Bitcoin Gold came into existence on November 12, 2017, through a procedure known as a hard fork. This usually happens when there are disagreements about changes, or when the project begins to drift from its initial objectives.
Bitcoin Gold emerged due to concerns about Bitcoin’s re-decentralization. The goal of decentralization in financial systems is to give total control and decision-making power to everyone without any exceptions. Satoshi Nakamoto established this key principle when he launched Bitcoin in 2008, as outlined in his white paper.
However, as Bitcoin started gaining traction in the finance sector, it ironically became less decentralized, limiting its mining power.
Bitcoin vs. Bitcoin Gold
Bitcoin Gold addresses the problem of Bitcoin mining becoming too centralized. In Bitcoin, the act of mining is limited to those who need unique hardware, which is often pricey and requires technical know-how. As such, it’s nearly impossible for an everyday Bitcoin user to mine.
The Application-Specific Integrated Circuits (ASICs) are required to mine Bitcoin effectively and profitably. However, Bitcoin mining presents some complexities, leading to a smaller number of miners relative to the amount of mineable Bitcoin.
Large mining companies hold the majority of the mining power, controlling about 80 to 90 percent. This gives them significant influence over the blockchain network.
The creators of Bitcoin Gold decided to use a totally different algorithm, called Equihash, instead of Bitcoin’s SHA-256 mining algorithm. This change was aimed at giving all users the ability to mine, not just a handful of them.
However, this algorithm is designed to be too memory-heavy for ASIC optimization. This means that it takes a lot of computing and electrical power to mine Bitcoin Gold.
But here’s the catch – Bitcoin Gold was developed so that regular computers with high-end GPUs could mine it. This opens up Bitcoin Gold mining to everyday people, making the network more decentralized.
Transaction fees
Bitcoin is the top dog in the world of digital currency. Its popularity and demand have driven its price way above other cryptocurrencies. Right now, a single Bitcoin is worth much more than a single Bitcoin Gold token.
Even though the value of one Bitcoin exceeds that of one Bitcoin Gold, there are more transactions going on in the Bitcoin blockchain. This congestion results in a higher transaction fee on Bitcoin. In times of high traffic, the average Bitcoin transaction fee has often exceeded $10. On the other hand, the fees for a Bitcoin Gold transaction remain significantly less, often averaging less than $0.01.
Coding approach
Bitcoin Gold is fundamentally similar to the original Bitcoin. However, it made a crucial change to let anyone mine. It also introduced two key safety measures for Bitcoin users.
Firstly, Bitcoin Gold implemented replay protection to ward off potential cross-chain replay attacks. Secondly, Bitcoin Gold introduced a distinct addressing scheme. This feature was designed to avoid confusion between Bitcoin Gold and Bitcoin wallets, which was a substantial issue with some other Bitcoin forks.
Since Bitcoin Gold is closely following Bitcoin Core’s code which fully supports SegWit, it presents a fantastic opportunity for budding developers. It’s perfect for those who want to understand how Bitcoin works or for those who are looking to create a similar app but want to keep transaction costs low.
Safety and security
Bitcoin Gold, like many crypto variations, is typically less secure than the original Bitcoin network. Some attacks on Bitcoin Gold have occurred, first in 2018 and then in January 2020.
Thanks to the joint efforts of the Bitcoin Gold miner and developer communities, further attacks in 2020 were stopped. In particular, they prevented a large-scale attack in July 2020. To enhance the network’s security, a new version of Bitcoin Gold was launched, which eliminates the possibility of deep chain reversions.