The Birth of Bitcoin Cash

Firstly, I would like to shed some light on the Blockchain technology. Blockchain is a transparent peer to peer network that allows us to transfer goods, funds and intellectual property fast and in secure way online. Before I go ahead further, it is important to understand the following general terms related to blockchain:

• Transaction blocks – All the transactions are maintained in blocks. Like say 4/5 transactions per block. There is a limit on the size of block.
• Distributed ledger – The entire public ledger is distributed across many systems. It is not maintained on a single server.
•  Decentralized system – There is no central head responsible for the transactions. Group of people called ‘Miners’ add the transactions to a block and add the block to the ledger. No federal organization / a bank is involved for the verification.
• Mining – The process of obtaining bitcoins
• Consensus – Set of rules and proof of work for the transaction to be valid.

Now the famous ‘Alice - Bob’ example: Suppose Alice wants to send 10 bitcoins to Bob. She initiates the transaction. Every user gets a unique address linked to their account. To send / receive bitcoins, all you need is that address. Once Alice initiates the transaction to Bob, miners obtain the proof of work and add it to the transaction block. Once the transaction block reaches consensus, the transaction is added to the global ledger and Bob receives 10 bitcoins. Now in this case, miners who discover this block or who add it to the ledger receive certain number of bitcoins as a fee. If there is a deadlock and transaction is not being added to the ledger, then Alice can reinitiate the transaction with higher fees for the miners so that the transaction can speed up. Then, miners will void the previous transaction and add the new one to the ledger. For mining, miners use super GPUs to solve complex mathematical problems and to hash the transactions. This mining will earn them bitcoins.

As you can see, there is a limit on the size currently. That’s when forking comes into picture. Forking of the entire blockchain is done temporarily or permanently sometimes. Forking will assure the security of the application. The recent Bitcoin Cash was released after forking the original Bitcoin chain. As the number of transactions grew in bitcoin, it reached a point where adding new transactions was taking a lot more time than expected. The size limit on a block in Bitcoin is 1MB. So, the entire chain is forked and they increased the size of the block to 8MB. This is released as Bitcoin Cash with more features and updates than Bitcoin. BCH allows more transactions and less fees than bitcoin.

I will provide more technical details in my upcoming posts.

P.S: Once you initiate any cryptocurrency transaction, you can not get it back. So be careful with the transactions.