State of the Blockchain: The birth of Bitcoin Gold

This is State of the Blockchain, where we focus on the most noteworthy news you need to know in the blockchain scene over the past week. Without further ado, here’s our hitlist for last week.

The birth of Bitcoin Gold

Last week, on October 25, a hard fork occurred at block 491,407 on the bitcoin blockchain to create a new cryptocurrency called Bitcoin Gold. Bitcoin Gold was created by Jack Liao, the CEO of Hong Kong-based mining firm LightningASIC, and pseudonymous Chinese developer “h4x3rotab.”

The new cryptocurrency’s purpose is to “make bitcoin decentralized again,” according to the official website. The author of the website claims that the manufacturing, distribution, and operations of specialized mining hardware have been dominated by a handful of entities, some of which have engaged in abusive practices to the bitcoin network.

By changing bitcoin’s proof-of-work algorithm from SHA-256 to Equihash, Bitcoin Gold can be mined using consumer-grade GPUs, which apparently provide a more decentralized and democratic mining infrastructure.

Why does it matter?

All bitcoin holders will receive Bitcoin Gold at a 1:1 ratio, provided they store their bitcoin in a wallet or exchange that recognizes and supports the new cryptocurrency. The most likely cause of the recent rise in bitcoin price can be attributed to people buying and holding bitcoin in hopes of receiving the new cryptocurrency, which they can then sell for profit.

This project has received a lot of criticism from the community:

• Safiri Felix, a researcher at financial publisher Empiricus, notes that the team behind Bitcoin Gold has no existing track record to prove that they can deliver quality code.
• Several prominent exchanges and wallet providers have declined to support the new cryptocurrency because the development team has not disclosed the code for public review. According to Coinbase, this is a major security risk.
• About 100,000 Bitcoin Gold tokens will be mined to pay the development team before the official launch of the blockchain. At the current price, this amounts to about US$12.15 million to compensate a team of six developers.

Bitcoin will undergo yet another hard fork, tentatively happening on November 18, 2017, to create another cryptocurrency named Segwit2X (ticker: B2X). The highly anticipated hard fork may continue to drive bitcoin prices higher.

Singapore will not regulate cryptocurrencies

In a Bloomberg interview, Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS), said that the authority does not plan to regulate cryptocurrencies but is alert to all forms of illicit financing risks. Menon intends to keep an eye on the activities surrounding cryptocurrencies to decide which appropriate regulatory frameworks need to be put in place to prevent money laundering, terrorism financing, fraud, and other illegal practices.

He also revealed that the MAS is working on a payments services regulatory framework to help cryptocurrency operators comply with strict know-your-customer (KYC) and anti-money laundering (AML) policies. Meanwhile, Singapore’s Securities and Futures Act will address blockchain startups that issue tokens that resemble securities.

Why does it matter?

The fact that Singaporean authorities are not planning to regulate or ban cryptocurrency operators is an encouraging sign for blockchain startups and investors. Together with Japan and Hong Kong, Singapore’s liberal stance on cryptocurrency may be the key to help the region emerge as one of the cryptocurrency market leaders in Asia.

Great reads this week