Up to now I have only ventured out of my comfort zone and invested in the mainstream cryptocurrencies Bitcoin and Ethereum. I have however noticed that the Luno app also has one called Bitcoin cash, and that got me wondering what Bitcoin cash is, and how it is different to that standard Bitcoin that I know.
Initially I thought that Bitcoin cash is really just the Bitcoin “cash price”. I thought that it was perhaps a different way to buy or trade Bitcoin and that it related to using cash. I also thought that it had to do with converting bitcoin to cash. However, I was wrong! Completely wrong, so don’t laugh too loudly! But, after some research I’m happy to share my newfound knowledge on this crypto currency.
What is Bitcoin Cash (BCH)?
Bitcoin Cash (BCH) a crypto currency that was developed in 2017. It is based on what we know as “normal” Bitcoin, but it is completely separate and independent. It’s a crypto coin in it’s own right, even got a different logo. It has it’s own pricing and you will need a separate wallet for Bitcoin Cash. The way you trade or invest in Bitcoin Cash is the the same as what you may be used to with other cryptos, and really, it’s just like any other crypto currency that you know.
The technical details of Bitcoin Cash
Bitcoin cash was developed from a Bitcoin fork in August 2017. A bitcoin hard fork is when a major change is made to the bitcoin blockchain protocol which results in two separate ways of working, or two branches. One that follows the previous protocol (unchanged) and one that follows the new version. Thus, Bitcoin cash is based on the bitcoin technology and methodologies, but it is now changed and is a new crypto currency.
Sounds confusing I know. The key takeaways are:
- Bitcoin Cash was created to accommodate a larger block size compared to Bitcoin, allowing more transactions into a single block.
- Bitcoin Cash is designed to be a transactional cryptocurrency that functions as an electronic cash payment system.
- Despite protocol differences, Bitcoin Cash and Bitcoin have many technical similarities. They use the same consensus mechanism and have capped their supply at 21 million.
- Bitcoin Cash itself underwent a fork in November 2018 and split into Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision). Bitcoin Cash ABC is referred to as Bitcoin Cash now. (You probably don’t need to know that, but now you do!)
You can read all about this in a great article on Investopedia.
Is Bitcoin cash safe?
Buying, selling and holding Bitcoin cash is as safe as any other cryptocurrency and a lot depends on the exchange and wallet you use. With other words, what app do you use and how do you secure it yourself. In my post on how to buy Ethereum I share a little about doing things the complicated DIY way, or simply using a trusted exchange such as Luno. I go for the latter.
The key however is to find a trustworthy and secure wallet to store your crypto, and then to keep it safe, as you would you bank account. If you’ve been following crypto news you would surely have heard of Africrypt and the billions of Rands worth of crypto that was stolen. Well, there is some confusion about the exact amount. Raees Cajee (one of the owners) claims in his affidavit that the extent of funds under Africrypt control was closer to $6 million (R88.5 million) than the R54 billion claimed by attorney Darren Hanekom of Hanekom Attorneys, who is representing several Africrypt clients.
There is also uncertainty of where or how the crypto was stolen. Was it simply a scam by the owners or was it really a hack as they claim? Either way, investors lost huge amounts of money.
This is not because any particular crypto token is not secure or not safe, rather, it’s the exchange that they used.
So, do you homework and look at the track record, global presence, and media reports of any potential crypto exchange that you wish to use.
How to create a wallet for bitcoin cash
Personally I just use the Luno app and create a wallet per crypto that I wish to buy. It’s safe, secure, and definitely the easiest way to invest in crypto’s. There are however more technical approaches and it depends on your views and know-how whether you choose them or not.
What is bitcoin cash used for?
Bitcoin Cash is designed to be a transactional cryptocurrency that functions as an electronic cash payment system. It’s meant to address Bitcoin’s perceived scalability problem and provide more utility in everyday life — it is designed to be spent, rather than held as a store of value. Having said that though, there is nowhere in South Africa where you can actually use Bitcoin cash (BCH) for everyday transactions. Perhaps one day we will use it as a payment method similar to Snapscan or Zapper, but right now it seems a pipedream.
Interestingly though, there are some Bitcoin ATM’s in South Africa. I have no idea how they actually work, but I guess it will become more popular going forward.
For now though it seems like a crypto to either trade to buy and hold as we wait to see whether it will become a transactional currency in South Africa.
Do you know of anywhere that you can use Bitcoin cash in South Africa? If so, please let me know in the comments below or send me a message.
Should I invest in Bitcoin cash?
I like to take the approach of a well diversified investment portfolio. Basically, I won’t put all my eggs in one basket.
I have some investments in property, in shares, in ETFs, art, and in crypto. In total I only have around 1% of my overall investments in cryptocurrency as I am still a little nervous of it. Crypto’s are volatile and relatively new (compared to precious metals, property, or shares). So, yes, I’d say do invest some of your wealth in crypto, but understand that this is a more risky investment and one which we don’t really know where it’s going. It could become the next gazillion dollar investment, or it could crash. I certainly don’t know LOL. But, it is gaining traction each day and it would be wise to get your feet wet if you haven’t yet.
See how I track my investment diversification with this free Excel download; no strings attached.