How Does Bitcoin Cash Work?
Bitcoin Cash is a 2017 hard fork of Bitcoin that increased the block size limit to 32MB to enable higher transaction throughput and lower fees. With a market cap of approximately $10.5 billion, BCH ranks among the top 20 cryptocurrencies. Its B grade reflects a clean mechanism profile inherited from Bitcoin's proven design, offset by risks from sharing SHA-256 mining with Bitcoin (making it vulnerable to hashrate rental attacks) and a 2020 mining pool coordination incident during a contentious fork.
TVL
—
Sector
L1
Risk Grade
B
Value Grade
C
Core Mechanisms
5.1.1
SHA-256 Proof-of-Work consensus — identical algorithm to Bitcoin, with ASIC-adjusting difficulty
Shares mining infrastructure with Bitcoin. Lower total hashrate means lower cost of attack.
1.1.2
Bitcoin halving schedule — block reward halves every 210,000 blocks, currently at 3.125 BCH
Identical to Bitcoin's emission schedule. Same 21M hard cap.
1.3.1
Low-fee transaction model with 32MB block size limit
Larger blocks reduce fee pressure, which is the primary value proposition but also means lower fee revenue for miners.
5.2.1
ASERT difficulty adjustment algorithm — adjusts every block based on exponential moving average
Improved over Bitcoin's 2,016-block adjustment. ASERT provides faster response to hashrate changes. Deployed November 2020.
7.1.1
CHIP governance process — Cash Improvement Proposals with community discussion and miner activation
Annual network upgrade schedule (May 15). Recent CHIPs include CashVM (May 2026) with smart contract capabilities.
How the Pieces Interact
Declining block rewards combined with low transaction fees create an increasingly thin security budget. BCH's lower price amplifies this relative to Bitcoin, as the same halving schedule produces less USD-denominated miner revenue.
BCH's design philosophy of low fees directly conflicts with the need for fee revenue to replace block subsidies. The 32MB block size ensures fees stay low, but this means the security budget depends almost entirely on BCH price appreciation.
Shared SHA-256 mining with Bitcoin means miners can rapidly switch chains based on profitability. The ASERT algorithm responds faster than Bitcoin's adjustment, but rapid hashrate oscillation between chains can create temporary security windows.
Contentious upgrades can lead to chain splits, as happened with the 2018 BCH/BSV fork. Mining pool operators have outsized influence during contentious forks, as demonstrated in the 2020 infrastructure funding proposal dispute.
What Could Go Wrong
- Bitcoin Cash shares SHA-256 mining with Bitcoin, making it vulnerable to hashrate migration. Miners can switch between BTC and BCH based on profitability, causing temporary hashrate drops that reduce security. A well-capitalized attacker could rent Bitcoin mining hardware to execute a 51% attack on BCH at a fraction of Bitcoin's attack cost.
- The 2020 incident where mining pools BTC.COM and BTC.TOP coordinated during a contentious hard fork demonstrated that mining pool operators can exert significant influence over the network's consensus. While framed as a defensive action, it proved that concentrated mining power can reorganize the chain.
- Bitcoin Cash's smaller ecosystem and lower transaction volume compared to Bitcoin create a weaker security budget. With the same halving schedule reducing block rewards to 3.125 BCH post-April 2024, fee revenue must eventually sustain the network, but daily transaction counts remain a fraction of Bitcoin's.
SHA-256 Hashrate Rental Attack
ModerateTrigger: BCH hashrate drops below 2% of Bitcoin's hashrate AND hashrate rental markets (NiceHash, etc.) have sufficient SHA-256 capacity to exceed BCH's total hashrate for sustained periods.
- 1.Attacker rents SHA-256 hashpower exceeding BCH's total network hashrate from mining rental markets — Attacker gains majority control of BCH block production at a cost far below Bitcoin's attack cost
- 2.Attacker performs deep chain reorganization, reversing confirmed transactions — Double-spend attacks succeed against exchanges with insufficient confirmation requirements
- 3.Exchanges increase confirmation requirements or delist BCH trading pairs — Liquidity dries up, BCH price drops, further reducing hashrate and security in a negative spiral
Risk Profile at a Glance
Overall: B (25/100)
Lower score = safer