Bitcoin Gold (BTG) is a cryptocurrency created from a hard fork of Bitcoin (BTC). Bitcoin Gold officially split from the original Bitcoin blockchain on October 24th, 2017.
According to the website, the purpose of the Bitcoin Gold project is to restore the original decentralization of Bitcoin mining. In the early days, Bitcoin (BTC) could be mined using regular computers. That meant there were individual miners spread throughout the globe, each securing the platform. However, as the network has grown, the only way to profitably mine BTC is to use ASICs (application-specific integrated circuits). ASICs are different from CPUs and GPUs in that they do only one thing, but they do it very well. The use of ASICs has led to a monopolization of Bitcoin mining where a few big companies dominate. If some of these large mining companies wanted to, they could join forces and issue a 51 percent attack where they control a majority of the network hash rate giving them the power to revise transaction history and prevent new transactions from being confirmed.
Jack Liao, CEO of the Hong King-based mining company Lightning ASIC, first announced the Bitcoin Gold project in July 2017. Bitcoin Gold changes Bitcoin’s proof-of-work (PoW) algorithm to create a digital asset that doesn’t require expensive, state-of-the-art hardware (ASICs) for mining. Instead, Bitcoin Gold can be acquired using GPU (graphics processing unit) mining which makes it more accessible and theoretically, restores decentralization in the network.
As with any other hard fork, to claim Bitcoin Gold, users had to hold the original Bitcoin at the time of the fork to automatically receive an equal amount of Bitcoin Gold at the same address. For people who held their BTC in hardware wallets, there were no issues. However, for users who kept their BTC on exchanges, problems arose.
At the time, some of the largest crypto exchanges (including Coinbase and Kraken) announced they would not support BTG. Coinbase wrote on their blog: “Information about this fork has been limited and there are concerns about its security and stability. As a result, we do not believe it is safe to allow support for Bitcoin Gold at this time.” At the time of this writing, Coinbase and Kraken still do not support BTG.
After officially launching on November 1st, 2017, community members criticized the development team after they found that 100,000 BTG coins had been pre-mined. The dev team responded by saying that the pre-mined funds would be used to support the growth of the Bitcoin Gold ecosystem. In addition, about five percent were set aside as a bonus for the team.
In that same month, the official Bitcoin Gold website was compromised and promoted a link to a fake BTG wallet. Users were encouraged to share their old private keys to claim their free BTG tokens. Before it was discovered and removed, more than $3.3 million were stolen in this scam.
In May of 2018, Bitcoin Gold was hacked by attackers who deployed a combination of a 51 percent attack as well as a double-spend attack. This was done to defraud crypto exchanges since they accept large deposits automatically. The fraudsters made large Bitcoin Gold deposits on exchanges, and at the same time, sent the same funds to wallets they owned. When exchanges realized the transactions were fake, it was too late. The hackers already withdrew the large BTG deposits from the exchanges and multiplied their funds. In the end, the hijackers stole more than $18 million in BTG from multiple exchanges, including Bittrex.
Hoping to prevent future 51 percent attacks, in June 2018, the Bitcoin Gold project changed their proof-of-work (PoW) algorithm from “Equihash” to “Equihash-BTG.”