What is Bitcoin, Bitcoin Cash and Bitcoin Gold?

Unless you have been living without the Internet for the past year, you most likely would have heard about Bitcoin. The decentralised cryptocurrency has been seeing a huge gain in interests over the past year. Its price has shot up from just under US$1,000 per Bitcoin at the beginning of the year to close to US$12,000 per Bitcoin at the moment. Many professional investors are chasing the craze, but many are warning about a possible asset bubble as well.

If you are curious about Bitcoin and its development, you would have realised there are more than one type of Bitcoin around. In fact, there are three versions of Bitcoin at this moment: Bitcoin, Bitcoin Cash and Bitcoin Gold. So, what is the difference between the three?

What is Bitcoin?

Bitcoin is the first decentralised digital currency. This means that there is no government or a single central repository for the currency. The currency was launched in 2009.

Bitcoin is created through a process called “mining”.  “Miners” are rewarded by providing their computer processing power to maintain the Bitcoin transaction ledger and solving the proof of work algorithm.

What is Bitcoin Cash?

As Bitcoin does not have a central bank, the decision regarding the currency is made based on its members in the community. When some members disagree on how the currency should be developed going forward, they can create a different version of Bitcoin. This is called a “fork”.

Bitcoin Cash is the result of such a fork that occurred on 1 August 2017.

What is Bitcoin Gold?

Bitcoin Gold is yet another fork that happened in November 2017. All these forks would be created when a certain group within the Bitcoin community decide to take the direction of the currency differently.

Foolish Summary

Bitcoin is a highly complex digital currency, and many people who are buying or mining Bitcoin now do not have much knowledge about the currency. This means that most people are merely speculating or gambling with Bitcoin. If you are looking to start buying some Bitcoin as well, think whether you are really “investing” in the currency or merely gambling.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.