This is an editorial by Zack Voell, a market researcher and bitcoin miner.
Bitcoin is designed to be a permissionless, censorship-resistant financial instrument, and miners are believed to be one of the groups supporting this functionality. However, efforts to censor transactions by mining are becoming an increasingly important topic of discussion as the mining industry landscape has changed dramatically over the past two years. Indeed, some mining pools have tried to design and roll out products that moderate certain transactions so they don’t get included in new blocks.
This article examines the history of moderation efforts from certain actors in the mining sector. It assesses the success or failure of these efforts and notes potential future exploit-related attack types.
Bitcoin Mining Censorship Effort
One of the most recent and alarming examples of attempting to censor miners occurred in Q2 2021 by Marathon Digital Holdings, a publicly traded miner with its own mining pool. At the end of March 2021, the company announced it will launch its first North America-based mining pool that is “fully compliant”, specifically to the naming standards set forth by the Office of Foreign Assets Control (OFAC) in a press release containing can be read on the SEC website here.
Obviously, this action was entirely voluntary by Marathon and not the result of an actual OFAC request. In May, the pool started filter the transactions it has mined. Less than a month later, it end experiment. Perhaps a combination of misunderstanding the Bitcoin protocol and seeing its payments flick off dust by addresses associated with the Hydra market – a large Russian dark web drug market – are the reasons behind calling it a shutdown. But some don’t seem to have forgotten about this incident, as evidenced by an unknown entity redirecting the link ofacpool.com to Marathon’s website.
In 2020, a blockchain analytics firm called Blockseer launched a beta version of a similar OFAC-compliant mining pool, requiring all miners to complete a KYC of their own. you and will maintain a blacklist of addresses to prevent processing of transactions from them. Blockseer also has a patent pending tool for filtering transactions, by company. On Twitter and Bitcoin Talk, the broader Bitcoin community laughed, mocked, and shamed this project for obvious reasons. A mining company later known as DMG start using pool and immediately after merging its hash rate with Marathon’s swimming pool.
Is mining a threat to Bitcoin’s censorship-resistant ethos?
The Bitcoin protocol is designed to resist censorship attacks from within its network and from the outside. The core ethos of the whole Bitcoin experiment is to create an immutable, permissionless financial instrument for the world. But each part of the network — nodes, developers, exchanges, and even miners — represents different potential attack vectors with which mining must be thwarted.
Mining attack vectors will not simply disappear, especially as the mining sector continues to grow with tens of billions of dollars. invested and the hash rate continues to be set new record high. Many of these potential weaknesses have been explained and discussed many times in many online forums, including Bitcoin WikiMining Brainins BlogBitcoin talk archives and of course, Twitter. And with the specter of miner extractable value (MEV) looming in the horizon of BitcoinThe complexity of some attacks is bound to increase as the mining revenue landscape changes as well.
However, past and potential exploit attacks have led to some misleading thinking and analysis about the state of network censorship. Ari Paul, CIO at BlockTower Capital, exactly Was observed that most miners are regulated entities, not deceptive, independent or more or less off-grid operations. But he then suggestions that large-scale mining censorship has been taking place, which is not true, as noted by industry members in response to Paul’s tweet, and evidence that the industry is small and vigilant enough to without bypassing mass censorship. Paul suggested. And, as the previous section explained, many such attempts have publicly failed. Staying vigilant is important, but disinformation is counterproductive.
Furthermore, individual censorship of one or several mining organizations is much less of a concern than complete network censorship. The difference here is not trivial. For example, some governments, or some mining pools, conspire to censor bitcoin transactions preventing their own ability to claim maximum mining rewards, which does not limit, slow down or stop mining. transaction verifier and propagation.
Beyond Bitcoin Censorship
Although Bitcoin represents over 95% Of the total market value of all proof-of-work cryptocurrencies, censorship concerns related to mining are not exclusive to Bitcoin. And other protocols dealing with censorship could inform the ways Bitcoin users, builders, and investors think about avoiding mining attacks themselves.
F2Pool, for example, is one of the biggest bitcoin mining pool and has one of the largest Zcash mining pools. The latter group was previously tracked to exclude transaction censorship from new blocks. An analyst said This practice has been going on since April 2017, claiming that “protected transactions” are “incompletely described” by “three major degrees” within the group.
And before moving on to the controversial proof-of-work, Ethereum miners are also grappling with privacy-related censorship issues such as Ethermine, one of the biggest miners, stop including transactions are routed through the Tornado Cash coin mixing service. The service was targeted and sanctioned by the US Department of Justice earlier this year, as previously reported by Bitcoin Magazine report.
Need to be careful
Most of the mining censorship incidents in Bitcoin’s history have been driven by new or expected regulation, which would signal regulation as one of the industry’s most watched attack vectors. And more regulation (that is, more censorship efforts) for the mining industry is coming as officials and elected officials pay more attention to bitcoin, global acceptance. its energy use concerns. Most miners expect stricter and possibly (in many jurisdictions) regulations for miners. This makes the importance of protecting against mining-related attack vectors all the more important.
Marty Bent explained some plausible theories surrounding the new mining censorship in this edition his Bitcoin newsletter. But even if Bitcoin is censored in one place, miners will still process transactions and continue hashing somewhere else. Bitcoin is unstoppable no matter how many politicians or even other miners try to censor and obstruct it.
This is a post by Zack Voell. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.