What is Bitcoin Cash?
After Bitcoin, the world’s first digital asset, launched there were problems with slow transaction times. Developers and miners could not agree on how to fix these issues and in 2017 Bitcoin was split during a hard fork. Two coins were created: Bitcoin (BTC) and Bitcoin Cash (BCH). There was quite a bit of controversy around the fork when it took place, driving the price of BTC and BCH up as developer debates went viral, attracting attention and causing investors to vote with their dollars for their favorite one.
So, what is Bitcoin Cash, and how is it different from the preceding crypto, Bitcoin? Bitcoin Cash was designed to solve Bitcoin’s scalability problems by speeding up transactions. With bigger blocks, the BCH chain is configured to process more transactions per second. This powers quicker payments at a lesser cost, making it more feasible as a payment system than BTC. These attributes make it an attractive cryptocurrency for other platforms to adopt, which in turn could interest cryptocurrency investors.
In the years since the upgrade to the cryptocurrency configuration, the increased transaction time paved the way for global scalability. Several industries accept payments with BCH including social media, games, and retail. Some people choose to invest in BCH because it originated from Satoshi Nakamoto’s BTC and it is so accessible.
Key Concepts of Bitcoin Cash
- Decentralized Currency – BCH, like BTC, stays true to the founding principal of cryptocurrency, with a peer-to-peer electronic cash system that isn’t maintained by a single government. Investors own the currency and peer groups approve the transactions, which are noted on a digital ledger.
- Blocks Sized for Speed – The hard fork was initiated with an increase in block size of 8 MB to accelerate the transaction time. Bitcoin blocks can only be 1 MB, but BCH blocks can now reach up to 32 MB.
- Limited Supply – BCH will be capped at 21 million coins; this characteristic, shared by many other cryptocurrencies, makes BCH closer to a physical commodity with intrinsic value than fiat, which is based on debt.
Bitcoin Cash vs. Bitcoin
Bitcoin Cash hard forked off the Bitcoin network in 2017. Bitcoin began gaining popularity at this time, and investors started using it as a form of payment for legal goods and services. Those in charge of developing cryptocurrency payment systems noted that as Bitcoin became more popular, transaction fees began to rise. This makes sense because miners had to do the proof of work (PoW) to print the transaction onto the blockchain.
Fees increased because people were willing to spend more to cut the line to get transactions processed first. In addition, most cryptocurrencies are configured to increase the difficulty (or amount of processing power required) to complete work and discover coins and process transactions as more coins are discovered—this factor was also slowing down the BTC network.
So, developers proposed the hard fork that would upgrade the Bitcoin network, allowing transactions to be processed faster and with lower fees. However, there was a lot of push back, and the hard fork became a popular topic.
Today, BCH is still faster and cheaper than BTC, and many projects have adopted it as a reliable payment format making it popular with investors and speculators alike.
How to Buy Bitcoin Cash
Bitcoin Cash Crypto IRA and Taxes
You can hold cryptocurrency within a self-directed traditional or Roth IRA. With a Roth IRA, you pay income taxes before depositing the money into the IRA account, but you generally don’t have to pay taxes when taking the money out of the account after you have reached retirement age.1 With a traditional self-directed IRA, you do not pay income tax on the amount put into the account but pay taxes at retirement age when you withdraw the money.
Besides those differences, you will not pay capital gains taxes by purchasing BCH in your IRA account. However, as with any IRA account, if you choose to withdraw before retirement age, you face paying a penalty and any taxes you owe.
Why Should I Invest in Bitcoin Cash with Bitcoin IRA?
The recent wide adoption of BCH by projects and applications makes it an attractive investment for some investors. Developers and others see BCH as a cost-saving alternative that delivers the same benefits as BTC. When you trade BCH in your crypto IRA, you don’t need to worry about recording every transaction for the IRS, and your IRA is securely stored for long-term investing.2
Bitcoin IRA also offers more than 60 cryptocurrencies to choose from, allowing you to diversify your holdings. In addition, Bitcoin IRA provides investors with education about coins and it seeks to add new opportunities to their coin selection.
How to Create a Bitcoin IRA with Bitcoin Cash
It’s easy to invest in Bitcoin Cash with your retirement account. If you already have a Bitcoin IRA account, you can simply log in and begin adding BCH to your portfolio. To open an account, visit Bitcoin IRA online or download the mobile app. Click Open Account and fill out the form. From there, you will be asked if you want to roll an existing IRA or fund the account from scratch. Once the account is funded, you can start trading BCH.
1Some taxes may apply. We recommend you consult your tax, legal, and investment advisor.
2Security may vary based on asset chosen and custody solution available.