Less than three months after the blockchain "hard forked" and Bitcoin split into legacy Bitcoin and Bitcoin Cash, here comes Bitcoin Gold. As of block 491,407 on the bitcoin blockchain, another alternative version of the protocol of the cryptocurrency has been formed after some developers split the blockchain. And in just one month, yet another fork is imminent.
After the split, bitcoin owners stand to receive one bitcoin gold for each bitcoin, assuming their wallets or exchanges support the new creation, although some such as the most popular US-based exchange CoinBase have refused to support the fork for the time being as there are "concerns about its security and stability." The project, which seeks to improve bitcoin's technology by changing how its competition for rewards is conducted, is the second to launch since August via an increasingly common process called a "hard fork." Readers may recall the term from the launch of bitcoin cash, the alternative version of the bitcoin protocol that spurred global headlines for unexpectedly creating billions of dollars in value, seemingly out of thin air.
Bitcoin dropped over 4% to $5,652 on Tuesday morning, paring a decline of as much as 5.9 percent, after the Bitcoin Gold "snapshot" took place on block 491,407 as of late Monday evening, at which point bitcoin holders sold when the cryptocurrency effective went ex-dividend, which also helped push both Ethereum, Litecoin and other altcoins which had been sold as traders rushed into bitcoin to pick up the free Bitcoin Gold, sharply higher.
Bitcoin's central authority independence - which as Bloomberg notes is part of bitcoin’s appeal - has also made it more susceptible to such “hard forks” which emerge when there are differing visions within the cryptocurrency community. Bitcoin gold aside, bitcoin miners and developers have been embroiled in a debate lately over an upgrade of its protocol that’s aimed at speeding up transactions. A lack of consensus is threatening yet another schism next month.
“This is what will be required to make fair mining accessible to the general public once again,” said Robert Khune, a strategist at the Bitcoin Gold project. "A successful fork will prove that bitcoin always has the ability to escape from any potential abusive mining hardware manufacturers," who he blamed for "unnecessary stalling" this year.
“Bitcoin’s recent downturn has been driven by the traders’ anticipation of minor disarray in the wake of the upcoming hard forks,” said Thomas Glucksmann, Hong Kong-based head of marketing at cryptocurrency exchange Gatecoin. “The bitcoin exchange and wallet community has been divided over their decisions to support or reject these contentious hard forks.”
Why Bitcoin gold? According to its website, its main innovation is to make it easier for people without special hardware to mine the digital asset. Instead of powerful mining machines called ASICs used in bitcoin, users can mine it with standard gaming graphics cards, similar to how mining is done with ethereum, the website says.
But wait there's more.
A major part of the blockchain community wants to increase bitcoin’s blocksize in order to shorten transaction times, while another is opposed. The first phase of this plan, called SegWit2x, was implemented in August and took some of the data off the main network. The Bitcoin Segwit2x "fork" is projected to conclude on November 16th and will temporarily result in two bitcoin blockchains.
The table below tries to summarize all the various forks that have already taken place or are expected in the near future.
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Here are some additional details on the Bitcoin Gold fork courtesy of CoinDesk:
What is bitcoin gold?
In short, bitcoin gold aims to achieve two goals:
- First, bitcoin gold wants to change how mining works by making it so the most powerful mining machines (called ASICs) can no longer be used.
- Second, by attracting more people to this system over time, it hopes to free the bitcoin network from the large companies that offer these products, and it argues, command undue influence on the network.
Instead of scaling bitcoin to support more users, bitcoin gold tweaks bitcoin in an effort to "make bitcoin decentralized again." This, proponents argue, will make the network, designed to offer an egalitarian way to send payments digitally around the globe, more accessible to users.
And while created via the same mechanism, bitcoin gold differs from bitcoin cash in a few ways, most notably in its distribution.
The bitcoin gold cryptocurrency is set to be created in advance (prior to the code being open-sourced to the public).
- About 1 percent of the total cryptocurrency tokens mined before the blockchain goes public will be used to pay the bitcoin gold development team.
- Once this distribution is over, the team claims it will launch the cryptocurrency so that users can redeem their coins.
- Of course, while it aims to become the de-facto version of bitcoin, others might consider bitcoin gold an "altcoin" – the term has long been used to denote any cryptocurrency launched using bitcoin’s existing code, but that has an alternative market or use case.
Of course, while it aims to become the de-facto version of bitcoin, others might consider bitcoin gold an "altcoin" – the term has long been used to denote any cryptocurrency launched using bitcoin’s existing code, but that has an alternative market or use case.
Do I have bitcoin gold?
All bitcoin owners will receive the cryptocurrency at a rate of 1 BTC to 1 BTG, setting the stage for possible market activity.
But, that's not to say it's totally intuitive to retrieve.
One quirk is that it'll be easier to redeem the funds from wallets or exchanges that recognize the cryptocurrency. The easiest way, then, to retrieve the bitcoin gold is to move bitcoin to a wallet or exchange that supports bitcoin gold, or to hold bitcoin in a wallet where you own your private keys (rather than holding them with an exchange).
To date, 20 exchanges and wallets promise to support bitcoin gold once it launches, according to the project's website.
Although one of the most popular U.S.-based exchanges, Coinbase stated on October 20 that it does not support bitcoin gold due to skepticism about how developers have made project information available to others.
"At this time, Coinbase cannot support bitcoin gold because its developers have not made the code available to the public for review. This is a major security risk,” the post reads.
This is perhaps something to keep an eye on as the project progresses. Although the project will officially fork on Monday night, it's not yet open to anyone and everyone, and there’s still plenty left on the developers' to-do list.
Who is behind bitcoin gold?
The team behind the hard fork appears to be a relatively small group.
Hong Kong-based LightningAsic CEO Jack Liao, who's an outspoken critic of the state of bitcoin mining, first broached the idea of bitcoin gold back in July.
His company LightningAsic sells mining equipment, including GPUs, the type of computing hardware bitcoin gold is supposed to rely on.
Since first introduced earlier this summer, the team has expanded to include pseudonymous lead developer h4x3rotab, as well as a team of five other volunteers who are now working on developing and promoting the cryptocurrency in their spare time.
The project can be tracked on Github and on the community Slack group.
How do people feel about bitcoin gold?
All that said, for those interested in exploring or using bitcoin gold, it's worth noting that it has generated its share of controversy.
Satoshi Labs CEO Marek Palatinus, who launched bitcoin's first ever mining pool, is skeptical the project will actually work to decentralize mining as planned. And he's not the only one to throw shade at the new project.
Bitcoin developer Rhett Creighton is working on alternative bitcoin gold "protest fork" software that seeks to pursue the same idea but without setting aside some of the new cryptocurrency for development.
If more than 51% of miners choose to use his software, the so-called pre-distribution to developers will be erased, he told CoinDesk. "It's up to the miners to decide what they want," he added.
All in all, it's unclear if business and mining groups will ultimately support the project, and if they do, how much value the alternative blockchain could create.
For example, while a list of roughly 50 businesses and miners support the so-called Segwit2x fork, similar support hasn't been seen for bitcoin gold. Likewise, though bitcoin cash began with support from vocal miners and exchanges, bitcoin gold has arguably yet to benefit from such early activity.