A new version of Bitcoin has been created after a ‘hard fork’ in the underlying blockchain, in a move surrounded by controversy and skepticism from the cryptocurrency community.
Bitcoin Gold was launched after a team of developers took a ‘snapshot’ of the Bitcoin blockchain on Tuesday night, essentially storing all of its history and past transactions, and then forged ahead on a different path with a new algorithm, a process known as a ‘hard fork’.
Following the first hard fork in August, there are now three different versions of Bitcoin: Bitcoin, Bitcoin Cash and now Bitcoin Gold.
The price of Bitcoin, which has soared by more than 400 per cent this year, quickly dropped by about 5 per cent following the split due to the uncertainty and controversy.
The creators of Bitcoin Gold say that the new form of Bitcoin will bring decentralisation back to cryptocurrency. Bitcoin mining is now a competitive activity, and currently requires expensive application-specific integrated circuits (ASICs) to take part, meaning this activity has been largely concentrated on large mining companies.*
Bitcoin Gold will operate on a different mining algorithm, with ASICs not required to take part, with the aim of decentralising the new cryptocurrency.
“The purpose of Bitcoin Gold is to make Bitcoin mining decentralised again,” the Bitcoin Gold developers said.
“Satoshi Nakamoto’s idealistic vision of ‘one CPU, one vote’ has been superseded by a reality where the manufacture and distribution of mining equipment has become dominated by a very small number of entities. Bitcoin Gold will provide an opportunity for countless new people around the world to participate in the mining process with widely-available consumer hardware that is manufactured and distributed by reputable mainstream corporations.
“A more decentralised, democratic mining infrastructure is more resilient and more in line with Satoshi’s original vision.”
But the new type of Bitcoin has been met with skepticism and criticism from the crypto community, with claims it is just a cash grab by its developers, and lacks the proper security safeguards.
Perhaps due to this lack of support, the price of Bitcoin Gold plummeted from $479.82 at launch to $274.44 within a day. The Bitcoin Gold website was also taken down for several hours on Tuesday night due to a Distributed Denial of Services attack.
Anyone who owns Bitcoin will now also own Bitcoin Gold at an exchange rate of 1:1. If the owner has control over the private keys to access the coins, they will be able to spend the new type easily, but if they are stored in a wallet without access to the keys, it will depend on whether the provider supports Bitcoin Gold. More than 20 Bitcoin exchanges have backed the new cryptocurrency, but large players like Coinbase are holding off at the moment.
In a statement, the Bitcoin exchange platform said it couldn’t trust Bitcoin Gold due to a lack of transparency from the developers behind it.
“At this time, Coinbase cannot support Bitcoin Gold because its developers have not made the code available to the public for review. This is a major security risk,” Coinbase said.
“Information about this fork has been limited, and there are concerns about its security and stability. As a result, we do not believe it is safe to allow support for Bitcoin Gold at this time.”
Bitcoin wallet provider Trezor also won’t support the new cryptocurrency due to safety concerns.
“Bitcoin Gold’s codebase is incomplete. Most importantly, it lacks replay protection. For this reason, Trezor Wallet will not support Bitcoin Gold yet, as it would endanger your Bitcoins,” the company said.
“We will make all of our efforts to develop support for BItcoin Gold, but we will not do so if it will risk your coins.”
While the hard fork has already taken place, Bitcoin Gold won’t be available to the public until 1 November, with 100,000 Bitcoin Gold coins going straight to the developers, about 1 per cent of the total coins.
The first hard fork of bitcoin took place in August and saw the creation of Bitcoin Cash, which created billions of dollars of value. This version of Bitcoin is now one of the leading cryptocurrencies in the market, and has established itself as a legitimate offering.
Another significant hard fork of the Bitcoin blockchain is expected in November.
* Bitcoin mining is the process where people – miners – verify and approve transactions, and then list them on the blockchain in exchange for bitcoins. It is done using powerful computers and putting together recent transactions into blocks, then solving difficult equations.