What is Bitcoin Gold and can it spark a Bitcoin mining revolution?

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His… read more.
on Oct 2, 2017
Updated: Apr 10, 2020

Did you know that there is another Bitcoin hard fork on the horizon? And it’s not the one that’s expected to come with SegWit2x in November? No, this particular fork might spark an open rebellion against the established order within the Bitcoin community, where the creation of Bitcoins is a largely centralised affair, dominated by large mining pools. Or it might turn out to be just a storm in a teacup. The jury is still out.

The hard fork, called Bitcoin Gold, is slated to launch on October 25. It will be similar to the Bitcoin Cash hard fork, which split the legacy Bitcoin blockchain and created its own token. As reported by industry website CoinDesk, the Bitcoin Gold token will be opened to exchanges on November 1.

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So with the launch expected to take place in less than a month, why is nobody talking about it? Well, that’s because not many people within the Bitcoin community are convinced that the event would be of any significance.

Some believe that Bitcoin Gold could be even smaller than Bitcoin Cash. While the August 1 fork created one of the most virtual coin on the market, which has gained some traction among investors and service providers, it wasn’t nearly as detrimental to the legacy network as many had feared. So it’s hardly surprising that Bitcoin Gold is mostly viewed as a mere distraction. And yet, at least on paper, Bitcoin Gold’s goal seems quite ambitious.

In short, the main goal of the new project is to replace Bitcoin’s mining algorithm with one that will allow the cryptocurrency to be mined with graphic processing units (GPUs). In theory this could loosen big miners’ hold on Bitcoin production.

“Bitcoin gold will implement a proof-of-work change from bitcoin’s SHA256 to Equihash, a memory-hard algorithm that is ASIC-resistant and optimized for GPU mining,” an anonymous Bitcoin Gold developer, named ‘The Sorrow’, told CoinDesk.

According to the original vision of Bitcoin’s creator, the enigmatic Satoshi Nakamoto, Bitcoin was meant to run on a truly decentralised network, where Bitcoins would be created by all network participants running the necessary software. However, the situation quickly changed after companies started developing specialised hardware equipment known as ASIC (application-specific integrated circuit) that targeted Bitcoin’s SHA-256 proof-of-work algorithm. This equipment allowed for much more effective Bitcoin mining, but its limited accessibility to the general public meant that it mainly benefited big miners.

By switching to Equihash, a memory-oriented proof-of-work algorithm that is also used by the altcoin Zcash, the Bitcoin Gold developers are aiming at making big miners less relevant.

In a blog post from last year, the Zcash team explained why they had decided to use this particular algorithm, highlighting its core strengths.

“Equihash is a memory-oriented Proof-of-Work, which means how much mining you can do is mostly determined by how much RAM you have,” the blog post said. “We think it is unlikely that anyone will be able to build cost-effective custom hardware (ASICs) for mining in the foreseeable future.”

“We also think it is unlikely that there will be any major optimizations of Equihash which would give the miners who know the optimization an advantage,” Zcash added.

It is interesting that the Bitcoin Gold project is led by Jack Liao, the chief executive officer of LightningASIC – a Hong Kong-based mining company that is primarily focused on the Litecoin network. Another influential figure is the projects lead developer, known as H4x3. Responding to a recent query by CoinDesk, the developer described Bitcoin Gold as “a minimalist fork of the Bitcoin Core codebase in the spirit of litecoin – only a few conservative modifications”. In a separate interview with Bitcoin.com, H4x3 confirmed the BTG team’s commitment to GPU mining, saying that the project would change the proof-of-work algorithm if an ASIC targeting Equihash was created.

Some within the Bitcoin community are no convinced that the Bitcoin Gold approach would work. “GPU mining can’t prevent centralization. GPU [markets] are controlled by Nvidia and AMD,” cryptocurrency trader and investor Zhao Dong, as quoted by CoinDesk. However, Liao argues that the greater accessibility of graphics cards might lead to a different distribution of hashing power.

Then again, the Bitcoin Gold project might not be capable of achieving such a lofty goal. Bitcoin.com points out that the project seems extremely unorganised for a hard fork slated for the end of October, while H4x3 admits that the project is “still evolving” and some technical details are still being discussed. But even if those issue are resolved by October 25, chances are that the Bitcoin Gold hard for would still be overlooked, as people’s attention would be on the SegWit2x activation in November. With little support from the community, the project may never get the chance to take off.

That’s not to say that the Bitcoin Gold fork would be entirely pointless. Even if it fails to gain traction in the cryptocurrency world, it would remain an interesting experiment. Perhaps the centralisation of Bitcoin production is indeed unavoidable and it may even be the right way to go. Nevertheless, this notion should not be taken as an axiom. It should be tested.

Will Bitcoin Gold provide such a test? It’s debatable, even unlikely. But just as Bitcoin Cash before it, BTG represents an alternative vision for the future of Bitcoin that perhaps warrants a closer inspection.

For further information on how to buy and trade Bitcoin, see our comprehensive Bitcoin guide.

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