Bitcoin Gold: FAQ on the new Bitcoin hard fork

Bitcoin Gold: FAQ on the new Bitcoin hard fork

in Bitcoin, Bitcoin, Newbie

There's a new Bitcoin hard fork around the corner, and it’s not SegWit2x. This article will explain what Bitcoin Gold is, how and when it will hard fork and what you’ll need to do to be ready for it.

What is Bitcoin Gold?

Bitcoin Gold (BTG) was created by Jack Liao, head of the Hong Kong-based company LightningASIC engaged in selling cryptocurrency mining equipment. The project has a rather ambitious goal: to become more attractive than the original Bitcoin. The primary way to do this is by trying to solve the problem of mining centralization through a change in the proof-of-work algorithm. This usually requires a hard fork, and BTG creators have decided to use this method. They have chosen Equihash, a memory-hard algorithm used by ZCash. It is believed that it will soon become impossible to create ASICs with this algorithm. This means that using CPUs and GPUs will start making sense again, and mining will return to the users' hands. BTG developers also plan to premine up to 1% of the total token amount. It is still unclear how they are going to implement this plan, but the idea is to give a part of the mining reward to the developers. The total amount of BTG is not supposed to exceed the 21 million limit.

What makes ASIC resistance so important?

ASICs are Application Specific Integrated Circuits. Unlike CPUs, they can do only one thing, but they do it very well. Most of Bitcoin mining is currently done by ASICs, usually with the equipment produced by Bitmain, Bitfury, and Canaan. In many respects, this is because the Bitcoin proof-of-work algorithm (SHA256) does not require much RAM and is relatively simple. Equihash, by contrast, is a fairly complex hash algorithm and requires a large amount of RAM. This means that it would be much more expensive to produce ASICs for Equihash and there is no guarantee of a significant mining speed gain. A standard CPU can work with SHA256 at around 5–10 MH/s. An ASIC can work with the same algorithm at around 5–10 TH/s, i.e. it can mine 1 million times faster than a CPU. By contrast, a standard CPU can mine Equihash at a hash rate of around 10–30 H/s, whereas specialized equipment can work at 1000–3000 H/s, which is about 100 times faster. Being ASIC-resistant, Equihash creates more equal conditions than SHA256. It's hard to predict the solutions that might emerge if Equihash mining becomes as profitable, but you can safely say that the efficiency gain, in any case, would be much less than for SHA256.

What will happen after the hard fork?

Tokens won't become available right away. Some block will get "frozen" for the BTG chain, and new BTG blocks will be added to it later. The developers plan an early November release, which means that their blockchain will have no blocks for a week or so. The Bitcoin Gold creators plan to build a testing net sometime in late October. They will release their own software shortly after.
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