It is no secret that big mining companies dominate Bitcoin.
To change that, we have Bitcoin Gold.
But what is it?
How does it work?
And how is it any different from the mainstream Bitcoin network?
Let’s try and answer these questions in the next couple of paragraphs.
Bitcoin Gold is the latest and the newest cryptocurrency.
And it has just gone live on the internet.
Bitcoin Gold wants to correct things that the mainstream Bitcoin won’t correct.
Bitcoin Gold backers want the new cryptocurrency to solve some serious flaws in the original design of the mainstream Bitcoin network.
By now, we have more than a hundred cryptocurrencies on the internet.
We also know that Bitcoin drives most of these new cryptocurrencies.
At least that is true in one way or another.
Its backers say Bitcoin Gold is different.
And different in a good way.
Just like Bitcoin Cash.
Bitcoin Cash is another new Bitcoin spinoff.
This cryptocurrency came onto the scene back in August.
But Bitcoin Gold is different from the mainstream Bitcoin network in two very important and different ways.
Right now, Bitcoin Gold has done a good job of branding itself as another version of Bitcoin.
Unlike many other versions of Bitcoin, it hasn’t gone out of its way to establishing itself as a new platform.
And as we have mentioned before, most of the new cryptocurrencies are basically Bitcoin derivations that use Bitcoin’s original source code.
The other interesting thing about Bitcoin Gold is that this new cryptocurrency has selected to not get rid of Bitcoin’s previous transaction history.
What does that mean exactly?
It means that if a user owned any Bitcoins before Bitcoin Gold fork, that same user would now own an equal number or amount of gold Bitcoins.
What prompted the backers of Bitcoin Gold to come up with a new cryptocurrency?
Well, according to official sources, developers designed Bitcoin Gold to resolve many of the original Bitcoin’s problems.
The most important of these problems included Bitcoin’s latest capacity crunch.
How does Bitcoin Gold intend to solve that problem?
That is simple enough as well.
Bitcoin Gold will simply use larger blocks.
But Bitcoin Gold is after another serious mainstream Bitcoin’s flaw.
And that is Bitcoin’s increased centralization.
Bitcoin Gold wants to tackle that problem and solve one of the major Bitcoin’s perceived flaw.
The mining industry has increasingly become centralized.
This is the same mining industry that secures and verifies all the Bitcoin transactions.
That, as most of us know, was not the vision of the original Bitcoin.
Bitcoin, originally, had envisioned that anyone on the internet would have the opportunity to participate in Bitcoin mining.
They could easily do so with their own personal computers.
Doing so would have also earned these individual users a bit of extra money.
Well, because these individual users who have helped and supported the Bitcoin network with their machines.
Of course, things changed very quickly.
Bitcoin started to become more valuable by the day a bit too quickly for its own “good”.
Soon enough some people discovered that they could carry out Bitcoin mining much more efficiently if they used ASICs.
ASICs is short for custom-build application-specific integrated circuits.
Consequently, the Bitcoin mining industry became more and more specialized.
Eventually, it became a very concentrated industry.
That is also the reason why the leading Bitcoin mining companies in a completely new industry started to wield a disproportionate percentage of influence and power over the entire mainstream Bitcoin network.
As pointed out earlier, Bitcoin Gold wants to change that.
And basically, dethrone the big mining companies that have taken over the mainstream Bitcoin network.
But how exactly will Bitcoin Gold manage that?
Surely overthrowing mining companies with so many resources can’t constitute an easy task?
Well, Bitcoin Gold aims to get rid of these big mining companies via a new method.
This new method would have Bitcoin Gold introducing alternative mining algorithms which would have more resistance to ASIC-based optimization.
Theoretically speaking, this could work.
Bitcoin Gold would allow ordinary users to make a bit of extra money with their idle/spare computing cycles.
This is exactly what the average user did in the early days of the mainstream Bitcoin network as well.
The Story Of Bitcoin Centralization.
How did all this happen?
To understand it, we have to remember the fact that the mainstream Bitcoin network is, at its core, a blockchain.
Think of it as a distributed ledger.
This ledger records every Bitcoin transaction that has ever taken place.
About every 10 minutes or 600 seconds, one computer machine in the mainstream Bitcoin network’s peer-to-peer network, on average, adds a Bitcoin block directly to the end of the Bitcoin blockchain.
For doing so it earns a reward that amount of 12.5 Bitcoins.
If we take Bitcoin for what it is worth today then that total of 12.5 Bitcoins comes to around $75000 worth of money.
As you would expect, Bitcoin miners for to desperately compete with each other to avail the privilege of adding another Bitcoin block to the mainstream Bitcoin blockchain.
How exactly do they do that?
Well, let’s just say that they are in a constant race with each other to solve the most difficult mathematical problems.
To know how it works, let’s take a deeper look at this phenomena.
Basically, you have Bitcoiners miners talking a list of Bitcoin transactions and then adding a random string.
This random string is called nonce.
Bitcoin miners add the nonce to the end of the blockchain.
Then these miners compute an SHA-256 bit hash function of a while particular Bitcoin block.
What does a hash function do?
A hash function is designed in such a way to produce a fundamentally random string of bits.
These random strings of bits essentially represented the hashed data in a unique way.
The miners win if the above-mentioned random bits begin with a very specific number of zeros.
A lot of the time, as you would imagine, this does not happen.
So miners then go towards another nonce and select it.
Then these miners repeat the whole calculation process again.
They continue to do so until they get to a winning block.
Needless to say, when that block does come up, they win.
And make some money.
A given miner who manages to discover a winning Bitcoin block then goes ahead and announces the discovery to the rest of the mainstream Bitcoin network.
Then everyone else on the mainstream Bitcoin network verifies that the discovery meets all the standard requirements of the mainstream bitcoin network rules.
After that, everyone adds that winning block to their own copies of the Bitcoin blockchain.
That basically finishes the cycle.
After that, the race starts again.
What is the point of all of this anyway?
We’ll admit that the process of Bitcoin mining is rather elaborate.
But the point we want to make here is that this is the process that gives the mainstream Bitcoin network the ability to reach a consensus.
Most of all, ideally, the mainstream Bitcoin network doesn’t require a central authority to form this consensus by counting votes.
So what happens if two Bitcoin miners announce two winning blocks at the same time?
Well, first of all, it produces a disagreement.
Disagreement about what?
About which is the official winning block.
How does the Bitcoin network solve this dispute?
Well, the community simply settles it by running for another round of the Bitcoin mining race.
Whichever miner manages to win the next round has the right to select which of the previous round’s winning block becomes the official one.
Of course, that is all theory.
What about practice?
Does Bitcoin work flawlessly in the real world as well?
Of course, it doesn’t.
But its underlying principles do mean that any node’s influence over the whole mainstream Bitcoin network is directly proportional to the exact amount of machine or computer power it can provide to the network.
In the early stages of Bitcoin’s life, this setup gave Bitcoin mining somewhat of a democratic character.
In other words, most users in the Bitcoin community had a bit of spare computing power lying around near their desks.
And a lot of those users could devote that extra computing power to the Bitcoin network via mining.
In the process of doing so, they also earned virtual currency.
But the important thing to remember here is that in the early days of Bitcoin the community didn’t have many professional Bitcoin miners.
Professional miners are users who have dedicated hardware for Bitcoin mining.
Early one professional Bitcoin miners didn’t present much of a problem.
A user with special hardware and equipment couldn’t really compete with a group of other guys who used their excess computing cycles.
As mentioned before, that began to change not long after.
People started to build custom ASICs for Bitcoin mining.
And the situation regarding mining began to evolve.
ASICs chips had the ability to compute SHA-256 hashes a lot more efficiently than average computers.
Soon enough, average PC miners within the community didn’t even have the opportunity to produce enough cash from Bitcoin mining that could cover their very own electricity bills.
And after a little while, Bitcoin mining became the domain of professional miners.
Professional miners who have ASICs.
Mining slow became an activity for only those who had access to these chips.
Only ASICs operations could handle mining with concentrate power and low electricity costs.
Bitcoin Gold Wants To Start Off Where Bitcoin Left Off And Make The Process Democratic Again.
That is the main objective of new cryptocurrencies such as Bitcoin Gold.
The strategy that we have discussed before is basically known only as a proof of work.
To have influence over the mainstream Bitcoin network one has to have the proportional computer power.
In other words, the more work a user can finish, the more likely that user is to win an opportunity to add a Bitcoin block to the end of the Bitcoin blockchain.
The work, in this case, is to compute as many SHA-256 hashes as possible.
Modern mining setups can compute these billions of times even.
So how is Bitcoin Gold different?
Bitcoin Gold, in essence, is still very much identical to the original and vanilla Bitcoin.
That is, if we are talking about the major aspects of the original mainstream Bitcoin network.
But it manages to differentiate itself from the original by providing an alternative proof-of-work.
Or more specifically, proof-of-work algorithm.
The community calls it Equihash.
Supporters of the new algorithm believe that this Equihash algorithm is impervious to people trying to speed it up via custom and more powerful hardware.
Another Bitcoin alternative called Zcash has also adopted the new Equihash.
More importantly though, Zcash has cited the same reasons for doing so.
What’s the key idea behind the new algorithm Equihash?
Well, the thing you need to understand about Equihash is that it represents an algorithm whose constraints more on the memory of a given machine rather than computing power alone.
Let’s take a look at the summary of how this new algorithm Equihash works.
If you want to go into all the gory details then you can do so, at your own risk, by clicking this link to access the Equihash white paper.
The Equihash algorithm starts off with a particular list of pseudorandom bit strings.
These strings are basically derived from the same block that a given miner wants to add to the end of the Bitcoin blockchain.
That completes step 1.
Next, the given Bitcoin miner tries to discover a subset of n strings.
These are the same strings that the miner generated in the previous phase.
Essentially, the miner is trying to find the subset of these strings that actually XOR to nothing but zero.
That completes step 2.
For step 3, the chosen bit strings from the previous step are actually concatenated together.
Then they are hashed with the single goal of finding a value.
This value has to be below some predetermined and predefined value.
So what’s the hard part about this whole process?
According to most media reports, the actual hard part is step 2.
Most believe that the first and the third steps represent something very trivial.
Readers should also understand that even the most efficient algorithm that can complete step 2 still requires a ton of memory.
If someone tries to solve the given problem with anything less than the absolute optimal level or amount of memory then that will come with drastic computational penalties.
To take an example from the Equihash paper, if someone tried to solve a given version of a problem with 700 MB or megabytes of memory it would take around 15 seconds.
However, if someone tried to solve the same problem with only 250 megabytes of memory then it would take 1000 times longer.
Why does it matter anyway?
It matters because, according to the creators of Equihash, you can’t really feasibly optimize all those memory-intensive algorithms with your custom silicon.
But you can easily optimize compute-intensive ones with more computing power.
There is no doubt about the fact that Bitcoin mining hardware is now blazingly fast.
Because, as we pointed out earlier, custom-designed chips for computing those SHA-256 hashes can actually compute them very quickly.
These chips can complete more hashes every second than even the most powerful of conventional CPU.
And it can do that with the same number of transistors as well.
Now coming to the memory part, a 1GB slot of memory basically eats up the same space on a given chip.
It is irrelevant if the user is using that memory for general purpose computing tasks or custom mining hardware activities.
As a result of this, Bitcoin Gold hopes they will always remain accessible to any and all ordinary users who would like to participate in mining cryptocurrency with their own computer machines.