Extraordinary Index Event: Removal of Bitcoin Gold (BTG)
We hereby announce that Bitcoin Gold (BTG) has been removed from the MithrilX MiX10 index on May, 23 2018 at 4pm ET. The MithrilX index committee voted unanimously on this change.
Why did we remove BTG?
We have strong evidence that one week ago, on May 16, 2018 the Bitcoin Gold address GTNjvCGssb2rbLnDV1xxsHmunQdvXnY2Ft has successfully completed a double spend attack by acquiring more than 50% of the Bitcoin Gold network’s hash rate. Bitcoin Gold lead developer H4x3rotab has confirmed the attack since.
What is a double spend attack?
The term “double spending” refers to the sending of the same coins to two different addresses. Example:
Eve has only 1 BTG and sends 1 BTG to Alice and also 1 BTG to Bob.
Solving double spending was and continues to be the key challenge in any decentralized monetary system. Owning to the absence of a central authority that approves transactions, decentralized monetary systems had to develop an alternative method (consensus mechanism) to validate transactions. Almost all consensus mechanisms, including the one of Bitcoin Gold, are based on a type of shareholder democracy. Characteristically for any democratic system, if more than half of the voting power is in the hands of a malicious actor, this party is able to make decisions on their own. Particularly, they can form double spend transactions and authorize them by themselves.
Why was Bitcoin Gold affected?
It is important to understand that digital asset protocols were designed to prevent double spending. If an outsider tries to attain more than 50% of a network’s hashing power, they would need to match the current network’s hash rate. This is usually either a significant expense or practically impossible.
However, a simpler and thus more dangerous approach can be described as the “tragedy of the underdog”. Bitcoin Gold uses the same hashing algorithm (called Equihash) as the much more popular protocol Zcash.
Furthermore, the relative hash rate of BTG has been dwindling and dropped below 6% of the hash rate of the ZCash network on May 16 (the day of the attack). As a result, even a relatively small, possibly rented, Zcash miner/mining pool was able to overtake the BTG network and successfully complete a >50% attack.
Conclusions
The Bitcoin Gold double spend attack shows the dangers of recycling an existing hashing algorithm for a new protocol. Relatively small miners from the matured protocol can jump ship and take over the new network. Ironically, the purpose of the Bitcoin Gold hard fork was to fight centralization of mining power by changing the ASIC friendly SHA-256 hashing algorithm (used for Bitcoin) to the GPU hard Equihash algorithm.
With the completion of the attack, BTG showed the lack of sufficient resistance against >50% attacks (MithrilX Policy 2) and stopped being eligible to be included in any MithrilX index. MithrilX took appropriate action and removed BTG from the MiX10 index.
