A new cryptocurrency called Bitcoin Gold was live on the Internet last year. It aims to remove the errors which are present in the design of the original Bitcoin.
- Every cryptocurrency that we see on the Internet are derived from Bitcoin in one or the other way. But, Bitcoin Gold which was created in August 2017 is different in two important ways.
- Bitcoin Gold brands itself as another version of Bitcoin. It is not a new platform derived from Bitcoin’s source code. It also provides to retain Bitcoin’s transaction history, which means, you can own an equal amount of “gold” bitcoins if you owned bitcoins before the fork.
- Bitcoin Cash was designed to resolve Bitcoin’s capacity crunch with larger blocks. In the same way, Bitcoin Gold aims to deal with increasing centralization of the mining industry that verifies and secures Bitcoin transactions.
- Bitcoin was designed with an aim that anyone would be able participate in Bitcoin mining with their personal PC’s. It will provide to earn a bit of extra cash to the participants as they support the network. When Bitcoin started becoming more valuable, people discovered a new way to mine Bitcoin. An efficient way was discovered in which custom-built application-specific integrated circuits (ASICs) are used to mine Bitcoin.
- With this, Bitcoin mining became a specialized industry which received a huge attention. The leading companies in this industry operate a very large or very small amount of power over the
- Bitcoin Gold has an alternative mining algorithm which is much less sensitive to ASIC – based optimization, and this alternative could dethrone the leading mining companies from the Bitcoin network.
How Bitcoin mining became centralized?
- Blockchain which is a distributed ledger that records every transaction is at the core of the Bitcoin network. A block is added to a computer in Bitcoin’speer-to-peerr network at the end of Blockchain in every 10 minutes on average. Also, it collects a reward of 12.5 Bitcoins during these 10 minutes.
- Miners are found solving a difficult mathematical problem in order to add a block to the blockchain. Usually, miners compete for adding a block to the blockchain.
- A random string called nonce is added at the end of the Blockchain by a miner. Then, an SHA- 256 hash function is computed of this entire block.
- A hash function produces a random string of bits representing the hashed data uniquely. If these random bits begin with a certain number of zeros, the miner succeeds. Most probably, miner does not succeed and chooses another nonce to repeat the function until the winner block comes up successfully.
- When a miner comes across a winning block, the announcement is made to rest of the network and everyone else on the network verifies whether it meets all the requirements of the Bitcoin rules. If it meets all the requirements, everyone adds the block to their copies of the blockchain. This way, mining process continues.
- In case two blocks are announced at the same time, the race begins again and whoever wins this round of race gets to choose which block is to be added.
- Bitcoin mining was very popular and almost everyone in the community had their desks for devoting computing power to Bitcoin mining for earning virtual currency. There were some professional miners in the community with dedicated hardware to compete with the other miners.
- Building custom Bitcoin-mining ASICs changed everything. Mining became very easy with it. Also, PC miners came across a situation where they were not able to produce enough Bitcoins that could cover their electricity bills. So, mining became an ASIC-only process.
Bitcoin Gold aims to make mining democratic again
- This strategy to make mining democratic again is called proof-of-work. In this, the more you work computing SHA-256 hashes, the more are the chances for you to add a block successfully to the blockchain.
- Bitcoin Gold uses proof-of-work algorithm called Equihash. It speeds up the process of mining. Equihash is also adopted by Zcash which is a Bitcoin rival.
- The concept of Equihash focuses more on memory than computing power.
This is how Equihash works:
- Equihash begins with a list of pseudorandom bit strings. These are the strings from the block, the miner wants to add to the blockchain.
- The miner tries to find a subset of total strings generated in Step 1 that XOR to zero.
- The subset of strings are concatenated together and hashed with an aim to find a value below some predefined value.
- Finding a subset is the hardest part of this process. Completing step 2 requires a lot of memory. Bitcoin Gold users are very helpful for the ordinary users who want to mine cryptocurrency with their PCs. This gives Bitcoin a democratic character and reduces the influence of the crowning heads that are powerful within the mainstream Bitcoin network.