Mining is a key feature of almost every blockchain protocol. Many cryptocurrencies are based on a proof-of-work (PoW) system, in which miners compete with one another to add blocks and are given new cryptocurrency as a reward for successfully doing so. But what happens when the computing power needed to mine a block exceeds the power output that many systems offer, effectively limiting the amount of miners that can harvest a coin?
Bitcoin Gold (BTG) is one of a few cryptocurrencies to have been forked off of the original Bitcoin blockchain to address this very issue.
In this article we’ll cover everything you need to know about Bitcoin Gold, how it differs from the Bitcoin blockchain that it split off from, why the split occurred, as well as the project’s current status by looking at the following topics:
- What is Bitcoin Gold?
- The Technology Behind Bitcoin Gold
- Bitcoin Gold Roadmap
- Bitcoin Gold Strengths & Advantages
- Bitcoin Gold Weaknesses & Disadvantages
- How to Buy & Store Bitcoin Gold (BTG)
Bitcoin Gold is a an open-source cryptocurrency which came about from a Bitcoin hard fork on October 24, 2017.
A hard fork occurs when a blockchain protocol undergoes a rule change that represents a substantial transformation, essentially creating a new blockchain with no transaction compatibility between the two versions. Transactions on the old chain are not recognized on the new one, and vice versa. In a hard fork, there is a permanent divergence from the current version of a blockchain. Nodes on the new blockchain can no longer interact with or acknowledge nodes or transactions on the old blockchain.
On Bitcoin Gold’s hard fork launch, the blockchain inherited the transaction history of the Bitcoin cryptocurrency to that date, but all later transactions became separate. Block 491407 was the last common block. The first separate Bitcoin Gold block was 491408.
Any wallet address holding a Bitcoin balance immediately before the Bitcoin Gold fork held an equivalent balance of Bitcoin Gold immediately after the fork (1 BTC = 1 BTG).
But why did the fork occur in the first place?
Bitcoin Gold’s stated purpose is to “make Bitcoin decentralized again”. While the original Bitcoin was always decentralized from a banking and financial control perspective, a problem arose with the blockchain’s mining process. Bitcoin’s mining algorithm was set up such that the difficulty of mining new blocks escalates over time. As the mining difficulty increased, mining became more and more centralized among a select group of mining pools that could afford the computing power and resources needed to be competitive. These operations also tend to be clustered in specific countries. There is a particularly large concentration of mining pools in China (approximately 80%), largely due to the countries low electricity costs.
The creators of Bitcoin Gold aimed to address this issue by introducing a new, simpler proof-of-work algorithm called Equihash. We’ll explain that in more detail a little later.
Who are the founders of the Bitcoin Gold project?
The individual co-founders are:
Franco Niebles – BTG’s Lead Designer based in Colombia.
Jack Liao – Hong Kong-based investor & CEO of Chinese mining firm LightningASIC.
Martin Kuvandzhiev – a Bulgarian software engineer with a focus on blockchain technology.
Robert Kuhne – previously a product manager at the China-based cryptocurrency exchange Huobi.
“h4x3rotab” – anonymous lead developer based in China.
As laid out in their manifesto, the BTG team came together and set up Bitcoin Gold to be a community-led project. In their mission statement, they proudly address the reason for their project’s creation:
“Satoshi Nakamoto’s idealistic vision of “one CPU one vote” has been superseded by a reality dominated by a very small number of entities… Bitcoin Gold provides an opportunity for countless new people around the world to participate in the mining process with widely-available consumer hardware that is manufactured and distributed by reputable mainstream corporations.”
Current and future operations of Bitcoin Gold are funded by a crypto endowment held in multi-signature time-locked wallets.
Bitcoin Gold (BTG) began freely trading on cryptocurrency markets on November 1st, 2017. Public mining commenced on approximately 12th November, 2017 when the project’s main net went live.
The coin’s circulating supply (approximately 16.98 million BTG) and total supply (21 million BTG) mirrors the amounts available in Bitcoin’s currency during BTG’s hard fork.
Currently the coin has a solid market capitalization and sits in the top 25 cryptocurrencies. Its overall value appears to have depreciated somewhat since it hit the market, and its current price is at or near its all-time low. This may be due somewhat to the decline of Bitcoin and the overall market since the start of 2018.
Let’s take a closer look at the technology behind Bitcoin Gold, how the platform differentiates itself from its Bitcoin parent and what solutions it hopes to offer.
Bitcoin Gold possesses many of the same traits as Bitcoin, including the same fundamental technology and early history. As covered in our Bitcoin Guide, Bitcoin was founded and developed by Satoshi Nakamoto in 2009 and released as an open-source software. Over the course of the last decade, Bitcoin has slowly grown to become the most popular and well-recognized cryptocurrency in the world—currently possessing about a third of the market share of the entire cryptocurrency market.
One of Bitcoin’s fundamental traits is that it is based on a proof-of-work (PoW) system, in which miners race to solve an extremely difficult computational puzzle. The first miner to find the answer is given the right to add a new block to the chain and is awarded an amount of BTC.
As mentioned above, Bitcoin’s SHA-256 cryptographic hash system has grown significantly more difficult with time and now requires expensive mining rigs and exorbitant amounts of power.
Bitcoin Gold’s stated purpose is to restore the functionality of mining to common graphics processor units (GPU’s) rather than the specialized ASIC chipsets now required to mine Bitcoin. To do this, BTG developers adopted the Equihash algorithm to combat mining centralization. This system is memory oriented, whereby the amount of mining you can do is determined by the amount of RAM available. This PoW system has been adopted by other cryptocurrencies such as Zcash.
Bitcoin Gold has some major plans to roll out for 2018.
Q1 2018 saw the project introduce a range of open-source libraries to assist developers in including BTG into their projects.
BTG will also capitalize on its differentiation by introducing P2Pool – “a decentralized approach to mining pools”.
Payment system integrations (such as a BTGPay debit card program) are also currently being introduced.
By Q4 2018, BTG plans to introduce Schnorr Signatures which will allow a frequent sender (like a bank or an exchange) to sign hundreds of transactions in one batch.
Merkelized Abstract Syntax Trees (MAST) will also be integrated. These are more complex but improve privacy and reduce the load on the blockchain.
Like its Bitcoin predecessor, Bitcoin Gold future plans include on-chain scaling, layer-two scaling and stronger privacy and fungibility.
Other long term goals for Bitcoin Gold potentially include private transactions, a decentralized fiat-crypto brokerage network, and research into smart contracts and blockchain democracy.
Easily Accessible Mining: The fundamental core strength and basic reason as to why Bitcoin Gold was created was to offer a Bitcoin-like currency that is accessible to all miners. This allows users to mine using freely available GPU hardware that is both affordable and less energy intensive.
Transaction Rate & Speed: Lightning Network integration (planned for Q2 2018) should address some existing issues that have plagued Bitcoin and its other forked currencies. A key feature of the Lightning Network is that it allows for rapid payments to be made almost as fast as data can travel over the internet between two peers, along with lower transaction fees.
Replay Protection & Transparency: BTG’s developers have implemented full replay protection and unique wallet addresses that will protect users and their coins from accidents and malicious threats. Operating as open-source software allows the platform to be built and developed by volunteer developers within the global community.
“Post-mine” Launch Controversy: Shortly after the BTG fork, the developers engaged in retroactive mining, or a “post-mine”, of 100,000 coins. This was achieved through a rapid mining process of approximately 8,000 blocks. This “endowment” was set aside with the goal of helping to grow and maintain the Bitcoin Gold network. However, controversy arose when it became known that 5% of the 100,000 BTG released were set aside for each of the six primary team members as a bonus.
Brand Dilution: Any cryptocurrency that carries the Bitcoin name but isn’t the original Bitcoin core currency suffers from being what many perceive to be “not the real Bitcoin”. While Bitcoin Gold advocates may beg to differ, competition and differentiation between all of the different forked Bitcoin currencies (Bitcoin Cash, Bitcoin Private, Bitcoin Diamond, BitcoinDark) as well as tokens that incorporate Bitcoin/BTC into their name, dilutes the strength of the brand name for all of them except the original.
ASIC Miners: At the time of writing, ASIC mining hardware manufacturer, Bitmain, revealed that it has developed an ASIC miner capable of mining on Equihash-secured networks. This would re-centralize BTG’s decentralized mining goal. However, shortly after this announcement, a Bitcoin Gold team member issued a statement saying that BTG would modify their algorithm to maintain ASIC resistance. This cat-and-mouse game directly threatens BTG’s core differentiation point.
Scalability Issues: While the Bitcoin Gold hard fork from Bitcoin addressed the issue of Bitcoin’s PoW system to make it more accessible and easier to mine, it didn’t address other issues inherent in Bitcoin’s structure, such as scalability–which concerns the limits on the amount of transactions a network can process. While this may not be a major problem while the Bitcoin Gold network is still growing, it may arise if Bitcoin Gold becomes more popular. The planned Lightning Network (mentioned previously) may help address this issue.
This seems to be an issue with several of the currencies that have forked off of the Bitcoin protocol where they will address one specific issue inherent in the original blockchain but keep its other faults. Bitcoin Cash, for example, forked off of Bitcoin to address the above scalability issue of block size but retains the same proof-of-work algorithm that favors powerful mining computers.
Presently BTG is listed on 76 markets and 45 exchanges. There are a number of these where you can exchange fiat currency (primarily USD and KRW along with some others) directly to BTG. The largest of these include Bitfinex for USD, CEX.IO for Euro or Upbit for KRW. It may be easier however, to first convert your fiat currency to highly tradable cryptocurrency like Bitcoin or Ethereum and then sending that currency to an exchange that trades BTG.
This can be done by setting up an account on Coinbase where you can either purchase your cryptocurrency directly, or transfer your fiat and then trade it on the linked GDAX exchange. You will then be able to transfer your cryptocurrency to high volume exchanges for BTG. These include Binance, Bithumb, Bittrex, KuCoin and many others.
For BTG storage, there are a range of wallet options. For ‘cold’ hardware wallet options, BTG can be stored on a Trezor, a Ledger wallet (any model) or a Kasse. Mobile wallet options include Coinomi, Guarda and FreeWallet. Desktop wallet options include Bitcoin Gold’s own Core Wallet and Exodus.
Overall, Bitcoin Gold appears to be a minimalistic fork of Bitcoin’s blockchain; only a few conservative modifications have been made. However, these changes do make it much more accessible for those interested in mining a Bitcoin-forked currency at fair value. To date, BTG seems to be holding up fairly well. Whether a forked currency such as this one can truly maintain support and growth remains to be seen.
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