Bitcoin Gold (BTG) – Investment flow data

Abstract: A few weeks ago, we published a piece on Bitcoin Cash and how one can analyse transaction data on the two blockchains involved in the split, to try to draw conclusions about the potential investment flows between the two chains. In this piece we provide a similar analysis, with respect to Bitcoin Gold (BTG).


Bitcoin Gold overview

Bitcoin Gold (BTG) is a Bitcoin chainsplit token, similar to Bitcoin Cash. Anyone who held Bitcoin on block 491,406, (which occurred on 24th October 2017) was allocated an identical amount of Bitcoin Gold. Some exchanges allowed customers to trade their Bitcoin Gold from this date, based on customer balances at the time of the fork. However, the Bitcoin Gold blockchain itself, did not appear to become usable until 14 November 2017, 21 days after the snapshot point.

The aim of Bitcoin Gold appears to be to improve mining centralization, by switching the hashing algorithm to Equihash from SHA256, which is currently more GPU-friendly than the ASIC-dominated SHA256.


Allocation of Bitcoin Gold to the coin founders

Although the Bitcoin Gold project team does not always appear to want to make this fact well-known, 100,000 coins were created and then allocated to the Bitcoin Gold team members. This consists of the block reward for 8,000 blocks, which with a block reward of 12.5 BTG, amounts to 100,000 coins.

Based on the current spot price of Bitcoin Gold of US$450 per coin, this balance is worth approximately US$45 million. In the eyes of many, this seemingly unnecessary allocation is likely to damage the integrity of Bitcoin Gold. Bitcoin Cash, for example, did not have such an allocation. One could argue that Bitcoin Cash’s initial difficulty adjustment mechanism also allowed an unusually large number of coins to be created in the initial period following the fork, although this seems somewhat fairer than what Bitcoin Gold did, as anyone could have mined the Bitcoin Cash tokens and they were not directly allocated.


Total coins spent

As at 20th December 2017, 2.61 million Bitcoin Gold tokens have been spent at least once. This compares to 4.7 million and 2.4 million Bitcoin spent, since the snapshot point and the point at which Bitcoin Gold transactions became possible, respectively. This also compares to 4.1 million Bitcoin Cash, which was spent after an equivalent number of days following the Bitcoin Cash fork point.

The 2.61 million Bitcoin Gold which has been spent represents c15.8% of all the Bitcoin Gold. In our view, this is likely to be related to the level of divestment from Bitcoin Gold, mainly because this 2.61 million coin figure is higher than a comparable first time spend in Bitcoin over the same period.


Figure 1 – Bitcoin Gold (BTG) vs Bitcoin (BTC) – Number of coins spent at least once since the chain split compared to the BTG price – million

Source: BitMEX research, Bitcoin blockchain, Bitcoin Gold blockchain, Bitfinex (Price data)


Daily Bitcoin Cash spend for the first time

The average daily spend for the first time on Bitcoin Gold is falling slightly, compared to the initial period after the launch. In the last 10 days the average daily spend for the first time was 44,000, compared to around 110,000 in the first 10 days.


Figure 2 – Bitcoin Gold coins spent for the first time since the split (daily millions) compared to the BTG price

Source: BitMEX research, Bitcoin Gold blockchain, Bitfinex (Price data)


Security Incident

For a 4.5 day period, from 21 November 2017 to 25 November 2017, the official Bitcoin Gold Github repository may have been hacked, and the official website pointed to a malicious wallet. According to an announcement from the Bitcoin Gold team, the malicious wallet allowed the malicious entity to access funds sent to new Bitcoin Gold addresses provided by the wallet, and therefore Bitcoin was not affected, as existing private keys were not compromised. It is not clear exactly what happened, but the Bitcoin Gold team claims that at least 80 BTG were stolen. Given the severity of this incident, the impact could have been far worse, in our view.

This illustrates why it’s important to handle these new fork tokens with caution. In particular, we would strongly advise you not to import your Bitcoin private key into these new fork token wallets, without first spending the Bitcoin to a new output with a different private key associated with it, after the token snapshot point, so that your Bitcoin is not at risk.