Know Your Crypto: What Is Bitcoin Gold?
By now you might have heard about something called “Bitcoin Gold”. What is it? Is it actually Bitcoin, or just another attempt to cash in on the name? Will BTC holders get it for free in a hard fork, and will it be worth anything? Read on to find out.
Ken Olsen, the founder and CEO of Digital Equipment Corporation (DEC), once said, “There is no reason why anyone would want a computer in their home.”
Sadly, time and evolution don’t wait for anyone, and those who fail to evolve with time are crushed to death. Microcomputers took over the market and threw DEC’s minicomputers out of the ring. In 1998 DEC was acquired by Compaq — which, in turn, was taken over by Hewlett-Packard (HP).
I believe we are about to see many such radical changes with the introduction of cryptocurrencies. Hence, it is important for everybody to have an idea of how it works and how to use it.
Bitcoin’s Golden Fork
In this article, I’ll be explaining about the hard fork that’s going to take place on 25th October — resulting in a split in the BTC blockchain and the introduction of a new cryptocurrency, Bitcoin Gold (BTG).
Like other hard forks (such as Bitcoin Cash), if you hold BTC and control your own private keys at fork time, you’ll instantly have access to BTG tokens as well.
Bitcoin Gold was announced back in July 2017, but didn’t really capture much attention. Some people were even calling it a gimmick, used to distract people from the bigger and much awaited SegWit2X fork.
The reason for its unpopularity is unclear, but probable causes might be that miners already running ASICs to mine bitcoin might not be as interested in it — since it is going to affect them negatively.
How Is Bitcoin Gold Different to Regular Bitcoin?
The major change in the Bitcoin Gold source code is its mining algorithm. Its developers chose to adopt something called “equihash”.
Equihash is the mining algorithm also used by Zcash. It was designed by Alex Biryukov and Dmitry Khovratovich, cryptographers at the University of Luxembourg. Equihash is designed to be “memory hard”. This means that it favors GPUs over ASICs for mining.
The Idea Behind Equihash – Generalized Birthday Problem
Equihash is based on something called the “generalized birthday problem”. This problem is the generalized version of the “Classical birthday problem”.
The problem seeks to find out the probability that, given a group of students, there exists at least one pair who share a common birth date. The special fact about this problem is how quickly the probability rises to 0.5.
There’s no point going over the proof right here, as this article is not supposed to be a mathematics class (although I can show it), but, nevertheless, I’ll tell you the important facts. It takes only about 23 people to give you a 50 percent chance of finding a pair that share a common birth date.
Whenever this happens, we call it a collision. The generalized birthday problem is nothing but scaling it up to find such ‘k-pairs’ or ‘k-tuples’.
In computer science, this has a very interesting application, called the “birthday attack”. The goal is to find out a pair (consisting of distinct components) from the message space (i.e. input), which, upon passing through the hashing function, produces the same hash value (i.e. output), resulting in a collision.
The same problem can be treated as finding a pair that XORs to 0. XOR, which as you might know, is a logic gate that produces 0 only when the operands are the same.
Calculations from the classic birthday problem show that such an attack only requires us to perform hash calculations that are a small multiple of 2^(n/2), where n is the number of bits in the generated hash. So, the greater the ‘n’, the safer (and also slower) the hashing algorithm is.
These days, SHA256, which produces a 256 bit hash value, is considered the minimum requirement to stay safe. SHA256 also happens to be the hashing algorithm used for Bitcoin mining.
So Will Bitcoin Gold Make Everyone Lots of Money?
From a technical perspective, Bitcoin Gold sounds pretty interesting. What it lacks, however, is significant community and industry support — which is probably why most people haven’t heard much about it. Since the aim is to hand mining back to GPU rigs, BTG obviously doesn’t need the support of big mining factories to produce blocks, and avoid dying out.
Whether its tokens will have much value, though, is less certain. That part is up to the market. It will also depend on whether service providers think it’s worthwhile to support it.
One other point: it’s less likely to take economic value away from Bitcoin, like Bitcoin Cash and SegWit2X (S2X) could. Bitcoin Gold would likely add new miners to the game — those with GPUs — and won’t affect the existing ones.
In a nutshell, the BTG split seems to be a positive move that will supposedly help GPU miners accross the globe to participate, thus promoting decentralization. This makes Bitcoin Gold, a fork to watch out for at the very least.
What are the prospects for Bitcoin Gold? Let’s hear your thoughts in the comments.