Are we Heading to yet Another Version of Bitcoin?
It seems as if many investors were just getting used to the concept of Bitcoin cash, Bitcoin and the SegWitx2 fork in November. However, they may have to get used to the concept of yet another version of Bitcoin called "Bitcoin Gold". It is entirely possible that there could be 4 different types of Bitcoin quite soon.
The developers at Bitcoin Gold like to see themselves as some sort of a rebel group that wants to make the Bitcoin network more decentralised. They also want to follow a "hard fork" from the legacy Bitcoin network and split from Bitcoin in a similar fashion to the way Bitcoin Cash did in August.
This Bitcoin Gold initiative is being led by Jack Liao who is the CEO of a Hong Kong based crypto mining firm called LightningASIC. As mentioned on their website, they plan to launch the coins on 25 October. It will open up the new coin to the exchanges on the 1 November.
Motivations for Bitcoin Gold
What Bitcoin Gold is trying to do is make the network more decentralised and to try and remove some of the control that has been ceded to number of very powerful mining firms. This is something that should in theory appeal to most Bitcoin users.
Part of the reason that Bitcoin has become so centralised is because of the development of ASICs. These are chips that are developed by technology firms (some of which are miners) that can rapidly increase mining efficiency. However, these ASICs are quite expensive and hence are not generally purchased by retail miners. This has been part of the reason that firms such as Bitmain have become so powerful. They produce the chips that they use in their mines.
In order to achieve this decentralisation, the developers aim to adjust the mining algorithms such that they could easily be mined with graphics cards or GPUs. This will mean that retail miners who operate from their homes with simple GPUs can also partake in the mining. Hence, the influence of the large mining firms will also begin to wane. According to Bitcoin Gold developer "The Sorrow"
Bitcoin gold will implement a proof-of-work change from bitcoin's SHA256 to Equihash, a memory-hard algorithm that is ASIC-resistant and optimized for GPU mining,
Liao's company has traditionally produced hardware that is more focused on Litecoin but he now wants to take on the established mining order in China. He makes no secret that he sees Bitmain as the reason for the large scale centralization on the network.
Although giving more power to the users and reducing centralisation is a noteworthy target, it is easier said than done. This is because one cannot merely look to GPU mining as the solution to the problem. GPU production is also centralised and is almost exclusively controlled by Nvidia and AMD. Yet, Liao claims that the ease with which consumers can buy this hardware makes it a much better solution than the status quo.
Lack of Certainty
Although it does indeed sound like an interesting proposal, there are many details that remain unknown. This includes such details as the block height on the fork. The main developers are also aware that many of the details are "fuzzy" and are up for discussion.
There was also the possible idea of an Initial Coin Offering (ICO) that would give 1% of the coins to the development team. This seems to have been removed however. Given that this is a fork of the network, each holder of Bitcoin at the time of the fork will be given an equivalent amount of Bitcoin Gold. According to a developer alias "h4x"
It is a minimalist fork of the Bitcoin Core codebase in the spirit of litecoin – only a few conservative modifications
Even though Bitcoin Gold sounds like a great idea in theory, whether it is likely to gain any traction is uncertain. The Bitcoin cash fork led to an ultimately smaller network that was worth only 12% of that of Bitcoin. Many are now predicting that a Bitcoin Gold could be even smaller in value compared to Bitcoin Cash. Two of the most vocal critics are Jiang Zhouer and Haipo Yang, the CEOs of BTC.Top and ViaBTC respectively. They claimed that the impact of Bitcoin Gold will be insignificant.
More Forks to Come
The news of the Bitcoin Gold fork is not that much of a shock. Many developers were of the view that more Bitcoin forks like the Cash fork in August are likely. For example, after the Bitcoin Cash fork Tadge Dryja, a developer at Lightning Network argued that forks will become much more common due to financial incentives.
This prediction has indeed been proven true through this Bitcoin Gold announcement and of course the SegWit 2X fork in November.
Featured Image via Fotolia
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.