch on a family tree that can then form new branches of its own.
Just like Bitcoin, Bitcoin Cash is:
Decentralized and not backed by a bank or government
Processed, validated and logged on a blockchain
Finite and therefore impervious to inflation — just like Bitcoin, only 21 million will ever be made
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The original Bitcoin blockchain had big problems that involved complicated stuff like signature data, block size and a technology known as segregated witness, all of which is beyond the scope of this article. Basically, Bitcoin outgrew its blockchain, which was made from small blocks that got clogged as Bitcoin’s popularity surged. As more people joined, the system became harder to scale. Both transaction times and transaction costs grew so high that Bitcoin’s chief miners and producers worried about its viability.
They responded by creating what is known as the Hard Fork, a deviation from the original Bitcoin chain. The new chain had bigger blocks that could be scaled to accommodate Bitcoin’s ever-growing user base. Since it sped up processing times and reduced costs enough to let Bitcoin be used just like cash, the only fitting name was Bitcoin Cash.
As of March 25, Bitcoin Cash is trading around $480, much less than the $51,000 or so you’d pay for a single Bitcoin. When it comes to value and price, however, the twin cryptocurrencies do have one thing in common — extreme volatility. About a month ago, Bitcoin Cash was trading above $700. Less than two months before that around Christmas 2020, it was trading under $300. That, however, is nothing compared to 2017-18, when Bitcoin Cash went from well over $1,000 to well under $100 — apparently trying to make every stop between — and then back again in about a year.
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If you can stomach the roller-coaster volatility of Bitcoin, if you can keep up with its complex and always-evolving technology and you’re OK with the fact that it’s not backed by any institution that you recognize, then you could certainly make an argument for Bitcoin Cash. Like Bitcoin itself, Bitcoin Cash offers the potential for otherworldly profits, but also like Bitcoin, high risks, big bubbles and crazy price swings are part of the package.
This article is part of GOBankingRates’ ‘Economy Explained’ series to help readers navigate the complexities of our financial system.
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Last updated: March 29, 2021
This article originally appeared on GOBankingRates.com: Bitcoin Cash (BCH): The Most Important Things You Need To Know About It