Bitcoin Gold (BTG) is a fork of Bitcoin that occurred on October 24, 2017 on block 419406. Bitcoin Gold changed Bitcoin’s proof-of-work algorithm from SHA256 to Equihash rendering specialised mining equipment obsolete in an attempt to democratise the Bitcoin mining process.
Bitcoin Gold hopes to make mining democratic again
This strategy of making influence over a network proportional to computing power is known as proof-of-work. The more work you do—in this case, computing SHA-256 hashes billions of times—the more likely you are to win a chance to add a block to the blockchain.
Bitcoin Gold is identical to vanilla Bitcoin in most respects, but it uses an alternative proof-of-work algorithm called Equihash that supporters believe is impervious to being sped up with custom hardware. Equihash has also been adopted by a Bitcoin rival called Zcash for the same reason.
The key idea behind Equihash is that the algorithm is constrained more by memory than by computing power. Here’s a simplified summary of how Equihash works (you can get all the gory details in the Equihash white paper):
- Equihash starts with a list of pseudorandom bit strings derived from the block the miner wants to add to the blockchain.
- The miner tries to find a subset of n strings (out of the ones generated in step 1) that XOR to zero.
- The bit strings chosen in step 2 are concatenated together and hashed with the goal (as in the original Bitcoin) of finding a value below some pre-defined value.
Step 2 is the hard part of this process—the first and third steps are relatively trivial. And the most efficient algorithm for completing step 2 requires a lot of memory. Trying to solve the problem with less than the optimal amount of memory imposes drastic computational penalties. In one example presented in the Equihash paper, solving a version of the problem with 700 megabytes took about 15 seconds, while solving the same problem with 250 megabytes took 1,000 times as long.
The reason this matters, the creators of Equihash say, is that it’s not really feasible to optimize memory-intensive algorithms with custom silicon the way you can optimize compute-intensive algorithms. Bitcoin mining hardware is blazingly fast because a chip custom-designed for computing SHA-256 hashes can compute vastly more hashes per second than a conventional CPU with the same number of transistors. But 1GB of memory takes up as much space on a chip whether it’s being used for custom mining hardware or a general purpose PC.
The result, supporters hope, is that Bitcoin Gold will always be accessible to ordinary users who want to mine cryptocurrency with their PCs. That could give Bitcoin a more democratic character and reduce the influence of the big mining pools that are so powerful within the mainstream Bitcoin network.
Bitcoin Gold is still a fringe cryptocurrency
Bitcoin Gold’s vision of democratizing Bitcoin mining appeals to a lot of people in the mainstream Bitcoin world. But the currency still faces a ton of skepticism in the broader Bitcoin community.
Critics have objected to the unusual way that Bitcoin Gold launched the currency. After forking the main Bitcoin blockchain a few weeks ago, the Bitcoin Gold team operated the new network privately, allowing them to mine a bunch of “gold” bitcoins without competition from the rest of the Bitcoin world. Critics say this leaves fewer bitcoins available for anyone else to mine.
How do I buy cryptocurrency?
While some cryptocurrencies, including bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoin or another cryptocurrency.
To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as bitcoin or ethereum.
Coinbase is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell bitcoin and other cryptocurrencies.