Only three months after the Bitcoin Cash hard fork the Bitcoin Gold (BTG) team has tried to capitalise with another Bitcoin hard fork. This occurred on block 491,407 on October 23rd, and the BTG blockchain went live on November 1st. It was the third high-profile fork in the crypto-sphere after Ethereum Classic and Bitcoin Cash. And in only two weeks there is a further hard fork planned, Bitcoin2X (B2X) which is estimated to take place on November 16th – block 494,784.
However, let’s take a look at the Bitcoin Gold hard fork which took place recently. A hard-fork is a software upgrade that’s not backwards compatible – which means miners must actively adopt and upgrade to the new software. Bitcoin Cash hard-forked to increase the blocksize to 8MB in order to reduce the transaction backlog.
The Bitcoin Gold team has its own vision of what Bitcoin should look like. In a nutshell, Bitcoin Gold’s main aim was to reduce the centralised control of miners by making ASIC mining chips less effective. ASIC mining hardware is only able to mine Bitcoin, but it does it exceptionally well, about 1 million times more effective than a CPU. This means that large groups of miners with specialised ASIC equipment make it infeasible for individuals to mine or vote on Bitcoin using CPUs or GPUs like they can with Ethereum’s equihash proof of work algorithm.
The price of Bitcoin rose to $6,000 prior to the fork as traders were looking to capitalise from free/airdropped bitcoin gold. Which they did, however the price of Bitcoin Gold is currently only $130 which compared to the Bitcoin Cash price of $500 is a little anticlimactic. There are some good reasons for this lower price, firstly the Bitcoin Gold development team (or lack of) had conducted a 1% pre-mine of all Bitcoin Gold. Which essentially means they own 1% of all BTG. Many believe this undermines their argument to further decentralise Bitcoin. It is true that miners have a significant amount of control over the direction and future of Bitcoin. However the economic incentives embedded into Bitcoins protocol ensure they act in any way that contributes towards a successful Bitcoin outcome ultimately leading to a higher price. In which case the large mining groups aren’t the biggest issues facing bitcoin, perhaps its scaling issues are greater.
So far Bitcoin Gold has not achieved much support from the community or from exchanges, wallet providers and developers, most of whom will not actively support BTG and simply tolerate it as wallet providers. Exchanges have a duty to give their customers BTG that belongs to them. Bittrex exchange cited the following reasons as to why they won’t let BTG trade:
1. No fully formed code
2. No replay protection
3. No adequate code testing and auditing
4. Lack of public code developers
The capacity for the cryptocommunity to create value out of ‘thin air’ is well founded. The ability of BTC forks to airdrop free altcoins certainly has a lifespan but investors, opportunists and the community will most likely lose their appetite for such hard forks as it is only logical to focus innovation on one primary chain. The next fork – Bitcoin2X – is likely to have much more support than Bitcoin Gold or Bitcoin Cash. The futures market of B2X is trading at $1,000 which is substantial but not likely to overtake Bitcoin as the ‘real’ Bitcoin. However anything is possible in cryptoworld.
The next blog post in the Bitcoin Fork series will be released after the Bitcoin 2X fork.