On 1st August 2017, Bitcoin’s blockchain forked; meaning a different cryptocurrency was created called bitcoin cash (BCC/BCH), another peer-to-peer electronic cash. The symbol for bitcoin cash has not been agreed upon and some use BCC while others use BCH to denote bitcoin cash.
The way a fork works is; rather than creating a new cryptocurrency (and blockchain) beginning at the first block, a fork simply creates a duplicate version that shares the same history. So all previous transactions on bitcoin cash’s brand-new blockchain are identical to bitcoin core’s blockchain, with future transactions and balances being entirely independent of each other.
For practical matters, all this implies is that everybody who owned bitcoin before the fork now has the same quantity of bitcoin cash that is recorded in bitcoin cash’s forked blockchain.
But it’s not exactly this simple. If you manage your own private keys or hold your bitcoin in an exchange that stated it would credit users’ accounts with bitcoin cash, you are fine and can access your new-found cryptocurrency right now.
If you had your bitcoin with a provider like Coinbase, which stated prior to the fork that they don’t intend on distributing bitcoin cash to users or even interacting with the new blockchain at all, then, for now, you might be out of luck.
To be clear, this does not mean firms like Gemini and Coinbase are taking your bitcoin cash for themselves. It’s just that they believe it’s a distraction and not going to be worth anything in the long run. If this proves to be incorrect and the coins hold value, these companies will probably end up distributing them to users.
Is ‘Bitcoin Cash’ special?
Basically, Bitcoin Cash is just another modified cryptocurrency. If you know anything about cryptocurrencies, you see there are loads of them. Literally thousands of them at the moment. Some are legit and significantly different (perhaps better) than bitcoin, and some are pretty much just copycats trying to make a fast buck.
It is getting a lot of attention right now mostly for a couple of reasons:
First, it was developed as a result of forking bitcoin core, and not produced from scratch. But this isn’t really new; other crypto-currencies have also forked from bitcoin before, and are nowhere near as valuable as bitcoin cash presently is. That being stated, it does mean that anyone who held bitcoin before yesterday now possibly has access to an equivalent amount of bitcoin cash, which is giving it a lot of attention, as individuals are stating it’s “free money.”
Secondly, it’s getting attention due to the fact that the big fork was timed to coincide with bitcoin’s core activating a significant change in its code called BIP 148, which was a highly publicised event in itself. This Bitcoin Improvement Proposal was the outcome of months of negotiation amongst major players and activated SegregatedWitness, something that will help bitcoin core scale moving forward.
The value of Bitcoin Cash
Right now, bitcoin cash is worth a fair bit, at least on paper. Some people are trading it at around a value of $375 per coin, that makes it the 4th-largest cryptocurrency by market capitalization.
But here’s the thing: it’s presently tough to sell bitcoin cash. While some exchanges have added the new cryptocurrency for trading, liquidity is extremely small, which is why some say the price is being synthetically inflated. Because most exchanges aren’t accepting deposits yet, the only bitcoin cash available to trade is the currency that was filed by exchanges after the fork. Users holding bitcoin cash outside of exchanges, or in exchanges that do not support trading, are stuck waiting.
So the moral of the story is: there is most probably loads of bitcoin cash waiting to be offloaded, as soon as people can move it. That is because there’s not a lot of incentive to keep the coins, especially when people already think it is overvalued and want to cash out quickly. And the rate has already fallen — have a look at the price today in USD. It’s already down from a maximum of $680 to around $307 on Bitfinex, one of the exchanges that is providing a market for the new electronic currency.
Now, we are not saying that it’s going to be worthless. Just take a look at Ethereum Classic, a hard fork of Ethereum. After that fork, the price dropped to about $1 per ETC. However, a few months later and it is now worth around $15 per ETC. Of course, this price pales in contrast to the $220 that regular Ethereum is currently trading at.
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By the way, if you are wondering why exchanges aren’t accepting deposits of bitcoin cash right now, it is because it’s almost impossible to send bitcoin cash over the blockchain at the moment. This is because the newly forked blockchain has not yet adjusted its difficulty, which happens automatically every 2016 blocks. So it is taking a lot more time than normal to mine blocks and confirm transactions. For reference, one block yesterday took about 10 hours to mine, compared to the 10 minutes it should. Most exchanges require 6 or 7 block verifications before they credit a deposit, so you can see how it’s essentially impossible to move around bitcoin cash right now.
Going forward
The general agreement in the cryptocurrency forums and community is that the majority of people are just going to sell bitcoin cash as quickly as they get the chance to, which, if happens, will further drive down its price. But there is always a possibility that individuals will flock to this coin and it retains or increases in value. Our advice will be to sell now if you have any, then wait and see.
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