Latest Hight: $89.67
0.01 % 0.00989126953692732
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0.00 % 0.000155626407687965
Bitcoin Gold - Trying To Make Mining Decentralized Again
• Area to disrupt: Money transfers, ASIC resistant mining, Store of Value
• Founded by: Jack Liao, h4x3rotab, Robert Kuhne, Alejandro Regojo, Martin Kuvandzhiev, Franco Niebles
• Based in: ---
• Total supply: 21 000 000
Bitcoin Gold (BTG) was officially forked in October 2017 and on its first day of trading, the price reached USD 539, which as of mid-2018 is still the all-time high.
However, just one day later, on October 25, the price fell to as low as USD 127. The most probable reason for this is that many BTC owners dumped their newly received BTG after the fork.
For the next three weeks BTG was trading between USD 110 and USD 170, but on November 10- 11 soared from USD 154 to USD 509.
Like during the previous spike, the pump and dump pattern remained and on November 20, BTG was changing hands for USD 125. Then, on November 24 the price surpassed USD 410 after Bithumb and Bitfinex added BTG trading pairs.
What a rollercoaster!
In December 2017, BTG remained much volatile with a monthly low of USD 200 reached on December 10 and a monthly high of USD 488 touched just 10 days later.
As the crypto market started its bear trend in mid-January 2018, BTG has been losing more and more of its value. The trading price of BTG at the end of June 2018 is just USD 25.
Bitcoin Gold (BTG) is a hard fork of Bitcoin (BTC) with its mainnet, dedicated to the specific idea to decentralize mining, released on November 12, 2017. The question about how decentralized is mining on the Bitcoin network became a hot topic in 2013-2014 after the ASIC miners were created. ASIC (application-specific integrated circuit) miners are machines invented with the specific goal to calculate the SHA-256 hash algorithm that Bitcoin uses. In simple terms – machines designed to verify the transactions on the Bitcoin network a lot faster.
Since then, many people believe that this is a big problem for Bitcoin and will become even bigger, because the largest manufacturer of ASIC miners – China’s Bitmain – controls most of the supply and a small group of mining pools produce most of the hashing power. In the critics’ opinion, this doesn’t correspond to the idea for decentralization. The main concern is that if a single party controls 51% of the hashing power it can manipulate the network and double-spend BTC.
Later I will explain in more detail what is the anatomy of this process, but here is a very basic example what you can do if you control 51% of the hashing power. You can buy a plane ticket to Thailand and when you get the boarding pass you can reverse your BTC back to your wallet and spend it again for a massage in Bangkok.
So, in order to prevent this scenario, Bitcoin Gold was created with its main purpose to eliminate ASIC miners from the game. From a technical point of view this is achieved by changing the hashing algorithm from SHA-256 to Equihash, which back then was ASIC resistant.
So, after Bitcoin Cash (BCH) was introduced to the world in July 2017, the founders of Bitcoin Gold decided to initiate a hard fork, too. The original idea was that after changing the Proof-of-Work (PoW) algorithm to Equihash, mining will become more accessible to the average user and therefore – the network will be more decentralized, like it was during the first years of Bitcoin.
Back then, desktop wallets were also full nodes and were able to mine BTC, so if you had a decent graphics card or a gaming rig you were able to be a profitable miner. Practically, every user was also a miner, which meant that the rewards were distributed among the users. Nowadays, this is impossible.
It is important to point out that the Bitcoin Gold team stresses heavily that the project is a “friendly fork”. They are not attacking Bitcoin like Bitcoin Cash does, for example. The idea of BTG is to offer an alternative where everyone can get involved in mining.
Another major difference between the Bitcoin Gold fork and the Bitcoin Cash fork is that BTG, unlike BCH, did a full code fork after SegWit and introduced a completely new hashing network, which means that there was no chance of a coin split and dispute which way the miners would go.
As an offshoot of Bitcoin, Bitcoin Gold supports most of the technological features of its ancestor with one key difference – the modified PoW algorithm aimed to achieve ASIC-resistance.
However, several months after the hard fork, Bitmain released a new ASIC called Antminer Z9, which was specifically manufactured to mine cryptocurrencies based on Bitcoin Gold’s underlying Equihash PoW algorithm.
So, ironically, the main purpose for BTG’s existence became obsolete. In order to eliminate the treat of 51% attacks, BTG announced on May 4, 2018 that they will perform a hard fork, which will upgrade the old PoW Equihash<200,9> with generic implementation to the new PoW Equihash<144,5> with BTG-specific Personalization.
In simple terms – this means that BTG will become ASIC resistant again. There won’t be a new coin. The hard fork is planned to happen in the beginning of July 2018.
However, shortly after BTG’s announcement on May 4, the network suffered multiple 51% attacks, which lead to the stealing of more than USD 18 million worth of BTG from different exchanges.
I will try to give you a very simplified representation of how a double-spend attack is performed in order to better understand what happened during this attack.
First, let’s recall what is a blockchain. A continuously growing list of transactions, recorded in blocks, linked and secured using cryptography.
Imagine the blockchain is a FedEx truck. Think of every block of transactions as a package, which the driver takes from a FedEx office and puts in the truck (the blockchain), glued to the previous package (block).
Miners are like couriers. When the truck arrives at the latest office and gets the last package it pulls off to the next one. Miners have 10 minutes to collect a certain amount of payment orders (announced transactions) from people around the neighborhood, to put all of them in a package (a block) and deliver this package to the next office. The first courier (miner) to do that gets a reward. Once the driver puts the latest package (block) in the truck (the blockchain), the race between the couriers (miners) starts again.
This is quite simplified explanation of a blockchain, not covering all the technological aspects, but the point is to remember that miners have the key role for running the network and prevent double-spend attacks.
Through the hash power. Hash power is basically speed.
The more hash power miners have, the bigger their chance to produce blocks and get rewards. Or if I stick to the dummy example – the faster a courier is, the more likely to get to the next FedEx office first.
If a mining pool has more than 50% of the hashing power – what was the case in the attack towards BTG in mid-May 2018 – it can start private mining on the side and make a fake secret chain.
When the attackers build a longer chain of blocks than the original one they are ready to begin. Let’s say the attack starts at block no. 100 000.
The attackers broadcast in block no. 100 001 a transaction of 2000 BTG from their wallet to an exchange wallet on the public network. But they don’t put this transaction on their secret chain.
There, they send the same 2000 BTG to another wallet which belongs to them.
After 10 confirmations, the exchange deposits those 2000 BTG to the attackers’ account, they trade them for BTC and immediately withdraw them to a BTC wallet.
Because the attackers control more than 50% of the mining power they can make blocks faster.
So, if the original chain is at block #100 011, the secret one is at #100 015, for example.
Then, the attackers broadcast the last, 15th block and they become public. Because the secret chain is longer, it is accepted unavoidably as the “true” one. As a result, the old 11 blocks are excluded from the chain.
Once that happens – the transaction of 2000 BTG from block #100 001 sent to the exchange wallet will no longer be valid. Instead, the transaction of 2000 BTG sent from the attacker to his other wallet on the fake chain will be approved. However, they have already withdrawn their 2000 BTG in BTC from the exchange, so the attack was successful.
And this is how double-spending happens.
ASIC-resistance is central to Bitcoin Gold’s mission. This is the main selling point of the project – to make mining decentralized again by giving the average user the power to participate in the mining process.
Ironically, after only six months of existence BTG failed in its main purpose – to stay secured from attacks.
In addition, many people believe that the launch of Bitcoin Gold was fueled by greed and nothing more. This accusation came as the developers did a post-mine after the launch, getting the rewards from the first 8000 blocks, or 100 000 BTG.
In less than a year after it was forked, BTG lost around 95% of its value. At this point of time, it seems that the Bitcoin community does not find a significant value in this project. Its long-term value is really questionable, despite its ambitious goals written on the roadmap, like adoption by merchants.
But adoption comes after trust.
In my opinion, the future of Bitcoin Gold is not very bright because it lacks something it will never have – centralization of interest. The Bitcoin community will never unite around the idea behind Bitcoin Gold, mainly because its controversial birth. No project can attract enough supporters and survive in the long term if the majority of users believe it was created to benefit its founders.
Description text: Lyubo Zhechev
(The views and opinions expressed by the contributor in this text should not be considered financial advice, neither treated as expression of Coins.Online’s view.
Cryptocurrency trading and investing is risky and market participants are advised to always conduct a thorough research.)