Unlike other cryptos, the creators of Bitcoin Gold wanted to solve a problem rather than simply exist in the same space. In the years since Bitcoin’s original inception, cryptocurrency mining has gone from an accessible space for any crypto enthusiast who has a computer, to a small club of pros that only elite miners can penetrate.
Here’s how Bitcoin Gold plans to change this:
Forks and Splits: The Origin of Bitcoin Gold
There’s no question that Bitcoin is the biggest and the most well-known cryptocurrency out there. While many cryptocurrencies that compete are created from scratch such as Litecoin or Ethereum, a few other cryptocurrencies that share the market with Bitcoin derive from Bitcoin in some way or another. There genesis come from what are know as “forks.” A fork is a derivative currency that shares the source code with an existing cryptocurrency. In a fork, part of the code remains the same as the original cryptocurrency code (like Bitcoin), but at some point, it splits off like a fork in a road, and the end product is its own cryptocurrency. For Bitcoin Gold, because it shares part of the blockchain with Bitcoin, the transaction history is the same up until that point. When a new coin is born, holders of the original coin at the time of the fork will automatically receive the same coins in the new coin, but only if the reserve that you use supports the fork. For instance, Uphold supports Bitcoin Gold, but Coinbase doesn’t at the time of this writing, so even though Uphold users have access to those forked coins, Coinbase users will not.
In 2017 alone, the cryptocurrency world saw 18 planned or completed splits from the original Bitcoin, ranging from Bitcoin Cash in August, to Bitcoin ATOM, which is still in the planning stages. Bitcoin Gold officially released on October 24th, 2017. Uphold was among the first to announce support of BTG and launch support on 21st December 2017.
The Perceived Problem with Bitcoin
The perceived problem with today’s Bitcoin is simple: it’s not accessible, even though the original idea behind Bitcoin was to create a system that anyone could participate in as long as they had a computer. Users participate by mining, or accessing the network to verify transactions. During the mining process, users compile transactions into blocks which are added to the blockchain, or the ledger that holds transaction information about every Bitcoin transaction that’s taken place. Users solve a difficult computational equation with their computer, and the first user to solve each equation gets the honor of adding the block to the blockchain. This requires computational speed and power.
A democratic system would encourage casual Bitcoin users to mine periodically with their personal computer, and both the user and the system would benefit: the server would receive the extra support of the casual users’ mining operations, while the user would receive extra cash for his efforts.
The bitcoin mining industry is highly centralized today, thanks to the creation of ASIC (application-specific integrated circuits) that are specifically created for efficient mining applications. These powerful dedicated computers are expensive and complicated to operate (mainly due to high energy costs), making them an unrealistic tool for the average user. As a result, the Bitcoin industry now sees the majority of all bitcoin currency coming from a handful of specialized mining companies.
Bitcoin Gold wants to tackle this problem by releasing their own mining algorithm that isn’t susceptible to ASICs, rendering this high-end equipment useless. Now, all users have similar potential to succeed at mining, introducing the accessible, democratic system that Bitcoin was meant to have in the first place.
ASICs and Their Effect on Mining
To understand why ASICs are such a huge problem for the Bitcoin economy, you have to know how the blockchain works. The blockchain is the foundation of Bitcoin. It’s a compilation of every Bitcoin transaction that occurs, and it’s always growing.
Miners race against each other to add blocks to the blockchain. If a user is part of the peer-to-peer computer network, the user’s computer takes the blockchain and adds a string of characters called a nonce to the end. Then, it creates a hash function or another string of characters that represents the data that the user just added. If the hash that the user generated begins with the right sequence of characters, then the user gets the privilege of adding a block to the blockchain and receives a reward. The reward is 12.5 bitcoin or around $191,000 at the time of this writing. All computers in the peer-to-peer network are notified and work together to verify the block addition, and the race begins fresh. Often, users combine their resources in what’s called a mining pool, by sharing their computer’s processing power via a network to increase the odds of scoring a block. This allows users to collect a smaller, partial reward on a more consistent basis, rather than resigning themselves to collecting a full reward once every several years.
This worked well in the initial days of Bitcoin when miners were crypto-nerds and small-scale geeks with extra computers sitting around that they could dedicate to mining without much expenditure. Then ASIC became commonplace. The average PC is not very efficient at mining bitcoin. It could run for months without adding a block because it is so slow at generating nonces and hash functions that it’s entirely dependent upon the right timing.
How Bitcoin Gold Aims to Make Mining a Neutral Space Again
At the core of Bitcoin Gold’s mission to democratize crypto-mining is the way, it handles a key concept called proof-of-work.
Proof-of-work is the concept that the more work your computer does (e.g. generating millions or billions of hash functions), the more likely you are to add a block to the blockchain (and score bitcoins as a reward). A proof-of-work algorithm is part of every cryptocurrency, and the majority of them are susceptible to ASIC: the higher the computing power, the faster the hardware, the faster you can solve hashes and get bitcoin.
The difference between Bitcoin and Bitcoin Gold is the proof-of-work algorithm. Bitcoin Gold uses Equihash, which cryptocurrency experts believe is invulnerable to the artificial speeds of ASIC hardware. Most proof-of-work algorithms are limited by computing power, so if you speed up your computer, you speed up the mining process… and it’s relatively easy to use custom silicon to design a chip that blows through billions of hashes in no time.
Equihash, on the other hand, is limited by computing memory. There’s no known way to optimize memory on a chip in the same way as sheer computing power. Memory takes up physical space on a chip, so there will always be memory limitations in computing as we know it today, and no amount of custom silicon can change that.
The bottom line is, the price tag on your mining equipment won’t determine your success at mining Bitcoin Gold. The long-term vision is a thriving community of casual miners who put what resources they can spare into Bitcoin Gold, rather than a small, secretive group of top-tier mining operations who spend millions of dollars on massive mining rigs. As of December 2017, Bitcoin Gold is still on the fringes, and the value per coin is far lower than Bitcoin (as to be expected with a brand new currency). But the potential for an accessible, fully democratic cryptocurrency economy is here once again.
Ready to get started with Bitcoin Gold? Uphold boasts early-market access, so don’t wait!