The creators of Bitcoin Gold are hoping to decentralize the mining that occurs on the Bitcoin blockchain. They contend that mining has become far too centralized on Bitcoin’s blockchain. And they intend to fix that.
Currently most of the Bitcoin mining is done in huge mining farms that contain hundreds of powerful ASIC mining rigs. These mining farms are owned by large companies who aren’t interested in preserving the decentralized nature of Bitcoin.
The Bitcoin Gold founders feel that these large corporations have no place controlling a decentralized peer-to-peer distributed ledger, and that it goes against the very ethos that created blockchain tech in the first place.
They want to give the mining power back to the people.
So, they created the Bitcoin Gold project. As a fork of Bitcoin it’s an alternative to that cryptocurrency, but with a key change – it makes mining equitable and fair again. Bitcoin Gold has given us a network where anyone can be a miner, even with basic hardware. This should make Bitcoin Gold far more decentralized and spread among many miners instead of a few large companies.
This review of Bitcoin Gold will investigate everything a beginner might need to know about the creation of Bitcoin Gold, and its use case among cryptocurrencies.
Returning Decentralization to the Bitcoin Blockchain
When Bitcoin was created, and for several years after, mining was done by ordinary computers. The same computers that individuals used for everyday tasks. In these early days mining was done with a computer’s central processing unit (CPU).
After several years passed miners learned that graphics processing units (GPU) were even more suited to Bitcoin mining. That was ok because mining was still being done by a wide variety of individuals.
Now, mining is done by super-powerful mining rigs with processors that were developed specifically to mine Bitcoin. These processors, called application specific integrated circuits (ASIC), are far more powerful than a CPU or GPU.
And they are also far more expensive. Which means the individual has largely been pushed out of the Bitcoin mining game.
You see, the more expensive mining becomes, the fewer people who are able to afford to do it. This limits the number of people actually mining, and causes the network to become increasingly centralized.
When it comes to blockchains centralization is bad.
Bitcoin Gold wants to make mining accessible to everyone, because they feel this is the only way to keep the blockchain as decentralized as possible.
“Make Bitcoin Decentralized Again”
That’s the slogan for Bitcoin Gold. And while it is a tongue in cheek jab at President Trump’s election campaign slogan, it is also a reference to Satoshi’s original vision for Bitcoin. Satoshi originally created Bitcoin as a peer-to-peer network where anyone could participate.
Bitcoin Gold was created to return mining to the individual by changing the blockchain so that ASIC mining is no longer possible.
Bitcoin’s SHA-256 versus Bitcoin Gold’s Equihash
There’s one fundamental change that was made when the Bitcoin Gold chain forked. That was to change the hashing algorithm to make it more difficult for ASIC rigs. This was accomplished by using a hashing algorithm that requires more memory to complete.
How can that help, you’re probably wondering.
ASICs are effective because they employ processing power almost exclusively. When a hashing algorithm requires more memory it creates a bottleneck for the ASIC, and slows it down. And then small-time GPUs can be competitive again.
The ASIC dominated Bitcoin blockchain uses an algorithm called SHA-256. The founders of Bitcoin Gold chose to use Equihash as their algorithm instead. Equihash was created as an ASIC-resistant algorithm and is best known for its use in Zcash.
The change to Equihash was made to halt ASIC mining and make mining of Bitcoin Gold more distributed, and thus more decentralized.
The Bitcoin Gold founders saw centralization as potentially damaging to Bitcoin, allowing miners and mining cartels to blacklist certain users or give preference to certain transactions. It isn’t clear if mining centralization has been that negative for Bitcoin or not.
Ultimately, if mining centralization did become a large enough problem, the Bitcoin core developers could simply switch to Equihash themselves. In essence this would be like firing all of the ASIC miners in the network.
So, it’s the fear of losing hundred’s of thousands of dollars in hardware and the ability to mine Bitcoin that keeps miners on the network honest.
Bitcoin Gold Review: Who Received Bitcoin Gold?
Because Bitcoin Gold is a fork of the original Bitcoin blockchain, anyone who owned Bitcoin when the fork occurred got an equal amount of Bitcoin Gold.
There was nothing special that needed to be done to receive the Bitcoin Gold, but claiming it was tricky, especially if you were holding your Bitcoin Gold in an exchange wallet.
Now anyone can get Bitcoin Gold by buying it from an exchange. It’s supported by more than 20 different exchanges, but you have to buy it with Bitcoin or Ethereum, you can’t use fiat currency to buy Bitcoin Gold.
Bitcoin Gold Review: What about Mining Bitcoin Gold
Bitcoin Gold was created to do away with mining centralization, so is it possible to mine it yourself?
The good news is that you can mine Bitcoin Gold. And you can mine it with a GPU on your home computer. No expensive ASIC needed.
There’s a small caveat though.
You probably can’t mine Bitcoin Gold as a solo miner. You’ll need to join a mining pool to make a profit.
That’s not a really big deal though, since there are over a dozen different pools for mining Bitcoin Gold. One of the most popular is pool.gold, but there are others and choosing the most popular isn’t always a good idea because you’ll be promoting the very centralization that Bitcoin Gold was created to get away from.
Once you know which pool you’re going to use you’ll also need to download and configure the proper mining software for your GPU. If you’re at pool.gold you’ll see they have software specific to Nvidia and software specific to AMD. Download the software that matches your GPU.
Finally, you’ll need a Bitcoin Gold wallet, if you don’t already have one. There are lots of good options, such as Exodus wallet and Coinomi wallet. Or you could simply send the coins to an exchange if you’re planning on converting them anyway.
Bitcoin Gold Review: When Did Bitcoin Gold Launch?
The Bitcoin Gold hard fork occurred at block 491,407 on the Bitcoin blockchain, which was on October 24, 2017. As is typical of a hard fork, Bitcoin Gold took a snapshot of the Bitcoin blockchain at that height, maintaining all the transactions and balances up to that point and then beginning its own new blockchain.
Bitcoin Gold Review: Are Bitcoin Gold and Bitcoin Rivals?
It’s true that Bitcoin Gold was created from Bitcoin’s blockchain, but they aren’t really rivals. A good part of this is because Bitcoin Gold also switched algorithms, meaning almost none of the Bitcoin miners switched and started mining Bitcoin Gold instead.
Bitcoin Gold actually competes more with ASIC-resistant coins such as Monero for mining power. The problem for Bitcoin Gold is that more established coins have a solid following, and miners tend to stick with them because they know what to expect.
In short, there’s very little reason for a miner to switch to Bitcoin Gold unless the price were to surge higher.
There was an upside when Bitcoin Gold was created, and that’s the fact that everyone who held BTC also received BTG. This created immediate widespread distribution, which helps foster broader adoption of Bitcoin Gold.
Bitcoin Gold Review: Bitcoin Gold vs Bitcoin, Bitcoin Cash, & SegWit2x
There have been quite a few Bitcoin forks, but Bitcoin Gold is the only one to switch to an ASIC-resistant mining algorithm. In addition to the algorithm change, Bitcoin Gold also updates network difficulty on every block, gradually increasing difficulty rather than making one huge change every couple of weeks. And Bitcoin Gold was one of the only Bitcoin forks to support both replay protection and Segregated Witness (SegWit). Replay protection stops bad actors from creating fraudulent parallel transactions, while SegWit increases the throughput of the network by increasing the number of transactions each block can hold.
Bitcoin Gold Review: Replay Protection in Bitcoin Gold
Replay protection is a critical technology when a hard fork is performed. Because Bitcoin and Bitcoin Gold share wallet address and code it’s possible for a replay attack to occur. Basically this allows an attacker to send a signal between the forks that takes your Bitcoin if you’re spending just Bitcoin Gold.
Bitcoin Gold has offered replay protection right from the hard fork by rehashing transactions so they can’t be transferred from the BTC chain to the BTG chain.
Bitcoin Gold Review: Conclusion
ASIC-resistance has become increasingly important to some cryptocurrency enthusiasts as decentralization has gained increased importance. That makes Bitcoin Gold a leader, since it was created specifically to make Bitcoin both ASIC-resistant and more decentralized.
The problem is that the majority of people don’t feel like the Bitcoin mining ecosystem is broken, or that its current more centralized development has harmed it in any way. Of course having a centralized network isn’t ideal, but the Bitcoin miners simply have too much to lose for them to take any actions that would be against the best interests of the blockchain.
And there are newcomers to the mining ecosystem that have been increasing the decentralization of Bitcoin.
The consensus from the community is that Bitcoin Gold doesn’t offer enough improvement to make it worthy of an independent investment. Many people have already dumped the BTG they received from the hard fork, so price should remain fairly stable, but if you didn’t receive BTG as part of the hard fork, it might not be worth it to buy BTG now.