On October 25th, Bitcoin is set to hard-fork for the second time this year with a new project named Bitcoin Gold. The man behind the project is Jack Liao, CEO of Hong Kong-based mining operation, LightningASIC. The upcoming fork comes on the back of another recent hard fork named Bitcoin Cash. The upcoming Bitcoin Gold (Bgold) is said to be available on November 1st to all users holding Bitcoin private keys.
One month until #bgold exodus fork.
— Bitcoin Gold (@btcgpu) September 25, 2017
The biggest claim Bitcoin Gold makes the need for their existence is a change in the mining algorithm, from SHA256 to Equihash. The reasoning behind this is it gives the regular user a chance to compete against the main mining conglomerates that make up the mining power of Bitcoin as we speak. The idea is to give more power to graphics cards and move the power away from industrial mining firms like Bitmain which dominate the cryptocurrency mining sector. This is indeed an urgent problem in the Bitcoin network, something users would like to see fixed.
The second claim that is made by Bitcoin Gold is that it will become a training ground for possible upcoming Bitcoin Improvement Proposals (BIPs). According to developer H4x3rotab, “Bitcoin Gold is also a real blockchain to pilot Bitcoin upgrades.” Bitcoin Gold is said to play a similar role that Litecoin had when it tested Segwit on its network before the implementing it on the Bitcoin Network.
Lastly, the Bitcoin Gold team is claiming that the new BTC is the perfect backup, or a protective cushion if the Bitcoin network falls apart in the near future. According to Brave New Coin, “This particular fork is similar enough to Bitcoin to also serve as a disaster recovery backup for Bitcoin’s blockchain if the Segwit2x split in November doesn’t go well — positioning Bitcoin Gold to take over for Bitcoin if necessary.” Confidence is high within the Bitcoin Gold team camp with their generous offer to serve as a Bitcoin backup, however, Laio is also somewhat realistic, “Up to community choice. No individual can decide it.”
The best description of Bitcoin Gold is from the developer H4x3rotab with an interview with Bitcoin.com,
“Bitcoin Gold can be thought of simply as a replication of the Bitcoin protocol and coin distribution that utilizes on a different type of computer hardware for security. This replication of Bitcoin on different hardware can serve as an insurance policy or backup plan in case the original SHA256 mining network is crippled or destroyed. The same “backup plan” rationale has been used as one of Litecoin’s value propositions, however Bitcoin Gold serves this function better than Litecoin because it has the exact same coin distribution and money supply as Bitcoin; Litecoin ownership is much more narrowly distributed, making it unsuitable for use as a universal store of value and reserve currency.”
The first red flag is that the developer of Bitcoin Gold, named H4x3rotab, is anonymous. This comes at a time when the Bitcoin community has reached a size where it is ok to unmask your developers, and this is what most projects do at present time. While there are some projects in the cryptocurrency space that have anonymous developers due to their rebellious nature, Bitcoin Gold has not announced anything that would warrant a developer to stay anonymous.
Which brings us to the next point, Bitcoin Gold’s vision is as blurry as mud. As yet, the details of the project are minimal and even the developer himself admitted that the details are “still evolving”. It boggles the mind that a project that is planning to hard fork Bitcoin, that is set to undermine the value of Bitcoin, has not even a vision set out for the future available for investors to see before the fork takes place.
The real kicker to the Bitcoin Gold story is the supposed ICO they were planning on hosting. According to the web archives of http://btcgpu.org found here, it clearly states they planned on pre-mining 16,000 blocks, then distributing the mined blocks amongst ICO participants. This was abandoned. At the time of writing, it also seems the http://btcgpu.org is down (a coincidence perhaps?). As it stands, it seems the Bitcoin Gold team plans on pre-mining 1% of the supply at release and then using these mined coins to fund development. While not an evidence of a scam as yet, the project does hold the characteristics of a potential classic pump and dump scheme.
In my opinion, Bitcoin Gold is a half-baked project that relies solely on the whether investors at large will embrace the project or not. Since the project relies on strong buy support to fund itself, it is likely the project will only develop if the price maintains at high levels. To reiterate, the project is not a confirmed scam, but it presents some of the classic characteristics. If the price does not hold, one could speculate that the project may end up being abandoned altogether. As the project has already begun in murky waters with its intended pre-mine and its unorthodox abandoned ICO plans, it’s going to be difficult to convince the public to hold.
Nevertheless, the plans to decentralize the network and to use the blockchain as a testing ground may bring about some praise but these two factors may not be enough to convince the advantage hardcore Bitcoin go-getter, already frustrated by the recent hard forks, that this time is different. Even though it is publicized as a “friendly dividend”, the vast majority of users see the fork as a nuisance. The most likely conclusion to make is that Bitcoin Gold is a money grab; a way to capitalize on Bitcoins legendary status and to follow in the footsteps of Bitcoin Cash.