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Bitcoin retreats as another cryptocurrency offshoot appears

Bitcoin Gold’s arrival pushes spot price down as much as 5.9%.

First there was bitcoin, then bitcoin cash — and now there’s bitcoin gold.

A new iteration of the cryptocurrency has been formed after some developers split the blockchain, the digitised ledger on which the bitcoin is based. Called bitcoin gold, the offshoot comes less than three months after bitcoin cash was created.

 

 

While independence from any central authority is part of bitcoin’s appeal, that’s also made it more susceptible to such so-called “hard forks” when there are differing visions within the cryptocurrency community. Bitcoin gold aside, bitcoin miners and developers have been embroiled in a debate lately over an upgrade of its protocol that’s aimed at speeding up transactions. A lack of consensus is threatening yet another schism next month. 

“This is what will be required to make fair mining accessible to the general public once again,” said Robert Khune, a strategist at the Bitcoin Gold project. “A successful fork will prove that bitcoin always has the ability to escape from any potential abusive mining hardware manufacturers,” who he blamed for “unnecessary stalling” this year.

Early trading of bitcoin gold was volatile, with prices ranging from $60 to $200 on several exchanges. The new cryptocurrency traded at $98 as of 11:21am in Tokyo, according to exchange Bitfinex. At that price, its market capitalisation stood at about $1.6 billion, making it the world’s eighth-largest cryptocurrency, according to data from coinmarketcap.com.

As groups supporting different digital networks and related currencies jockey for dominance, some may be trying to undermine bitcoin gold’s efforts. The official website went down Tuesday as hackers sought to prevent users from accessing it in what are known as denial-of-service attacks. Bitcoin gold developers said on Twitter that the site is fielding 10 million requests per minute, and they are working with providers to halt the attackers.

Bitcoin dropped 3.3% to $5 413 as of 11:18am in Tokyo after falling as much as 5.9% a day earlier when the split occurred.

“Bitcoin’s recent downturn has been driven by the traders’ anticipation of minor disarray in the wake of the upcoming hard forks,” said Thomas Glucksmann, Hong Kong-based head of marketing at cryptocurrency exchange Gatecoin. “The bitcoin exchange and wallet community has been divided over their decisions to support or reject these contentious hard forks.”

Bitcoin gold’s main innovation makes it easier for people without special hardware to mine the digital asset, according to its website. Instead of powerful mining machines called ASICs used in bitcoin, users can mine it with standard gaming graphics cards, similar to how mining is done with ethereum, the website says. After the split, bitcoin owners stand to receive one bitcoin gold for each bitcoin, assuming their wallets or exchanges support the new creation, it said.

Further splits may be imminent. One faction of the community wants to increase bitcoin’s blocksize in order to shorten transaction times, while another is opposed. The first phase of this plan, called SegWit2x, was implemented in August and took some of the data off the main network.

Bitcoin gold faces hurdles for wider acceptance. Coinbase, one of the largest online cryptocurrency exchanges, has said it won’t support bitcoin gold because of questions about its software. Coinbase doesn’t trade bitcoin cash, though it will let users withdraw it from their so-called wallets starting in January, since bitcoin owners automatically received bitcoin cash after the first fork.

Read: Bitcoin pioneer says new coin to work on multiple blockchains

Read: Bitcoin hits $100bn four times faster than Apple

© 2017 Bloomberg

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