A Second Bitcoin Fork Is Looming and Battle Lines Are Being Drawn
Bitcoin, Bitcoin Cash, and soon... Bitcoin Gold.
When a group of Bitcoin users and companies split the digital currency into two different versions in August, it was an unprecedented event in the technology's nine-year history. Now just four months after that "hard fork," as such splits are known, yet another version of the world's most popular digital currency is scheduled to be created.
Within the next 12 hours, if all goes according to plan, techies and investors will be able to choose between Bitcoin (the original version), Bitcoin Cash, and the latest, soon-to-be-created iteration: Bitcoin Gold. As the deadline looms, Bitcoin companies and exchanges are taking sides on whether to support Bitcoin Gold or not.
While Bitcoin Cash focused on increasing transaction throughput, Bitcoin Gold aims to tackle the problem of decentralization. The algorithm that governs how Bitcoin and Bitcoin Cash "miners" create new digital coins for a reward has been monopolized by specialized (and expensive) hardware. Because of this, the average Joe or Jane has essentially no chance of making any money mining these currencies with their home computer. But Bitcoin Gold will use an algorithm known as "Equihash" which is designed so that people can effectively use their graphical processing units, or GPUs—common computer gaming hardware—to profitably mine the coin for the foreseeable future.
At Bitcoin block 491,407, Bitcoin Gold will take a "snapshot" of the Bitcoin network and stop following the main blockchain. At that point, the fork will have occurred and everyone who holds Bitcoin will receive a mirror ballance in Bitcoin Gold, which they can collect with compatible software. That event is scheduled to occur sometime around midnight on October 24.
However, it won't be until November 1, or even a bit later, that the code will be released to the public and the first block is mined on the new blockchain, the Bitcoin Gold developers told me in their official Slack channel. This could spell trouble, because a week is plenty of time for people to lose interest if there's no mining or economic activity on the network. Bitcoin Cash's first block was mined hours after the fork, and it's currently humming along at $315 USD per coin compared to Bitcoin's nearly $6,000 value. Bitcoin Gold may have an even tougher time clinging to life.
The ambitious timelines and lack of public code have made some Bitcoin companies and exchanges wary of the fork.
Coinbase, one of the largest exchanges, wrote in a blog post that it won't be immediately supporting Bitcoin Gold because the code is not yet available to the public, which they see as a "major security risk." Trezor, a company that manufacturers popular hardware wallets for Bitcoin, will likewise not be supporting Bitcoin Gold. Kraken, a popular exchange, tweeted that it would not be supporting Bitcoin Cash on Monday, but then immediately asked followers to disregard that tweet and to wait for an official announcement.
Despite all of the confusion, it still looks like the fork will be going ahead at block 491,407, at which point there will be three version of Bitcoin: Bitcoin, Bitcoin Cash, and Bitcoin Gold. In case that wasn't enough, another contentious hard fork is scheduled for November under the name Segwit2x.
There was a time in Bitcoin when a hard fork seemed like a distant possibility—now, it seems like they're becoming a regular affair.
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