Why is bitcoin splitting again and what is bitcoin gold?

24 Oct 2017

Image: Lukasz Stefanski/Shutterstock

Bitcoin is forking for a second time to form a new cryptocurrency called bitcoin gold, but why is this happening so soon after bitcoin cash?

The forking of bitcoin into two different cryptocurrencies caused quite a stir last August, bolstered by the fact that the price of bitcoin continues to skyrocket as it approaches $6,000.

Just two months later, ‘splitcoin’ is happening for a second time with the creation of yet another cryptocurrency called bitcoin gold.

Much like the reasoning behind why bitcoin forked in the first place, the creators of bitcoin gold intend to fundamentally change how the original cryptocurrency works on blockchain. According to CoinDesk, bitcoin gold is attempting to remove corporate control by preventing immensely powerful mining machines from working on its blockchain and, in doing so, limiting the influence the makers of these machines have on the market.

In effect, it is attempting to decentralise a decentralised currency and make it more accessible to people investing in bitcoin for the first time, of which there are many, given the soar in price.

Bitcoin gold’s distribution method is also considerably different to bitcoin in that it isn’t just launching from scratch, but will be introduced with tokens already mined, which the public can then buy into when officially launched.

Before this can happen, the developers must set aside 1pc of the total cryptocurrency tokens to pay for their work.

So, who created bitcoin gold?

The cryptocurrency was the idea of Jack Liao, CEO of bitcoin mining hardware provider LightningAsic, based in Hong Kong.

An outspoken critic of bitcoin in its current form, Liao began forming a team a few months ago and is working on taking bitcoin gold into the mainstream.

He has managed to get 20 exchanges and wallets to support bitcoin gold but, in a major blow, Coinbase – the US’s largest exchange – said it would not support it, citing scepticism of the fact that its code has not been shared with the public.

In a statement, Coinbase said this lack of transparency would make it a “major security risk” to host the cryptocurrency.

Meanwhile, bitcoin cash continues to be the smaller sibling, with its current price at $332 while bitcoin sits at $5,687 at the time of writing.

Colm Gorey was a senior journalist with Silicon Republic