Bitcoin Gold is a hard fork of Bitcoin, and it brings with it some changes that differentiate it from its parent blockchain and cryptocurrency. This is the second hard fork in the Bitcoin blockchain after Bitcoin Cash. Like BTC, everyone who owns Bitcoins will own BTG in a 1:1 ratio. But Bitcoin Gold looks to make mining more decentralized and therefore tackle the problem of concentration of power in the hands of miners.
Why Bitcoin Gold came into existence
When Bitcoin first appeared, mining was open to all users. The process of verification required a proof-of-work which any CPU could do. While the process hasn’t changed and is still something an average user’s CPU can do, the playfield has changed drastically.
After the first few years, ASICs (application specific integrated circuits) were introduced. These gave miners a much higher computational power. The GPUs were a million times faster than the regular computer processors, thus giving miners a much higher hashing rate. This obviously meant that they had the edge over others who didn’t have such hardware on them. So with a considerable upfront investment on these expensive miners, one could have an advantage over others. When you couple this with the fact that some regions have a low cost of electricity, things become favorable for people living there and owning such ASICs.
As a result, there are mining farms that have entire warehouses full of ASIC GPUs that run 24/7. A new miner looking to go about the business using his or her computer just cannot compete. This has led to the concentration of power in the hands of few. These miners can blacklist users and even favor some transactions over others because of the mining power that lies with them. This is an issue that is plaguing Bitcoin and why more and more people are switching to altcoins.
How Bitcoin Gold is different
Bitcoin Gold offers a change in the proof-of-work and thereby create a new blockchain to render ASIC driven mining useless. They want to ‘decentralize the bitcoin blockchain again’ by taking power away from a few rich miners and distributing it equally among all users. With Bitcoin Gold, things will become as they were for Bitcoin in the early stages. The fork took place on October 24, 2017, on block 491,407.
While Bitcoin uses the SHA-256 algorithm for hashing, Bitcoin Gold will use the Equihash algorithm. Equihash is popular with users as there are already altcoins like ZCash that use it to good effect. Apart from this change in the mining algorithm and practice, Bitcoin Gold doesn’t introduce any other changes.
Pros and Cons
- Wide distribution network since all Bitcoin users will own an equal number of BTG as well
- Capacity to attract a large number of users and miners as BTG has a good potential to see a surge in market price
- There are already altcoins that are anti-ASICs like Ethereum, and there are already altcoins which use the Equihash algorithm to good effects, like ZCash. Users and miners don’t really have a reason to switch to using BTG
- Block times are still the same as Bitcoin and Bitcoin Cash, which is something people are shying away from now
Buying Bitcoin Gold
To get Bitcoin Gold tokens, those who were holding BTC in eligible wallets didn’t have to do much, other than claiming the BTG. If you are not one of those people, you can buy Bitcoin Gold from an exchange for fiat currency now that Bitcoin Gold is live. Initially, there were just a handful of exchanges dealing in BTG, but now there are more of such exchanges.