Crypto exchange Bittrex is set to delist Bitcoin Gold (BTG), a hard fork of Bitcoin (BTC), by Sept.14, after details of an $18 million hack of the BTG network in May emerged this week. How unexpected was this announcement coming from the exchange, and what are the chances for BTG now that it has found itself in the midst of yet another scandal?
“One CPU one vote” ideology: How Bitcoin Gold was created
Bitcoin Gold (BTG) is a hard fork of Bitcoin (BTC). It splintered off the original blockchain on Oct. 24 2017, at a block height 491,407. The project was first announced in July 2017 on Bitcointalk.org, when Jack Liao, CEO of LightingAsic and BitExchange, revealed that he was looking for a way to change Bitcoin’s proof-of-work (PoW) algorithm from the SHA256 algorithm to Equihash.
“Given the dysfunctional current reality of the Bitcoin mining sector,” as the BTG’s roadmap reads, Liao and his team wanted to create a digital currency that wouldn’t require expensive, state-of-the-art hardware for mining. By mid-2017, allegedly 70 percent of BTC mining was performed by Application Specific Integrated Circuits (ASICs) — i.e., specialized hardware designed solely for mining purposes. ASICs can perform SHA256 calculations significantly faster and more efficiently than an average computer. BTG, with its Equihash protocol, in turn, would allow for productive mining powered by casual graphics processing units (GPUs).
Meanwhile, unlike its relatively successful predecessor Bitcoin Cash (BCH) — a BTC hard fork whose supporters claim it to be “the real Bitcoin” — BTG was not designed to take over the original Bitcoin:
“Bitcoin Gold arises from a desire to protect Bitcoin and ensure that it not only maintains its position as the dominant cryptocurrency but continues to grow until its liberating roots stretch deep into the economic life of all nations.”
In short, the ideology of BTG is to be a virtual currency that has roots in the original Bitcoin and hands power back to the casual miner equipped with a GPU. This ideology was outlined in more detail in the project’s white paper:
“Satoshi’s vision of ‘one-CPU-one-vote’ was replaced by one-ASIC-one-vote… ASIC-resistance is a permanent attribute of Bitcoin Gold. It is much more difficult to create ASICs for a memory hard algorithm like Equihash than SHA256, however it is not impossible. If the day ever comes when Equihash ASICs begin to proliferate and mining begins to centralize again, Bitcoin Gold will have another hard fork to implement a new PoW algorithm.”
“This is what will be required to make fair mining accessible to the general public once again,” Robert Khune, a strategist at the Bitcoin Gold project, told Bloomberg in October 2017. “A successful fork will prove that Bitcoin always has the ability to escape from any potential abusive mining hardware manufacturers.”
First blood: DDoS attack straight after the launch
Nevertheless, BTG was off to a rocky start. Straight after launching on Oct. 24, the project experienced a major security breach. According to the BTG team’s tweet sent out on that day, their cloud site was experiencing around 10 million requests per minute, which was blocking out legitimate traffic.
A few hours later, Bitcoin Gold tweeted that the attack had been “handled,” but that “it will take a bit more time” for the site to be operating normally. The website eventually went online, but the community’s backlash was evident at that point: The DDoS attack coincided with a number of angry posts regarding BTG flaws, where community members pointed out that around 100,000 of BTG coins were allegedly premined — the confusion was later clarified by the dev team, who explained that some of the coins were set aside as a bonus for the team — while GPUs could be used in large-scale mining operations just as ASICs.
As per the nature of a hard fork, to claim BTG coins, crypto users had to hold the original Bitcoin at the time of the fork to automatically receive an equal amount of BTG at the same address. BTG team warned that the fork was set to be performed in November 2017, and reminded to check if crypto exchanges supported the hard fork to those who held their BTC on external platforms instead of private software or hardware wallets. Normally, ahead of a major hard fork, crypto exchanges make an announcement explaining whether their customers would be reimbursed with the new coins or not.
Thus, ahead of the hard fork, a number of large crypto exchanges — including Coinbase, Poloniex and Kraken — declared that they chose not to support BTG (although Poloniex actually did it approximately four hours after the fork):
“Information about this fork has been limited and there are concerns about its security and stability,” Coinbase stated in a press release. “As a result, we do not believe it is safe to allow support for Bitcoin Gold at this time.”
That kind of response from some of the…