This is opinion editor Zack Voell, bitcoin miner and market researcher.
Bitcoin is designed to be a permissionless, censorship-resistant financial instrument, and miners are believed to be one of the few groups that support this feature. However, as the mining industry landscape has changed dramatically over the past two years, attempts at operational censorship of mining have become an increasingly important topic of discussion. Indeed, some mining groups have gone out of their way to design and market products that censor certain transactions from being included in new blocks.
This article examines the history of censorship attempts by certain actors in the mining sector. It assesses the success or failure of these efforts and outlines potential types of mining-related attacks for the future.
Bitcoin Mining Censorship Attempts
One of the most recent and cautious examples of attempted miner censorship occurred in Q2 2021 by Marathon Digital Holdings, a publicly traded mining company with its own mining pool. At the end of March 2021, the company announced that it will launch its first “fully compliant” mining pool located in North America, specifically what it calls the standards set by the Office of Foreign Assets Control (OFAC). The SEC’s website is here.
To be clear, this action was entirely voluntary by Marathon and not the result of an actual OFAC request. In May, the pool began filtering mining operations. He stopped the experiment after less than a month. Maybe it’s a mix of misunderstanding the Bitcoin protocol and seeing its fees dusted Addresses linked to the Hydra marketplace, a large Russian dark internet drug market, were among the reasons calling for him to leave. But some don’t seem to have forgotten the incident, with an unknown entity redirecting the ofacpool.com link to the Marathon website.
In 2020, a blockchain analytics firm called Blockseer launched a beta version of a similar OFAC-compliant mining pool, which would require all miners to know your customer (KYC) verification and maintain a blacklist of addresses to prevent them from transacting. Blockseer also had a patent-pending tool for filtering transactions, according to the company. The wider Bitcoin community on Twitter and Bitcoin Talk laughed, mocked and shamed this project for obvious reasons. Then a mining company called DMG started using it pool and shortly thereafter merged its hash rate with the Marathon pool.
Is Mining a Threat to Bitcoin’s Censorship-Resistant Ethics?
The Bitcoin protocol is designed to withstand censorship attacks from inside and outside the network. The core principle of the entire Bitcoin experiment is to create a permissionless, uncensored financial instrument for the world. But each part of the network—nodes, developers, exchanges, and even miners—represents different potential attack vectors whose exploits must be prevented.
Mining attack vectors simply won’t go away, especially as the mining sector continues to grow with tens of billions of dollars of investment and the hashrate continues to be set. reached a new record high. Many of these potential vulnerabilities have been explained and discussed extensively in many online forums, including the Bitcoin Wiki, the Braiins mining blog, the Bitcoin Talk archive, and of course, Twitter. With the specter of miner extractable value (MEV) looming on Bitcoin’s horizon, the complexity of some attacks will surely increase as the mining revenue landscape changes as well.
Previous and potential mining attacks, however, have led to some misinformed thinking and analysis about the state of network censorship. Ari Paul, CIO at BlockTower Capital, right It is observed that most mining companies are regulated entities, not illegal, independent or more or less off-grid operations. But he later he suggested As industry members pointed out in response to Paul’s tweet, large-scale mining censorship is already happening, evidenced by the fact that the industry is small and vigilant enough to ignore such mass censorship. Paul suggested. And as explained in the previous section, many such attempts have clearly failed. Constant vigilance is essential, but distractions are counterproductive.
Individual censorship by one or more miners is also less of a concern than full network censorship. The difference here is not insignificant. A few governments or a few mining pools conspiring to censor bitcoin transactions, for example, hinders their ability to claim maximum mining rewards, does not limit, slow, or stop the flow of transaction verification and distribution.
Beyond Bitcoin Censorship
Although Bitcoin represents More than 95% Because of the total market capitalization of all proof-of-work cryptocurrencies, censorship concerns about mining are not unique to Bitcoin. And other protocols that deal with censorship can inform the ways Bitcoin users, developers, and investors themselves think about avoiding mining attacks.
F2Pool, for example, is one of the largest bitcoin mining pools and has one of the largest Zcash mining pools. The latter pool was previously monitored for exclusion from new blocks through transaction censoring. One analyst claimed that this practice has continued since April 2017, with “protective operations” being “underrepresented” in the pool by “three orders of magnitude”.
And before moving away from the highly controversial proof-of-work, Ethereum miners also struggled with privacy-related censorship incidents, as did Ethermine, one of the largest miners. stopped including transactions through the coin mixing service Tornado Cash. As Bitcoin Magazine previously reported, the service was targeted and sanctioned by the US Department of Justice earlier this year.
The Need for Vigilance
Many of the mining censorship incidents in Bitcoin’s history have been spurred by new or pending regulation, which should signal regulation as one of the industry’s most watched attack vectors. As bureaucrats and elected officials pay more attention to bitcoin, its global adoption and concerns about its energy use, comes more regulation (which means more attempts at censorship) for the mining industry. Almost every miner expects stronger and probably (in many jurisdictions) more restrictive regulations for miners. This makes it even more important to protect against mining-related attack vectors.
Marty Bent explained some plausible hypotheticals regarding the new mining censorship in this issue of the Bitcoin newsletter. But even if Bitcoin is censored somewhere, miners will still process transactions and continue hashing somewhere else. Bitcoin is unstoppable no matter how much politicians or even other miners try to censor and block it.
This is a guest post by Zack Voell. The views expressed are entirely their own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.