BITCOIN GOLD, ANOTHER HARD FORK ON THE BITCOIN BLOCKCHAIN

in cryptocurrency •  2 years ago  (edited)
  • Do not make investment decisions based on this article. All contents are personal opinion and not financial advice.

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August this year we had a hard fork on the Bitcoin network which leads to the creation of BitcoinCash [BCH]. Now there is huge buzz going around in cryptocurrency communities about another hard fork to be launched on 25th of October. This will lead to a new cryptocurrency graft off Bitcoin called BitcoinGold [BTG].

Before we go deep into explaining the reason for this coming fork, first I will like to explain in simple terms using simple analogies what hard and soft forks are all about.

A FORK IN BLOCKCHAIN TECHNOLOGY

A “Fork”, popular among developer and in blockchain technology, is a fancy way of saying “We are updating a protocol or software”. This implies an introduction of new features in cryptocurrency (Bitcoin) protocol. Unlike the process of carrying out software update, forks in cryptocurrencies (Bitcoin, Ethereum) are not as straight forward in reality. This could be because some nodes on the network may fail to get the update in time, or not get to update at all.

A fork is simply a change/update which is of two types in cryptocurrencies: Hard fork and Soft forks.

Hard Fork

This change in a cryptocurrency (Bitcoin) is the type that introduces new features that were previously considered invalid into the protocol. What this means is that, blocks that the old version of the software considered invalid, will be considered valid with the new software. In a hard fork, all nodes on the network will exist in parallel, on one side or another based on which protocol version it is running.

Another way of looking at it is preparing a document in Microsoft word 2010, which is not backward compatible with Microsoft word 2000. A hard fork enforces a permanent divergent split from the previous blockchain version.

Soft Fork

This is not a permanent split compared to a hard fork. It is also a change to the software protocol, which only requires that a majority of the nodes switch to the new software unlike the hard fork which requires that all nodes upgrade to the new version.

So why a fork happens?

Given that most cryptocurrency projects are open source contributed to by a community of developers (programmers), miners, and users. Contentions towards the direction which a software project should go usually arise. A group of people, programmers, investors, and miners alike may decide to split the existing software into 2, hence a hard fork. This is because they believe they have a better solution, compared to what is obtainable. In August 1 2017, some members of the community decide that they wanted larger blocks, and therefore chose the route of a hard fork which gave birth to BitcoinCash.

Another hard fork is around the corner already, named BitcoinGold (BTG) to be launched on October 25th and open to exchanges on November 1st. This project was created by Jack Liao and an anonymous developer pseudonymously known as “the sorrow” who said “Bitcoin gold will implement a proof-of-work change from Bitcoin’s SHA256 to Equihash, a memory-hard algorithm that is ASIC-resistant and optimized for GPU mining”. There are currently 458 contributors on the BitcoinGold project on Github. Rumor has it that the plan for BitcoinGold originates from China. Their ultimate goal for a hard fork is to make the network more decentralized by opening up mining to more participants.

They intend to do this by replacing Bitcoins’ mining algorithm with one that can be mined with graphic processing units (GPU) including other changes, thereby making big miners who are often controversial, less relevant. Making mining easier by taking away the need for complicated Asycs card.

WHO IS BENEFITING FROM THIS?

Speculators and investors of course are part of the people going to benefit from this split.
This is possible in two ways: First way is that the fork will lead to more people buying Bitcoin in anticipation of difficulty in mining Bitcoin after October 25th. Following the events that lead to the last fork, there was a decline in the price of Bitcoin as a result of fear uncertainty and doubt. A lot of speculators will be expecting this to happen so they can buy Bitcoin at a low price when it dips.

Secondly, this will lead to free coins for some investors holding Bitcoin in some hard wallets as described in this forum. Some hardware wallets used to support Bitcoin (BTC) only. Following the hard fork leading to BitcoinCash (BCH), the wallet got upgraded and was able to support the new blockchain.

CONCLUSION

Finally as stated on BITCOIN.COM: “For too long, Bitcoin has been held back by the centralized mining industry. GPU brings Bitcoin into the modern age with an exciting technological roadmap to enable massive on-chain scaling well into the future with decentralization.”

In my humble opinion, BitcoinGold is a revolution/rebellion from a group of developers towards centralized miners, and therefore bringing Bitcoin back to the original project vision.

There are many dissatisfied cryptocurrency investors who are risk averse and getting annoyed by the amount of hard forks, they are considering switching to Ethereum and other Altcoins.

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  ·  2 years ago (edited)

Hi Guys

What are your guys thoughts? Feel free to leave a comment or constructive feedback on my contents.

Cheers

Great Article. I followed you!

Thanks for following, more content on the way. If you want me to talk about a topic, feel free to throw them in here.

Thanks for clarifying this issue in a brief but concise manner. I was not quite getting it why they wanted to fork bitcoin again and cannot say I'm pro or against, but most probably will get a few satoshis before the fork :)

That's sure a good idea, can't say no to free money. :)