Image: Dreamstime

 

On October 23, after block 491406 was mined, the new Bitcoin Gold fork emerged in the Bitcoin network. Bitcoin Gold proclaims the following four principles:

  • Decentralization – by adopting Equihash as its proof-of-work algorithm, it will enable home users to find blocks on the Bitcoin Gold network and thus decentralize the mining process;
  • Fair distribution – the hard fork prompts the creation of a new Bitcoin-based digital asset that ordinary users can access;
  • Reply protection – will implement full replay protection;
  • Transparency – Bitcoin Gold emphasizes itself as a free, open source, community project.

So, we at the Blockchain Intelligence Group have taken a closer look at how Bitcoin Gold operates and to see whether its actions are as good as its promises.

Q: What are the main features of Bitcoin Gold?

A: Bitcoin Gold proclaims the following five features:

  1. Mining that can be run on CPUs and consumer GPUs;
  2. A new proof-of-work algorithm, Equihash, that is ASIC-resistant;
  3. A new difficulty re-adjustment algorithm, DigiShield V3, that facilitates adjustments per block;
  4. Replay protection;
  5. Reformatted addresses (Bitcoin Gold Roadmap).

Q: At what block number is the fork happening?

A: 491407. The datestamp for the completion of block 491406 was 2017-10-24 01:17:35. At that point, Bitcoin Gold forked and the Bitcoin Gold blockchain effectively came under the new Equihash algorithm, pausing at block 491407. Meanwhile, the Core chain continued to mine blocks beyond that height.

Q: What is the value of Bitcoin Gold’s pivot towards CPU and GPU mining?

A: Bitcoin Gold wishes to restore Bitcoin mining to CPUs and GPUs and thus rejuvenate Satoshi Nakamoto’s original vision of “one CPU one vote” (Redman) and “…to create an ASIC-resilient mining ecosystem, wherein the gap between GPU/CPU mining and ASIC mining is relatively small” (Young). Satoshi Nakamoto’s idea behind this was to ensure that each CPU would invest the required computational power to mine blocks and thus the rewards for mining remain proportionate to the number of CPUs participating in the network. Nakamoto rejected the alternative model, “one IP address one vote”, on the grounds that it can be more easily gamed by using a VPN to adopt an array of IP addresses and so vote frequently on a single CPU’s hashing power. One scenario that bears out the concern is that corporations can own large numbers of IP addresses which they can skew in their favour under the “one IP address one vote” protocol.

Bitcoin Gold’s enabling of CPU- and GPU-based mining is intended to return Bitcoin mining to home users and, in so doing, restore mining decentralization to the Bitcoin network (Hay). Having said this, “one CPU one vote” assumed that every full node on the network would double up as a miner and did not anticipate the runaway development of GPUs and their ASICS mining capabilities (Bitcoin StackExchange).

So, Bitcoin Gold proposes to correct this imbalance in Bitcoin mining.

Q: What are the similarities between Bitcoin Gold and BTC?

  1. Both versions of Bitcoin support SegWit so both will be supporting external solutions, such as Lightning;
  2. Both chains share the same block size of 1Mb and block time of 10 minutes. HOWEVER, Gold plans to give miners a choice on what block size they wish to mine Bitcoin Exchange Guide.

 

Q: What are the differences between Bitcoin Gold and the other Bitcoin forks?

A: There are five differences of note here:

  1. Premining – BTG’s codebase has a private premine of 8000 blocks (100,000 BTG). Bitcoin Core has never operated a premine.
  2. Proof-of-work algorithm – BTG will be using Equihash whereas Core uses Hashcash, SHA-256 public key cryptography.
  3. Bitcoin Gold’s Equihash algorithm allows the resumption of Bitcoin mining on CPUs and GPUs which will make mining more decentralized than the ASIC-based mining (Application-Specific Integrated Circuit) hardware that Core requires. CPU and GPU mining allow home users to mine blocks on the BTG blockchain whereas ASIC equipment can only be utilized by large mining pools whose power capacity is beyond that of a home user. These mining pools are companies that aggregate the hash power from many users: a practice that a home user can not undertake.
  4. Difficulty adjustments – Bitcoin Gold’s adjustments are set to take place per block rather than once every 2 weeks, as is the case with Core. This higher frequency is an effort to protect the chain from severe swings in hash power (Bitcoin Gold Roadmap) and to prevent the chain from stalling (Van Wirdum).
  5. Address format – when Bitcoin Cash forked, the developers retained Core’s address format. This meant that BTC and BCH addresses remained indistinguishable and posed a risk to users of mistakenly sending their BTC to BCH addresses or vice versa. BTG will prefix the address string with a “G” or “A” to give much better security for BTG wallet users when transmitting coins to other addresses, whether or not they are to legacy Bitcoin addresses. (Bitcoin Gold)

Below is a table that summarizes the four Bitcoin versions:

Bitcoin Bitcoin Gold Bitcoin Cash SegWit2X
Coin supply 21 million 21 million 21 million 21 million
Required mining hardware ASIC CPU/GPU ASIC ASIC
Proof-of-work algorithm SHA-256 Equihash SHA-256 SHA-256
Begins at block number Genesis block 491407 478558 494784
Block time 10 mins 15 seconds-45 minutes* 10 mins 10 mins
Difficulty adjustment 2 weeks Each block 2 weeks + EDA# 2 weeks
SegWit Yes Yes No Yes
Replay protection n/a Yes Yes No
Unique address format no Yes No No

*  Please see http://www.btgexp.com/charts

# EDA (Emergency Difficulty Adjustment)

 

Q: Who is behind the fork?

A: An organization called Bitcoin GPU, otherwise known as Bitcoin Gold or BGold. Whereas Bitcoin Cash has five development teams, Bitcoin Gold has a single development team, the leader of which is the anonymously-named H4x3rotab (cindy23).

 

Q: What was the intention behind Bitcoin Gold’s hard fork?

A: The protocol planned to fork off the main chain, then use an ICO to ensure the BTG chain becomes the longest blockchain Bitcoin Exchange Guide.

In October 2017, the head of BTG Jack Liao, gave an interview to 8BTC where he pointed out his aspirations for Bitcoin Gold:

  • To compete with Bitcoin Cash (BCH);
  • To increase mining decentralization and thus enhance the prosperity of the Bitcoin ecosystem;
  • Post-SegWit2X, they will work on technical upgrades to better serve the community and distinguish BTG from BTC and other coins (cindy23).

Q: What is Bitcoin Gold’s timetable?

A: Here is Bitcoin Gold’s proposed timetable as gleaned from their Roadmap on the Bitcoin Gold website:

  • Step 1 (before mining of block 491407):
  1. At the cusp of block 491407, i.e. October 24, the hard fork is enacted but the Bitcoin Gold chain will not yet separate from the Bitcoin Core chain. A snapshot of the Bitcoin blockchain will be taken;
  2. October 24-November 1 – The BTG chain remains inactive, meaning that it will not mine block 491407. BTG full node client prepares to mine its own 491407 block using the Equihash algorithm. The BTG full nodes will not recognize the BTC block 491407;
  3. At Equihash mining of block 491407 – “the Bitcoin blockchain will bifurcate and a new coin – Bitcoin Gold (BTG) – will be created. Everyone who holds BTC at block 491406 will then control an equal amount of coins on the BTG blockchain branch, which can be spent at any time in the future with the corresponding private keys.”
  • Step 2 (post-mining of block 491407):
  1. Any kind of secure private key storage will yield spendable BTG tokens at a 1:1 ratio with existing BTC tokens i.e. 1 BTG for 1 BTC;
  2. BTG will become available to either be rewarded out or available on the open market at exchanges (Bitcoin Gold Roadmap).

 

Q: The timetable for the hard fork has been overshadowed by two controversial features that have concerned the Bitcoin community. How is Bitcoin Gold dealing with these concerns?

A: the features we are referring to are the presence of a premine and the presence (or not) of replay protection.

Premine

Bitcoin Gold plans the following:

  1. Reduce the difficulty level of an undisclosed number of blocks post-491407 for the benefit of the development team.
  2. A new difficulty level will “kick in” which will then allow home users to mine on the Bitcoin Gold chain.
  3. The Bitcoin Gold developers will hold 0.476% of the total BTG supply (approximately 100,000 BTG) in multisignature wallets. They will distribute 60% of that supply over the course of three years, in the form of developer bounties (Bitcoin Gold Roadmap).

All through late October, Bitcoin Gold stated their plan to premine 8,000 blocks. The reward generated, estimated to be 100000 BTG (8000 x 12.5 BTG) would be sold on/rewarded to investors at 1 BTG for 1 BTC (Bittrex Support).

The Blockchain Intelligence Group have these transparency questions:

  • We realize that erratic block times and hash power will prompt the difficulty adjustments to “kick in”. Will the premine reward also affect the difficulty?
  • Who are these investors that will benefit from the premine?
  • On what terms is this reward being distributed: through the protocols of an ICO sale or through the protocols of a typical Bitcoin reward?
  • If it is the latter, will the ‘winners’ of each block be stated in Gold’s blockchain record?
  • if 8000 blocks are being premined after the fork and before the BTG blockchain goes live, is that to say that the 0.476% of soon-to-be rewarded BTGs will have been pre-validated?
  • And at which block number has this premining taken place if block 491407 has remained in stasis on the Gold chain??
  • What is to stop possible scamming in between BTG activation and official listing on exchanges?
  • And once BTG tokens become tradable on the exchanges that have supported BTG, what is to stop these “investors” from timing the sale of their profits from the premine… or their bounties, come to think of it… in order to manipulate the BTG price on those exchanges?

We close this section with a remark made by Jack Liao. In his interview with 8btc.com, Liao dismissed the concerns about the lack of transparency in the premine: “What’s wrong with us having a premine of 200,000 BTG (Liao has got his numbers based on an original intention to premine 16,000 blocks… it is now 8000 blocks and so there are 100,000 BTG up for reward) to raise money for the development? To those who have a problem with the premine of BTG: mine or f*&k off” (cindy23).

Replay protection

Replay protection is an instruction that comes in the form of a script. It ensures that the validation of a transaction on one side of a fork in a blockchain is not validated on the other fork.

The Roadmap stated that it would “implement replay protection before the launch” i.e. before the chain goes live (Bitcoin Gold Roadmap). The Bitcoin community was becoming concerned with the way in which Bitcoin Gold was conducting its development of replay protection. Some on various BTCGPU Github pages were speculating that those developer bounties might be used as payouts for successful development of that same replay protection (Github/BTCGPU1). To support this claim, there had been at least two more Github repositories all developing replay protection in the hope of receiving their share of the bounty: Github/BTCGPU2; Github/BTCGPU3.

The Roadmap stated the payment of bounties as part of its financial strategy but it was unclear whether replay protection development would come under that rubric. However, looking at Bitcoin Gold’s daily development update, it had appeared that Bitcoin Gold had crowdsourced its replay protection development and had been paying bounties based on pull requests on Github (Bitcoin Gold). This distributed approach to developing replay protection is fine but the Bitcoin Gold team would have got more trust and goodwill had they stated this more clearly in their Roadmap.

UPDATE November 2

Bitcoin Gold announced on November 1 that they have implemented two-way replay protection using a SIGHASH_FORK_ID algorithm. Further details of their implementation can be found on Bitcoin Gold’s blog.

 

Q: How do we check whether these promises are being met?

A:We can now consult a block explorer that displays network activity for BTG. Beforehand, we had no means to check on the direction of the planned difficulty adjustments.

We still await the completion of replay protection scripts and the new address format. For now, we rely on the words of the Bitcoin Gold team and chatter on Reddit and bitcointalk can give us indicators.

Q: What exchanges are supporting BTG, which ones are not?

A: Some exchanges have stated they will support BTG e.g. Bitfinex, Coinnest; some ignore it e.g. Kraken, BTC.com, Bithumb; whereas others have stated a position against the fork e.g. Gemini, GDAX, TREZOR.

Bittrex was willing to place Bitcoin Gold as a tradable entity on its exchange BUT was one of the few exchanges to come forward and give a critique of its structure… or, more accurately, that it lacked:

  1. Fully formed consensus code
  2. Implement(ation of) replay protection
  3. Adequate code for testing and auditing
  4. Publicly known code developers (Bittrex Support)

However, most exchanges are ambivalent about BTG. For instance, Bittrex, Poloniex and Coinbase have all noted Bitcoin Gold but have expressed a ‘wait and see’ position. On the one hand, they have shown a willingness to introduce BTG/BTC trading pairs and to credit BTG to users’ wallets but, on the other hand, these initiatives are subject to their reservations about Bitcoin Gold’s stability and hitherto lack of replay protection (writing this on October 30).

Other exchanges have either said nothing or stated that they know too little about Gold to offer it as a tradable token for their users. Coinsquare, based here in Canada, sums up the wary stance that most exchanges have taken: “Information about this fork has been limited and we have concerns about its security and stability. Coinsquare is actively monitoring the situation with respect to Bitcoin gold in order to determine if it safe to allow support for it” (Coinsquare on Facebook).

Q: Any price predictions?

A: As with many developments in Bitcoin, there are grounds for optimism but also grounds for pessimism about Bitcoin Gold’s future. The Blockchain Intelligence Group does not plan to engage with the Bitcoin Gold-forked chain and neither does it speculate about future price behaviour.

The emergence of a BTG futures market depends on how interested exchanges are to list BTG. Focusing on Bitfinex and HitBTC, two exchanges that have already committed to BTG or BTG-based listings, they trade BTG at 0.0176 and 0.0202 BTC respectively, as of 15:40 Pacific Time, November 8.

As far as price predictions and trade recommendations are concerned, no-one can be sure because these trading pairs are still very young and come at a time when the BTC price itself is volatile. If you want to see an ongoing picture of BTG’s price in USD, Coinmarketcap quotes the latest BTG price.

So, Bitcoin Gold is managing a path through its scheduled hard fork and premine. We at Blockchain Intelligence Group wish them well. However, the Group also sees the concerns from exchanges and some wallets about the integrity of the fledgling coin, referring to the presence of the premine and the obscurity of their developers. I would say, in closing, that the premine is a legitimate concern for the Bitcoin community. And Bitcoin Gold’s leader (if you will), Jack Liao, needs to treat the governance concerns about the premine more maturely if he wants the fork to fulfil its potential as a well-supported coin that does indeed restore mining decentralization.

References

Bitcoin Gold Roadmap https://btcgpu.org/wp-content/uploads/2017/10/BitcoinGold-Roadmap.pdf

Bitcoin Exchange Guide. Bitcoin GPU – BTC GOLD User Activated Hard Fork BTCGPU ICO? https://bitcoinexchangeguide.com/bitcoin-gpu/

Bitcoin Gold. Bitcoin Gold Daily Dev Update 29.10.2017. https://bitcoingold.org/bitcoin-gold-daily-dev-update-28-10-2017/

Bitcoin StackExchange. What is the motivation behind one-cpu-one-vote rule? https://bitcoin.stackexchange.com/questions/5638/what-is-the-motivation-behind-one-cpu-one-vote-rule

Bitfinex. BTG to BTC Order Book. https://www.bitfinex.com/order_book/btgbtc

Bittrex Support. Statement on Bitcoin Gold [BTG] https://support.bittrex.com/hc/en-us/articles/115002320451-Statement-on-Bitcoin-Gold-BTG-

Cindy23. Jack Liao, the Person Behind Bitcoin Gold Aims to Compete with Bitcoin Cash. http://news.8btc.com/jack-liao-the-person-behind-bitcoin-gold-aims-to-compete-with-bitcoin-cash

Coinmarketcap.com. Cryptocurrency Market Capitalizations. https://coinmarketcap.com/currencies/bitcoin-gold/

Coinsquare on Facebook. https://www.facebook.com/pg/coinsquare.io/posts/?ref=page_internal

Github/BTCGPU1. Replay Protection Implementation #51. https://github.com/BTCGPU/BTCGPU/issues/51

Github/BTCGPU2. WIP: Add fork id to defend replay attack #55.  https://github.com/BTCGPU/BTCGPU/pull/55

Github/BTCGPU3. Bounty Completion for SIGHASH_FORKID-based two-way replay protection #83 https://github.com/BTCGPU/BTCGPU/pull/83

Hay, S. The Bitcoin Gold Hard Fork Explained (Coming October 25). https://99bitcoins.com/the-bitcoin-gold-hard-fork-explained-coming-october-25th/

HitBTC.com. Bitcoin Gold to BTC Exchange. https://hitbtc.com/BTG-to-BTC

Redman, J. A Closer Look at the Suspicious Activity Involved with the Bitcoin Gold Fork. https://news.bitcoin.com/a-closer-look-at-the-suspicious-activity-involved-with-the-bitcoin-gold-fork/

Van Wirdum, A. Bitcoin Gold Is About to Trial an ASIC-Resistant Bitcoin Fork. https://bitcoinmagazine.com/articles/bitcoin-gold-about-trial-asic-resistant-bitcoin-fork/

Young, J. Bittrex, World’s 3rd Largest Exchange, Will Not List Bitcoin Gold Trading. https://www.cryptocoinsnews.com/bittrex-worlds-3rd-largest-exchange-will-not-list-bitcoin-gold-trading/