All That Glitters is Not (Bitcoin) Gold

In the September Crypto News Roundup, we wrote about the upcoming Bitcoin fork into Bitcoin Gold. Bitcoin Gold was cited as “attempting to equalise the playing field”. A recent discovery seems to have provided evidence to the contrary.

The rise

Bitcoin Gold had the makings of another cryptocurrency success mystery. Move over, Satoshi Nakamoto, there’s another enigmatic creator on the horizon. The founder of Hong-Kong based Bitcoin hardware firm Lightning ASIC, Jack Liao, together with anonymous developer “h4x3″, spearheaded the project. And Bitcoin Gold set out to democratize the cryptocurrency community, first established by Nakamoto’s pioneering whitepaper, even further.

Bitcoin Gold was designed to change Bitcoin’s consensus mechanism, thereby allowing users to employ graphic processing units (GPU), lowering the barrier to entry for new miners. The fork would also be a switchover from bitcoin’s SHA256 to the same Equihash algorithm used by Zcash.

More promises were made, including mining decentralization, and replay and wipeout protection.

The project was first announced on Bitcoin Forum on July 26. User ZBTCoin responded to what was invariably received by many crypto-enthusiasts as great news, that he had taken the liberty of correcting the website text, adding, “I think that it is important because many people judge a project as a scam if the english [sic] is not “perfect” on the project website.” Apparently, it took more than grammar for the true nature of the project to come to light.

Although few Bitcoin and cryptocurrency backers were aware or, if they were, convinced by the legitimacy of this project, many saw it as a “crypto-troll” or a joke. Commenters on a Bitcoin News article were particularly opinionated.

The fall

But whereas Satoshi set out to free the world from its fiscal enslavement alongside a string of open-source developers, Bitcoin Gold planned its grand takeover with the help of financial partner Jinse.com. With a minimum of 2 exchanges committing to listing BTG in November, the plan was simple: Pay 1 Bitcoin (BTC), get 10 Bitcoin Gold (BTG).

According to the old version of their website, anyway.

The website content has since been replaced by a splash screen shrouded in … mystery.

Reddit user EnviousArm became suspicious. There were too many discrepancies and too little delivering on promises, like two-way replay protection not having been implemented. Or that a WHOIS lookup revealed the project is connected to another active altcoin, sandcoin.org (Editor’s note: Offline at the time of writing), and a host of scammy-looking domain names.

Another major source of suspicion was due to revelations that the altcoin had been premined for 16,000 coins in lieu of its October 25 opening date. This would give the development team a potential total of 200,000 coins, enabling them to manipulate the market.

Thus, a probe ensued.

Another one bites the dust

The company took to Twitter to refute claims, but succeeding only in making it sound like an – unsuccessful – half-hearted sales pitch.

However, the crypto community does not seem to be convinced by the company’s riposte.

On Github, users had a field day upon the discovery of Bitcoin Gold update that did indicate a premine.

While Bitcoin Gold is still scheduled to go live on October 25, it’s anyone’s guess what effect this controversy will have on the company’s intended results.

The key takeaway, as always, is that investors should do their do diligence before investing in a coin. While this is true for speculation in any industry, nowhere is this more pertinent than in the Wild West of cryptocurrency. As the saying goes, “With great power comes great responsibility.” And as a cryptocurrency investor, there is indeed great power … and great (research) responsibility.

Also read: Investing in Cryptocurrency: A Beginner’s Guide