What’s different about Bitcoin Gold?
The new Bitcoin Gold fork coming in late October means to shake things up. The result could be a new burst of wealth creation and a return to how Bitcoin was mined in its early days…or it could fail. Either way, it’s important to understand the basic facts.
What is Bitcoin Gold hoping to accomplish?
The problem Bitcoin Gold (BTG) is trying to solve for is mining centralization. For years, it’s only been economical to set up shop as a Bitcoin miner by acquiring large numbers of specialized mining rigs called ASICs. These costly machines are built for this purpose and demand enormous amounts of electricity. They also become obsolete rather quickly as newer ASICs make them uncompetitively slow in a matter of months.
The large costs associated with running a kind of farm full of ASICs precludes most people from mining profitably, and has since perhaps 2011 or so. Given the huge amount of resources required, only a relative few operations remain. Many of them are in China and other locations where electricity is cheap or subsidized by governments. Miners work out various forms of subsidies with governments who believe they gain some control over what happens with Bitcoin when miners are close by.
Jack Liao, whose team has prepared the BTG fork and is CEO of Hong Kong-based mining company LightningASIC, intends to restore the more egalitarian days of Bitcoin’s early period when many more people had the ability to use their CPUs and GPUs to mine coins. The Bitcoin Gold team intends to democratize mining once again.
What’s technically different about it?
There are others, but the main one to be aware of is the hashing algorithm. BTG won’t use SHA256 hashing, unlike other Bitcoin forks. The BTG team plans to replace the original proof-of-work algorithm with the implementation Zcash currently uses.
This is called Equihash, and you can get a sense of its technical details in the Ledger journal, where you can read a research article entitled “Equihash: Asymmetric Proof-of-Work Based on the Generalized Birthday Problem.”
The Equihash version of the proof-of-work concept is a workaround for the problem the Bitcoin proof-of-work algorithm has with fast verification. Its requirement for fast verification means that it becomes easier over time for users with ASICs to take and hold a huge advantage. As Jimmy Song says, ASICs can do about a million times more work per second than CPUs can. This all but requires centralization.
Equihash instead requires memory-intensive computing, which makes a big difference: Memory is expensive, and the end result is that advanced machines like ASICs have only a marginal advantage over “regular” users using x86-based machines.
And here lies the whole point–Equihash is meant to disrupt the concentration of power among Bitcoin miners and make the whole system a bit more open, more akin to how things were in Bitcoin’s early years.
How does it affect Bitcoin or Bitcoin Cash?
“When a digital currency forks, it creates a new digital asset,” the Coinbase blog reminds us. You don’t necessarily need to fear that other assets will be devalued.
Both Bitcoin and Ethereum now have forks that have gone on to trade on their own merits and exist apart from their forebears. When BTG is created, current owners of Bitcoin will be given an equivalent amount of BTG simply because they own Bitcoin. Whether BTG becomes valuable or not, it’s unlikely to seriously affect Bitcoin.
The fork is scheduled for October 25th, so seeing how BTG is received publicly won’t take long. November will be Bitcoin Gold’s moment, and its core team will have to back up its claims in public.
Even if the projects doesn’t succeed, the advent of Bitcoin Gold is a valuable reminder of how decentralized organizations may function in years to come: Nobody is forever bound by preexisting constraints, nor is anyone forced to remain in a system whose rules they fundamentally disagree with.
The idea of creating a “fork” of an existing group’s work to pursue different goals than the original group will become more common outside tech circles as time goes on, and society will have to figure out how this new method fits into the life of organizations.
Originally published at overby.online on October 19, 2017.