Bitcoin Gold — A friendly dividend fork, or Bitcoin’s disaster recovery plan?

On October 25th, the Bitcoin blockchain is set to hard fork and create a new cryptocurrency called Bitcoin Gold (BTG). Existing private keys holding a Bitcoin balance at that time will be credited with the same amount of Bitcoin Gold on November 1st, similar to how they received Bitcoin Cash at the beginning of August. A wallet for Bitcoin Gold may not be available in time, however, which could cause a delay of up to a few weeks before holders will be able to use the new coins.

The driving force behind Bitcoin Gold is a team of developers, miners, and other contributors led by Jack Liao, the CEO of Hong Kong mining manufacturer LightningAsic. His financial partner in the endeavor is known simply as Wubi, a Chinese mining tycoon and owner of Chinese Bitcoin news portal Jinse.com. The project’s anonymous lead developer goes by the name H4x3rotab, and several other developers and contributors can be found inside the project’s GitHub project and slack channel.

Deemed a “friendly fork” by the development team, many differences in this copy of Bitcoin make it less like Bitcoin Cash and more like a complimentary accessory to Bitcoin. H4x3rotab explained to Brave New Coin that there are “vested interests who benefit from blocking upcoming upgrades of Bitcoin by making hard forks like C-cash, D-cash, or SegWit4x and SegWit8x.”

His team’s plan to combat this ongoing attack is to have Bitcoin Gold take a similar, supporting role to Bitcoin, much like Litecoin did for the segwit upgrade when it deployed segwit first. However, unlike Litecoin, which has shorter block times and uses a mining algorithm that is different but still allows for ASICs, Bitcoin Gold “is also a real blockchain to pilot Bitcoin upgrades,” H4x3rotab says.

“Bitcoin Gold is also a real blockchain to pilot Bitcoin upgrades."
—  — Bitcoin Gold lead developer h4x3rotab

The project’s originator and primary financial backer says the goal of Bitcoin Gold is to compete with Bcash, Ethereum, and GPU Coins, increase mining decentralization, and protect the Bitcoin ecosystem. “We will use Segwit and try to follow Core as closely as possible,” says Liao. “Because unlike Bcash, we know that the best engineers in the industry are working on Core, so that is obviously the best technical roadmap to take Bgold safely into the future.”

The biggest change in the code that helps it be complementary to Bitcoin, is that it uses a different mining algorithm that is resistant to ASIC chips, called Equihash. Zcash uses the same mining algorithm, and just like Ethereum, these coins both require the use of GPUs instead of Bitcoin’s current ASIC mining machines. ASICs are widely regarded among bitcoin’s development team and their supporters as the primary source of many of Bitcoin’s current problems, leaving Bitcoin centralized in the hands of a small number of miners.

Another advantage for the project is that it uses the Equihash algorithm instead of Bitcoin’s SHA-256. Bitcoin Gold will therefore compete with Ethereum for mining hardware, despite being closer in design to Zcash. This is noteworthy because sometime in 2018, the Ethereum project plans to switch its Proof of Work mining algorithm over to a new one based on Proof of Stake. Ethereum is currently using a large percentage of the world’s total GPU mining equipment, so the Bitcoin Gold team has designed their coin to become the prime recipient of that mining hardware.

Bitcoin Gold has also altered its difficulty adjustment time. Every two weeks, Bitcoin adjusts a ‘handicap’ setting that makes it easier or harder for miners to solve a block and get their reward. Doing so ensures that as more mining power is added, blocks continue to get mined at an average rate of one per ten minutes. This long adjustment period had been working well enough until the Bitcoin Cash fork in August, but now with the hashpower available to Bitcoin fluctuating so often, two weeks was too long for the Bitcoin Gold team. Instead, their blockchain will measure and adjust its difficulty setting with every block found.

While the Bitcoin Gold project has been a work in progress since July, it has recently taken shape as more than just another free dividend to Bitcoin holders. This particular fork is similar enough to Bitcoin to also serve as a disaster recovery backup for Bitcoin’s blockchain if the Segwit2x split in November doesn’t go well — positioning Bitcoin Gold to take over for Bitcoin if necessary. It could possibly even have its code merged with Bitcoin, thus eliminating Bitcoin’s problems that are rooted in an ASIC mining monopoly.

“Yes we will provide BIP for Bitcoin"
— — Jack Liao, LightningAsic CEO

Liao welcomed the thought of Bitcoin Gold becoming Bitcoin in such circumstances, but says such a decision is “up to community choice. No individual can decide it.” Asked if he would welcome Bitcoin Gold’s code being merged into the Bitcoin core directory, he told Brave New Coin “Yes. We will provide BIP for Bitcoin.”

Bitcoin Gold still has a few hurdles to clear before it launches, however. The mining software, mining pool, and block explorer have yet to be released and although the project doesn’t have a wallet yet, it still plans to allow miners to test-mine Bitcoin Gold on a testnet within two weeks. In addition, the project has not yet added strong replay protection code to its software. This important code change ensures Bitcoin Gold users don’t accidentally spend real Bitcoin and vice versa, otherwise known as a ‘replay attack’. However, Liao has assured several different people who questioned him that “Bgold will have replay protection; friendliness to Bitcoin is paramount.”

The single largest criticism directed at the project, however, is the developer’s decision to mine the new blockchain themselves for some time after the fork — thus keeping all the mining rewards. The community is concerned this will result in an unknown amount of Bitcoin Gold being mined. Talking to supporters on the project’s slack channel, H4x3rotab says the number of blocks they plan to mine is still under deliberation and “would be at most one percent of the total supply.”

Two exchanges so far have committed to listing BTG in November: Hong Kong’s Bitexchange, and a new CFD exchange, Bitstar.