Bitcoin Gold: Distribution, Protection, and Transparency

What Is Bitcoin Gold?

Bitcoin Gold was a hard fork of the original open-source cryptocurrency, which took place on Nov. 12, 2017. While hard forks occur for several reasons—including to scale as a cryptocurrency customer base grows or because of developer conflicts—Bitcoin Gold's stated purpose was to "make Bitcoin decentralized again." Bitcoin Gold was one of the largest and most discussed Bitcoin forks at the time.

On the surface, the idea of "making Bitcoin decentralized again" may seem counterintuitive. Like all other cryptocurrencies, Bitcoin is designed to be decentralized already; it is not linked with any central bank, a particular country, or a government body.

One of the major issues with Bitcoin that prompted the development of Bitcoin Gold, however, was not related to the question of central issuance at all. Instead, it had to do with the mining process. Bitcoin Gold developers believed that by adopting a new algorithm for the mining process (in this case, a so-called proof-of-work algorithm called Equihash-BTG), the new branch of the world's most popular cryptocurrency by market cap would not disproportionally favor major mining operations.

Understanding Bitcoin Gold 

Bitcoin mining is a lucrative but resource-intensive process. The most profitable mining ventures are often those that pool together many miners, each of which requires expensive, special equipment. Individuals attempting to mine bitcoin alone either have to invest a considerable amount of money in their own rigs and join a pool or get passed by in the process, as single miners cannot generally compete with mining farms and pools.

One of the primary goals of Bitcoin Gold was to change the algorithm by which the cryptocurrency itself is mined, meaning that the mining process cannot be run faster on specialized equipment than on standard computer systems.

History of Bitcoin Gold: Launch and Controversy

The legacy of Bitcoin Gold is one steeped in controversy from the beginning. Within one day after the launch, miners accused one of the developers of Bitcoin Gold of adding a 0.5% mining pool fee hidden from the mining community. There was also concern that Bitcoin Gold's security measures were not as robust as they had initially claimed, and these flaws could result in increased vulnerability to threats.

A few days later, BTG developers notified the community that an unknown entity had uploaded suspicious files on its website that created vulnerabilities, forcing them to recall wallet software and direct users to its GitHub page rather than download files from its website.

Post-Mining

Similarly, the developers of Bitcoin Gold used what is called "post-mine" after the launch, which concerned crypto exchanges as they were considering listing BTG. This was the retroactive mining of 100,000 coins after the fork had already occurred. The way this happened was through the rapid mining of about 8,000 blocks, the results of which were set aside as an "endowment" of sorts to be used to grow and maintain the broader Bitcoin Gold network. About 5% of those 100,000 coins were set aside for each of the six primary team members as a bonus. The remaining 95,000 coins were set aside to support the growth of the BTG community's ecosystem.

Exchange Skeptics

While initially skeptical, crypto exchange Bittrex eventually agreed to list Bitcoin Gold. Their biggest concern was that Bitcoin Gold did not have "fully formed consensus code; [an] implemented replay protection; adequate code for testing and auditing; publicly known code developers." Similarly, they gave their users the following warning: "Bitcoin Gold codebase also contains a private pre-mine of 8,000 blocks (100,000 BTG). Please be aware that if a market does open, there is a possibility of the developers selling their pre-mined BTG on the open market." Following the May 2018 51% attack, Bittrex requested more than 12,000 BTG (valued at $255,000 at the time) as compensation from Bitcoin Gold to make up for the loss sustained by the exchange. Bitcoin Gold did not compensate Bittrex, and the exchange delisted BTG.

At the time of the launch, all bitcoin owners were expected to receive Bitcoin Gold coins at one Bitcoin Gold token per one bitcoin token—a process known as air-dropping. Coinbase, one of the largest cryptocurrency exchanges in the world, was notably skeptical of Bitcoin Gold at launch time. Unlike Bittrex, Coinbase ultimately decided to keep BTG off its exchange. Coinbase representatives stated that the exchange did not believe BTG was safe because information about the blockchain was limited.

Coinbase did not air-drop BTG to Bitcoin holders on its platform upon its release in October 2017, and this action resulted in a lawsuit filed against Coinbase by plaintiff Daniel Archer on March 27, 2018, claiming Coinbase had violated the terms of its contract agreement—specifically negligence, conversion, and breach of contract. The original ruling stated that Coinbase's agreement with Archer contained no part requiring Coinbase to provide services for cryptocurrencies from third parties. In August 2020, the appellate court affirmed the original court's summary judgment in favor of Coinbase.

Network as of November 2023

Continuing the long-term downward trend of dwindling nodes as Bitcoin Gold continues to stay afloat, as of Nov. 2, 2023, Bitcoin Gold had 70 reachable nodes, a pale number in comparison to Bitcoin's active nodes. The highest concentration of BTG nodes was in the U.S., Germany, and France.

Bitcoin Gold's Availability on Exchanges

As the Bittrex and Coinbase examples have shown us, for all cryptocurrencies, one of the major factors that help to determine both short-term and long-term success is its availability on cryptocurrency exchanges. Users must be able to access the cryptocurrency on exchanges to make transactions.

According to the Bitcoin Gold website, as of Nov. 2, 2023, the cryptocurrency was trading live on 34 exchanges. However, of the exchanges listed in November 2023, it is only active on Bithumb, Uphold, Unocoin, and Coinone. The rest are defunct or no longer supporting Bitcoin Gold.

Bitcoin Gold's website also claims it is supported by 18 wallet services, including Trezor Wallet, Ledger Wallet, Exodus, Coinomi, Guarda, Freewallet, BTGWallet, and Kasse.

Special Considerations

Besides the goal of "re-decentralizing" Bitcoin and making a more accessible digital asset for smaller miners that could be more fairly and efficiently distributed, Bitcoin Gold's developers also focused on protection and transparency issues. Unlike other blockchains (including Bitcoin), Bitcoin Gold sought to increase anonymity by not publishing transaction details or wallet addresses. As a free, open-source community project, decentralization and transparency in the Bitcoin Gold community are inherently expected. However, threats from hackers and other malicious entities are an ongoing concern.

In the world of virtual currencies, smaller proof-of-work blockchains like Bitcoin Gold are particularly susceptible to 51% attacks, where an attacker seeks to gain control of 51% or more of the blockchain's computing power or hash rate. While Bitcoin Gold has claimed it has implemented additional safety and protective measures from the time of its launch—like full replay protection—in an effort to help secure its customers' accounts and coins, the blockchain has endured three 51% attacks and multiple BTG wallet thefts.

The most recent 51% attack occurred in January 2020. The first January 2020 attack netted attackers 1,900 BTG, or $19,000; in the second, approximately 5,267 BTG, or about $53,000, was stolen. In the immediate aftermath of the May 2018 loss of 388,000 BTG, or roughly $18 million, the cryptocurrency exchange Bittrex chose to de-list the Bitcoin Gold (BTG) blockchain. This first incident required Bitcoin Gold to update its mining algorithm to Equihash-BTG.

Future of Bitcoin Gold

It's difficult to say what will happen to Bitcoin Gold over the long term. According to the 2021 BTG Roadmap (the latest available), the primary development areas of focus are interoperability, applications, infrastructure, and the lightning network.

Developers noted that they planned to shift from a board-based governance structure to a modern DAO-based model. Updates to the core items in their tech stack were underway, and updates to some of these items—like their explorers and ElectrumG, were being upgraded. BTG noted that while transaction volumes and fees at the moment don't necessitate a layer-2 lightning network solution just yet, it's on their radar.

The Bottom Line

Bitcoin is a cryptocurrency, forked from the Bitcoin blockchain in 2017. Since then, it has become a controversial coin with minimal use, as evidenced by the approximately 300 daily transactions on its blockchain (compared to Bitcoin's average of about 3,000 transactions per block and about 144 blocks per day). As of November 2023, it is also no longer listed on many of the exchanges it claims to be listed on, or there is no BTG trading or transaction volume shown. With dwindling updates and activity, it's hard to predict how Bitcoin Gold will turn out in the future.

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