What Is Bitcoin Cash (BCH) and How Does it Work?

Designed for spending rather than holding, Bitcoin Cash is faster than Bitcoin.

What is Bitcoin Cash (BCH)? How does it work? And how can you buy some for your portfolio?

In this article, we’ll answer those questions and discuss tips to help you get the most out of buying this cryptocurrency.

Table of Contents

What Is Bitcoin Cash?

Bitcoin Cash (BCH) is a cryptocurrency –based on the original Bitcoin blockchain.

BCH was designed to be a transactional currency rather than a pure store of value and to address scalability and utility issues inherent in the Bitcoin protocol.

The History of Bitcoin Cash

The original Bitcoin cryptocurrency suffered from long transaction verification times and high transaction fees. Some in the Bitcoin community suggested increasing the block size limit to fix these problems.

Larger blocks would be faster but would also mean that fewer nodes on the network (users) would have the computing power necessary to run the blockchain calculations. In essence, larger blocks would mean more centralization — the opposite of the decentralization principles that lie at the heart of all cryptocurrencies.

After years of debating, developers implemented a hard fork that created a brand new cryptocurrency — Bitcoin Cash — which allowed for larger blocks and faster transaction speeds.

BCH was now completely separate from the original Bitcoin which continued to develop its own set of protocols and features.

The biggest changes to come out of this hard fork were an increase in transaction speed and a reduction in transaction fees. For example, BCH can process an average of 116 transactions per second. Bitcoin can process about seven.

In addition, BCH’s transaction fees are less than $0.01. Bitcoin’s transaction fees typically range from $1 to $5 (although they can stray into double digits during periods of peak network congestion).

How Does Bitcoin Cash Work?

Bitcoin Cash operates on a proof-of-work (PoW) consensus mechanism that makes use of large block sizes (anywhere from 8 MB to 32 MB) to settle transactions.

The increased processing speed makes it possible to use BCH for grab-and-go retail purchases like buying a cup of coffee or a meal at a fast-food restaurant.

Core Features of BCH

Open to all — No one person, business, or government controls BCH. Anyone can use it at any time.

Anonymous — As with most cryptocurrencies, you can buy, sell, and trade BCH with complete anonymity.

Secure — BCH’s public and private keys ensure security when implementing transactions on the blockchain.

Transparent — All BCH transactions are recorded on the blockchain and are available for anyone to review at any time.

Decentralized — Like other cryptocurrencies, Bitcoin Cash operates on a decentralized network of nodes (individual users) that each store a copy of the ledger and run the BCH software.

Affordable — The transaction fees associated with using BCH are low and make it an effective alternative to other payment networks (e.g., Amex, Mastercard, and Visa).

Fixed — According to the Bitcoin Cash protocol, only 21 million coins will ever be created.

Immutable — Once recorded in the blockchain, transactions cannot be altered, changed, or in any way erased.

Protocol-based — Each node follows a set of rules (the protocol) to maintain the immutability of the BCH blockchain.

How to Buy Bitcoin Cash

1) Find a Platform

The first step in buying Bitcoin Cash is to find a crypto platform — like Binance.US — that supports BCH, offers reasonable fees, gives you resources and tools to help you make the right choices, and provides access to other popular cryptocurrencies on the market.

2) Create an Account

Once you’ve chosen a crypto platform, create an account and verify your identity.

Look for an account that comes with advanced security, a range of tokens and coins, low trading fees, advanced trading API, and real-time order books.

Opening an account that offers these features for all of their coins — not just BCH — and provides benefits down the road when you want to diversify your portfolio.

3) Fund Your Account

The next step in buying Bitcoin Cash is to fund your account with government-backed money.

Advanced platforms will allow you to do this via an established payment service, like Apple Pay or PayPal (check platform for details), debit or credit card, bank or wire transfer, or ACH debit from an existing bank account.

4) Choose When to Buy

When the money arrives in your account, you can use those funds to specify how much BCH you want to buy and when you want to buy it.

Ultimately, you want to buy low and sell high (if selling is part of your overall strategy), so it’s imperative to monitor the market to see when it’s most beneficial for you to get involved.

You can also set up an Auto-Buy on Binance.US. This will help ensure that you purchase a set amount of BCH on a fixed schedule, eliminating the need to constantly monitor the ever-changing crypto markets.

5) Keep Your BCH Secure

Once you’ve purchased Bitcoin Cash, store the BCH in one of two types of crypto wallets: a cold wallet or a hot wallet.

A cold crypto wallet is an offline space like an external hard drive. A hot crypto wallet, on the other hand, is an online space typically provided by the platform through which you made the purchase.

Tips for Buying Bitcoin Cash

1) Plan

Rushing headlong into buying Bitcoin Cash (or any cryptocurrency for that matter) can be a risky endeavor. To mitigate that risk — and to set yourself up for success — have a plan before making any moves.

Depending on your strategy, buying and staking may be the best option. Or, perhaps, buying and then day trading is more to your liking.

Whatever path you choose, do your best to stick to it as closely as possible and resist the urge to follow temporary hype into a losing situation.

2) Research

After you make a plan for buying BCH, do your research.

Learning what Bitcoin Cash is, of course, a good first step, but don’t stop there. Delve deep into the cryptocurrency market as a whole and get to know how it works and the factors that affect its movement.

Then, dig into the exchange you’ll use to buy your BCH. Be as objective as possible and look at each option with a critical eye.

Ask questions such as:

  • What problems does the platform solve?
  • What benefits does the crypto ecosystem offer?
  • How many users does the platform have?
  • What do users have to say about the platform?
  • What are the fees involved in buying BCH?
  • Will this platform still be useful as my portfolio grows?

Before you buy BCH, get to know both the market and the exchange as intimately as possible.

With the right plan and research, you can avoid coins, tokens, protocols, and transactions that make grand promises but don’t have any real results to show.

3) Set Limits

In the process of planning your strategy and researching Bitcoin Cash, consider setting limits on the losses you can tolerate.

With such limits in place, you’ll know exactly when to get out of the market so you don’t get swept away by emotion, adrenaline, or excitement and wind up maintaining a losing position.

4) Diversify

Buying too much BCH can expose you to more risk than your portfolio can handle. Instead of putting all your eggs in one basket — in this case, going all in on Bitcoin Cash — diversify into other coins and tokens as well.

Even adding a second option to your BCH buy means your portfolio will be more stable should one of the coins or tokens in your wallet start to drop.

5) Automate Buying BCH

Buying Bitcoin Cash at the right time can be very stressful and labor intensive. You can streamline the process by taking advantage of any automation the crypto platform offers.

For example, you can use automation to set up recurring buy orders — e.g., $300 worth of Bitcoin Cash — every month, regardless of the price using the new Auto-Buy feature on the Buy, Sell & Convert page.

Some of these recurring buy orders will get you less BCH because prices are high, while other recurring buy orders will get you more BCH when prices are low.

Overall, regularly scheduled buys using Auto-Buy may net more Bitcoin Cash than you would bring in by trying to time the market and place orders on your own.

Partner With the Right Platform

Whether you’re just getting started in cryptocurrency or you’ve been in it from the beginning, understanding the difference between Bitcoin and Bitcoin Cash — and, indeed, all the different cryptocurrency options — is important for success.

But what’s even more important is partnering with the right crypto platform.

Make sure the platform you choose secures your personal information, offers a wide selection of cryptocurrencies, has low trading fees, provides automation for buying and selling, and makes it easy to execute your plans (no matter how complicated they are).

It’s also important to partner with a crypto platform, like Binance.US, that has experience, knowledge, and insight on all things crypto.

Binance.US gives you access to all the tools and information you need to make the right decisions and grow your portfolio.

Download the Binance.US app to trade on the go: iOS | Android

Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Risk warning: Buying, selling, and holding cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in a significant loss. Binance.US is not responsible for any loss that you may incur from price fluctuations when you buy, sell, or hold cryptocurrencies. Please refer to our Terms of Use for more information.

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