On May 15, 2023, the Bitcoin Cash network underwent its latest upgrade, after exactly one year with no changes to the mainnet.
The new upgrade was implemented as a hard fork and introduced CashTokens to the platform, allowing developers to easily create and deploy fungible and non-fungible tokens (NFTs) on the platform.
Other changes included in the upgrade will help to enhance the overall capabilities of the Bitcoin Cash network by reducing transaction sizes (hence increasing transaction throughput), and enhancing its smart contract functionality to support use cases like derivatives trading, crowdfunding and recurring payments.
Bitcoin Cash first split from Bitcoin in August 2017 following a disagreement in the Bitcoin community about how the platform should scale. Bitcoin Cash emerged following a hard fork and promised to lower fees and higher throughput due to a much larger maximum block size.
Learn more about the difference between hard forks and soft forks.
The upgrade is supported by several popular centralized exchanges (CEXs), including Binance and KuCoin.
What Are CashTokens?
CashTokens are ideologically similar to BEP-20 tokens found on BNB Chain or ERC-20 tokens found on Ethereum, in that they allow anybody to deploy tokens that represent practically any type of asset.
These tokens are distinct from the native Bitcoin Cash gas unit (BCH) but can still be transferred on the blockchain via transactions. CashToken transactions are considered just as secure as non-token transactions, with no use of additional indexing software.
The new token format enables a variety of business applications to be developed on the Bitcoin Cash blockchain, including identity tokens and decentralized exchanges.
As of block #792773, the Bitcoin Cash blockchain is now capable of supporting CashTokens. As per data from 3XPL, more than 25,000 CashToken NFTs have been created since the upgrade, in addition to over 1,100 fungible tokens (FTs). Most of these represent NFT art collections.
Since CashTokens can be either fungible or non-fungible, they are suitable for a wide range of use cases. For example:
- Fungible CashTokens: Suitable for use cases where asset or data fungibility is necessary — such as on-chain stocks, bonds, stablecoins, loyalty points, voting shares and general-admission tickets.
- Non-fungible CashTokens: Suitable for use cases where token uniqueness and indivisibility are necessary — such as tokenized works of art, identity tokens, role tokens and options positions.
CashTokens were first proposed back in February 2022 via a Cash Improvement Proposal (CHIP). The CHIP specifies a new set of opcodes that extend the capabilities of Bitcoin Cash to support new financial primitives in the form of fungible and non-fungible tokens.
Besides the addition of the new token layer, several minor upgrades were made to the node software, bringing it to v24.0.0. These upgrades include:
- CHIP-2021-03: Bigger Script Integers v1.0 is implemented in v24.0.0 (MR!1253).
- CHIP-2021-02: Native Introspection Opcodes v1.1.3 is implemented in v24.0.0 (MR!1208).
- BIP-0069: Lexicographical Indexing of Transaction Inputs and Outputs is implemented in v24.0.0 (MR!1260).
Bitcoin Cash’s last upgrade went live exactly 1 year prior, on May 15, 2022.
How Do CashTokens Work?
The new tokens have a specific address format associated with them, and not all Bitcoin Cash wallets are compatible with CashToken-based transactions. The CashToken feature is opt-in, meaning wallets can accept BCH without supporting CashTokens.
Click here to learn more about Bitcoin Cash.
Currently, there is no marketplace for CashTokens, but users can mint tokens directly within a CashToken-compatible wallet. Some of the wallets that plan to support CashTokens include Electron Cash, Guarda, and Cashual Wallet.
In a recent tweet, Blockchair developer, Nikita Zhavoronkov, highlighted a key benefit of CashTokens over Ethereum-based NFTs like ERC-721 tokens — they're far more gas efficient.
The new update adds four new fields to the transaction output data model, known as token fields. These are the token category, non-fungible token capability, non-fungible token commitment and fungible token amount.
Users can send both fungible tokens and non-fungible tokens with a single output using the UTXO model without calling any resource-heavy smart contract functions, keeping transaction size down.
Platforms like CashScript can now be used to create UTXO smart contracts on Bitcoin Cash or develop their own CashTokens.
The CHIP specification for the CashToken upgrade also includes details for a Metadata Registry, allowing CashToken issuers to publish information easily about their token.
Which Projects Are Building CashTokens?
The new development comes following rampant demand for similar tokens already issued on the Bitcoin blockchain.
As per data from Ordspace, over 18,000 tokens have already been issued on the Bitcoin blockchain, several of which have a market capitalization in excess of $10 million. Some of the most popular BRC-20 collections now rack up over $100,000 in daily trade volume.
The first wave of projects set to leverage these new capabilities on the Bitcoin Cash blockchain is already in development. But as of yet, there is no universal project explorer or repository to keep track of them all.
Most CashTokens are currently being given away for free by project developers or the community and there is no evidence that any have gone in to garner significant value (yet). Likewise, it is not clear if these are yet being traded P2P.
As you might expect, the vast majority of current CashTokens are simple memes and AI-generated art collections. Most currently have no utility. It remains to be seen which (if any) CashTokens become established projects with long-term prospects.
Besides a temporary spike in value on the day of the hard fork, the price of Bitcoin Cash (BCH) has been largely unaffected by the upgrade, suggesting a muted response from the community. The coin is currently down 3% over the seven-day timescale.
Over a longer horizon, the BCH coin is currently down more than 97% from its all-time high value of $4,355, achieved in December 2017.
Despite this, activity on the Bitcoin Cash blockchain skyrocketed between May 15 and May 16 — almost quadrupling from 34,600 transactions per day to over 128,800 (per BitInfoCharts). Transaction fees remain negligible at just a fraction of a cent per transfer.
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