The Strategist

Should owners of bitcoins be worried about new hard fork?

10/20/2017 - 10:59

Bitcoin Gold (BTG) is a brainchild of Jack Liao, Hong Kong company LightningASIC’s leader, which also sells equipment for mining. The goal of the project is high-flying: to become more attractive currency than the original Bitcoin. And the main way to hit this goal is to try to solve the centralized mining problem by altering the algorithm that keeps the Proof-of-Work protocol going. You usually need a hard fork to do this, and the creators of BTG have chosen this path. For their own purposes, they took Equihash. This is an algorithm sensitive to RAM’s amount.

dry2 via Pixabay
dry2 via Pixabay
They say that in years ahead no one can create specialized hardware for mining bitcoins using this algorithm. This means that processors and video cards used for mining will again become valid, and the crypto currency will once become a responsibility of users. Also, creators of BTG consider pre-mining in the amount of up to one percent of the total volume of tokens. It is not yet evident how this idea will become a reality, but. Perhaps, its meaning is to transfer part of the mined coins to developers. Overall, the volume of Bitcoin Gold tokens should not exceed twenty one million.

When and how will the hard fork take place?

The developers’ plan is to take one of the blocks of the chain for the hard fork on October 25, 2017. It is not necessarily that their tokens will pop in users’ wallets on the same day - only a particular block will become unavailable as a new blockchain’s part, and Bitcoin Gold blocks will be affixed to it in the future. Currently, developers are planning to launch BTG in early November, which means that new blocks will not appear in their blockchain for about a week. The developers of Bitcoin Gold plan to create a test network somewhere in the late October. After that, they will come out with their invention.

What does this mean for me?

The whole story with Bitcoin Gold concerns you only in one case. You should have bitcoins on your accounts when the hard fork takes place, that is, on October 25. Then you will be given the same amount of Bitcoin Gold. The authors have ensured solid protection against replay attacks, so users probably do not have to worry about it. However, to access your BTG coins, you will probably have to open a separate wallet or carry out the necessary actions manually. In principle, if BTG will be cheap (less than 0.0001 bitcoins or so), you may do nothing about it. If the course will be more attractive (say, 0.01 bitcoins or higher), those responsible for wallets will certainly come up with something that will allow you to access BTG quickly. If you store your coins on an exchange, most likely, it will have to provide you with access to your BTG. This is especially probable if the price of the new coins will rise more than 0.01 bitcoins. All in all, managing your personal keys by yourself is better since this gives you maximum flexibility. Yet, it is a duty of any exchange to transfer your BTG to you.

In conclusion

Bitcoin Gold is another upturn that is about to make some changes in the ecosystem. There’s nothing to fear if you already have bitcoins - you can receive some free cash! However, if you are a developer of a wallet or own an exchange, all this is completely different for you.