Review on Bitcoin Gold by Saleh Bayramli

What is Bitcoin Gold?

To achieve its goals of democratizing BTG distribution, Bitcoin Gold is derived from Bitcoin's SHA256 mining algorithm; migrated to Equihash, which allows users to mine BTG using graphics processing units (GPUs). The Bitcoin Gold development team hoped this would prevent decentralization of mining power. This is an issue that cryptocurrency using Bitcoin and many other proof-of-work algorithms are struggling with.

Bitcoin Gold developers had implemented something called “post-mine” until the launch of public mining. This allowed the team to raise a total of 100,000 BTG without competition, of which 5,000 BTG was reserved for the founding team members and the remainder to grow the Bitcoin Gold ecosystem.

The development of Bitcoin Gold is mostly managed by the Bitcoin Gold organization despite its open source code.

What went wrong?

Although the Bitcoin Gold project was launched with immediate success, reaching a market capitalization of over $8 billion and remaining the 8th largest cryptocurrency less than two months after its launch; dropped from that level.

First, a number of popular exchanges initially refused to support the fork, including both Bittrex (the third most popular cryptocurrency exchange at the time) and Coinbase. Bittrex later listed the asset after the network stabilized, but removed it when the asset was attacked by 51% in May 2018.

This 51% attack forced the Bitcoin Gold development team to implement an update to the mining algorithm in June 2018, to switch from Equihash based on parameter set <200.9> to a modified version of Equihash called “Equihash-BTG”. Bitcoin Gold posted a summary of the rationale behind the change on its blog.

Despite the team's quick work, the damage had already been done. After hitting an all-time high of over $474 in December 2017, Bitcoin Gold entered an almost continuous downtrend, dropping to $260 at the end of 2017, then $12.64 at the end of 2018 and $5.41 at the end of 2019. Overall, Bitcoin Gold has lost more than 98% of its value in just two years.

The current situation

It was reported in January 2020 that a single entity could control at least half of the circulating BTG supply, possibly causing Bitcoin Gold to surge from $5.33 to $19.41 in a matter of days before the market crashed again. That same month, the Bitcoin Gold network again suffered a 51% attack, seeing a total of 29 blocks reorganized and $70,000 worth of BTG stolen through double-spend attacks.

Since then, Bitcoin Gold has been in a clear downtrend and has seen its daily trading volume drop by 75% since the start of the year. Also, with just 21 new commits and 985 new lines of code on Github last year; development activity, which was zero in the last three months, was seen to stagnate in 2020.

Bitcoin Gold will also prevent fraud by using a secret miner to authenticate blocks; It announced a potential solution to the 51% attack problems with a soft fork concept known as the Cross-Chain Block Noterization Protocol.

There are currently only 97 accessible nodes on the Bitcoin Gold network, half of which are located in Germany, the USA and France. This amount has decreased by 10% since July 2020 and 60% since March 2018 – indicating a clear long-term downward trend. Despite the dwindling node network, the Bitcoin Gold developer team prevented the attacker from retrieving the blockchain; It managed to circumvent a potential 51% attack in July 2020 by roaming a checkpoint to nodes at 640,650 blocks.