An Expert’s View: How to Buy Bitcoin Cash
It wasn’t until August 1, 2017, that we had Bitcoin Cash, symbol BCH. So far, this free Bitcoin dividend is proving lucrative. In fact, statistics show that there is a growing demand for this Bitcoin alternative and it is no surprise that it’s the 4th most valuable and liquid coin in the world with a staggering $23.8B market cap.
Bitcoin Cash was specifically created to address issues of scalability and transaction congestion prevalent within the main Bitcoin network.
At the moment you might be wondering what scalability means and why is it popping up all across over the media. The answer is simple. We must understand that prior to this, the main Bitcoin network- which is still in use albeit with several improvements and contentious proposals -remains pretty much the same as it was back in 2009.
The only thing that has changed is the number of users who are by the hundreds of thousands and this is definitely stressing the system. It’s logical that when the number of users explodes then delays and miner fee hikes are prevalent.
The issue is even exacerbated by the blockchain architecture and block size limitation.
Segwit 2X was a viable solution that agitated for block size increment to 2MB. This, in turn, could increase the speed of transaction processing since more transactions are held within a single block. Statistics show that the Bitcoin network can process a maximum of 7 TX/S and that is nothing compared to 4000 TX/S processed by Visa.
On top of that, with Segwit 2x threats of malleability attacks were neutralized and set the foundation for off chain solutions as Lightning Network.
However, there was no follow through of BIP 91 and Segwit 2X even after New York Agreement (NYA) and User Activated Soft Fork (UASF) Segwit were adopted weeks before Bitcoin Cash hard fork. In fact, the politics of block size dragged on for 2 years.
To address transaction processing speed, Bitcoin Cash increased their block size limit to 8MB. This was a compromise because as you increase block size so does the size of the blockchain increase. As such centralization is inevitable.
Where to buy Bitcoin Cash
From coinmarketcap, there are 235 different ways besides peer to peer transfer of how you can buy Bitcoin Cash.
This is how you do it:
- Go to CoinBase, create, verify and set a 2FA for your account.
- Click on Buy/sell and click Buy. From there you can link your Bank account and chose the number of Bitcoin Cash you want to buy.
- Click buy and your Bitcoin Cash will be sent to your Bitcoin Cash wallet.
Secure Bitcoin Cash wallets
After buying, the best thing to do is transfer from your Bitcoin Cash to a secure 3rd party wallet. Cold wallets like Ledger Nano S are secure and hacker proof and that’s where I recommend storing your new BCH coins at. Then again, Ledger Nano S wallets support Segwit just like Bitcoin Cash.
The hard fork planned on the Bitcoin Cash blockchain is intended for improving the network only. And not for creating a new currency.
The hard fork would go live on 14th November 2017.
In Bitcoin Cash network, for every 2016 new blocks found the Difficulty adjusts. This is as same as the Bitcoin network.
Bitcoin cash has a problem. Both Bitcoin and Bitcoin Cash uses same mining algorithm, i.e., SHA-256. The miners of Bitcoin can also switch to mine Bitcoin Cash. Here, the mining reward is the critical factor. If the miners are to stay mining BCH, the reward should be on par or better than the Bitcoin mining reward.
Considering the value of both the currencies the Bitcoin Cash mining should be reduced based the BCH and BTC value factor.
Emergency Difficulty Adjustment (EDA)
EDA adjusts the mining Difficulty so that the mining rewards are as better as Bitcoin mining.
For example, if fewer than six blocks are mined in 12 hours, using EDA, the Difficulty falls by 20% for the upcoming block. When miners coordinated well or time the situation appropriately, within a day, the Difficulty drops by 75 percent. And mining to their advantage.
This leads to miners switching between the networks causing the instability on both the networks. Only the end users suffer as the transaction confirmations might take too long in some days. The miners would game the system to their benefit.
Difficulty Adjustment Algorithm (DAA)
A DAA is proposed and would be implemented on the Bitcoin Cash network using the hard fork. The DAA solves problems like:
- Adjusting the Difficulty with the available hash rate so that the block time stabilizes at 10 minutes
- Avoiding steep changes in the Difficulty
- Resisting timestamp manipulation attacks
Bitcoin Cash Fork Conclusion
For this upgrade, Cryptocurrency exchanges, and users should be aware of upgrading their wallets to be compatible after the hard fork.