All you need to know about Bitcoin Gold: technical aspects, key differences and trading opportunities. How to buy and where to keep Bitcoin Gold (BTG).
Bitcoin Gold is a hard fork of Bitcoin that has gained popularity thanks to the new Equihash mining algorithm. The hard folk occurred on October 24, 2017. The starting price of the new coin was USD $480, but after three days, the cost of the token dropped to USD $140.36. As of August 3rd, 2020, on the EXMO exchange, the token price is USD $10.26 and it has an upward trend. Analysts have explained such a reduction in the rate due to traders who received tokens for free during a hard fork to make money on speculation quickly. In this guide, we discuss the advantages of the new algorithm and how Bitcoin Gold differs from the original and whether it makes sense to invest in this coin.
Purpose of creation. Bitcoin Gold (BTG) is a hard fork of the first cryptocurrency, which occured in October 2017 at block #491407. The main inspirer of the project is Jack Liao, owner, and CEO of the Lightning ASIC mining company. According to Jack Liao, the Bitcoin Gold blockchain network has two main objectives:
Both objectives are attractive, but the fork was almost no different from the original. Its only feature that users appreciated was the Equihash algorithm. It created a possibility to mine BTG using a regular computer with a decent video card (priced between USD $200 to $500) since the implementation team stated that the level of mining on a PC would be the same as that for ASIC (priced between USD $2 to $50,000). It is also possible to mine bitcoins (BTC) on a regular computer, but it is unprofitable — the profit will not even cover the electricity bill!
Why is Equihash better than SHA-256? The original Bitcoin blockchain uses the SHA-256 hashing algorithm to generate new blocks, which uses processor power. Also, since a processor is, in fact, all that is needed for such mining, engineers have created individual devices from a bundle of several processors with a focus on crypto mining — ASICs.
The remuneration level for mining bitcoins depends on the ratio of an individual miner’s power to the power of the entire blockchain network (more power → more BTC). The emergence of ASICs led to mining centralisation: people began to buy hundreds or even thousands of ASICs and link them at the software level into one big Miner (farm) to mine more BTC in this way. As a result, mining farms receive the majority of the rewards from mining bitcoins, and mining on a regular PC has become unprofitable.
The mining centralisation has led to the Bitcoin network. It is controlled by a number of the largest mining farms, on whose decisions it depends on how and in what direction the world’s first cryptocurrency will develop. Besides, the centralisation of the blockchain affects it to become more vulnerable to hacker assaults.
To mitigate these problems, Jack Liao and his associates decided to create an “alternative Bitcoin”, with a mining algorithm that would be resistant to centralisation. In their opinion, in this way, they will return Bitcoin to the ‘correct’ and originally foreseen development path that Satoshi Nakamoto spoke about: one processor — one vote.
For this, it was decided to implement the Equihash hashing algorithm into the Bitcoin blockchain, which uses the RAM of video cards. Integrated and/or discrete video cards are available on every modern device, so any owner of a computer, laptop, tablet, or smartphone can become a miner.
At the same time, Equihash did not affect the mining process in any way. As with the mining of other cryptocurrencies, to mine BTG, you need to create a crypto address and download the appropriate software. Connecting to a mining pool to increase your mining profitability is recommended.
Основное отличие – алгоритм хеширования Equihash. Помимо этого, хард-форк также отличается от первоисточника в следующем:
Уникальный формат крипто-адреса предназначен для предотвращения ошибок, когда пользователи отправляют монеты в неправильную цепочку блоков (как это было в случае с Bitcoin Cash). В частности, изменен префикс функций SCRIPT_ADDRESS и PUBKEY_ADDRESS.
После каждого созданного блока происходит коррекция сложности. В исходном Биткойне корректировка происходит примерно каждые две недели – каждые 2016 блоков.
First, you need to create a crypto-address on the cryptocurrency network. This can be done by downloading the BTG Core Wallet or any other wallet that supports this coin. For example, we will use the official wallet, but since it is at an early stage of development (version 0.17.2 as of June 2020), you’d better use a different, familiar option. Here is a list of wallets that support Bitcoin Gold.
Steps to follow:
Download the wallet. The official version supports Windows, Mac OS, and Linux.
Run the installation file and follow the instructions.
After installation, launch the wallet and indicate where the blockchain distribution will be stored. Currently, it is over 220 GB. It will take several hours to download and to sync the blockchain fully.
Once the sync is complete, a wallet window will open where you can manage your BTG assets.
To keep your money safe, back up your wallet. To do this, select File> Backup wallet.
You can purchase BTG on almost all major cryptocurrency exchanges including the UK-based platform EXMO.
Decentralisation of mining. Bitcoin Gold mining was decentralised at the start; however, due to the emergence of an increasing number of coins, the mining is tailored for video cards, ASICs were created from video chips. The new ASICs have neutralised Equihash’s advantage over SHA-256. At the same time, you can purchase such ASICs at Lightning ASIC, a company run by the creator of Bitcoin Gold, Jack Liao — there is a conflict of interest.
The Bitcoin Gold team claims to be aware of this problem, and it will be addressed in a new update. There is no information on how exactly this will be done. The project team also prefers to remain silent about the conflict of interest.
Centralisation of capital. The latest investigation indicated that one or more whales are likely to regulate the Bitcoin Gold currency network. According to this analysis, there are now 17.5 million BTG coins on the market, of which 11 million are “either inactive or lost forever.” The remaining 7 million BTG is largely controlled by one or more players, accounting for 38-48% of active BTG coins.
At the start of 2020, these whales first achieved a drop in the BTG rate to $5 and then stimulated its growth to $15. At the same time, it was predicted that the whales will further move the worth of Bitcoin Gold to $22.86.
These five addresses control 16.8% of all coins in the Bitcoin Gold network (from a total of 17.5 million coins). Source
Hacker attacks. In May 2018, the Bitcoin Gold network was impacted by a 51% intervention, resulting in 388,000 BTG worth USD $18 million. Then the project team stated that they had solved this problem and that it would not occur again. However, in January 2020, the network was again subjected to a 51% assault, and as a result, the hackers withdrew 7167 BTG (~USD $80,000) from Binance exchange.
In both cases, the 51% attack followed a simple pattern. The hackers bought mining power from large players, which had previously been used to mine another coin, and used it to gain control over 51% of the hash of the Bitcoin Gold blockchain network. After that, the so-called “double-spend” was used to steal coins. Since the Bitcoin Gold network is relatively limited, the cost of such an attack is low — from USD $1200.
bitcoingold.org explaining the CCBN concept and how it will work
To avoid the threat of similar attacks in the future, the Bitcoin Gold team intends to implement the CCBN initiative. It’s about using other blockchains to notarise “BTG blocks with transaction hashes.” This solution is described in detail in a document called “CCBN_Whitepaper_Draft“.
Consequently, technicians have said that the value of Bitcoin Gold will grow. Reasons: Implementation of schnorr scheme and CCBN. The first will increase the security and privacy of transactions and reduce the block size of transactions, which will increase the bandwidth of the blockchain network. The second will protect the cryptocurrency from hacker attacks.
The increase in the value of BTG will be influenced by the general medium-term trend of the cryptocurrency market, the growth that we have seen in recent years and, presumably, the game of whales – specifically at the price of BTG.