‘Slippery slope’ as new Bitcoin mining pool censors transactions

November 11, 2020 Coin Payment

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Blockchain analytics platform BlockSeer has launched the private beta of a new Bitcoin (BTC) mining pool (Blockseer Mining Pool) that censors transactions from blacklisted wallets.

The pool will use BlockSeer and Walletscore labeling data among other verified sources, such as the US Office of Foreign Assets Control (OFAC) blacklist for cryptocurrencies, to identify BTC transactions it does not want to process. The pool also requires all miners to pass Know-Your-Customer (KYC) protocols. DMG COO Sheldon Bennett said:

“The pool focuses on being transaction-free from known nefarious wallets that use this medium in ways that continue to tarnish the reputation of cryptocurrencies, particularly Bitcoin, in the mainstream and prevent their widespread adoption.”

Riccardo Spagni, former lead developer of Monero (@fluffypony) suggested on Twitter that this could be the start of a slippery slope. He speculated that transaction censorship by Bitcoin mining pools could become widespread due to regulatory pressure and said the concern was: “Regulators who look at this and think it’s a good idea ‘for extreme cases like the OFAC cryptographic list ”, then becomes applicable. “

“Adding more privacy to Bitcoin would prevent this,” Spagni suggested, adding:

“Things like p2pool and Stratum v2 make it virtually inapplicable, and I prefer to rely on that rather than hope and prayer.”

P2pool is a decentralized Bitcoin mining pool that was established in 2011. Stratum V2 draft, by Braiins, is a comprehensive overhaul that implements BetterHash, a secondary protocol that allows members of the mining pool to decide the composition of the block from extract, instead of pools that have control over which transactions to include in each block. This should make censorship of the pool impossible. According to Braiins co-founder Jan Capek, the draft still needs formal review, but will receive grants from Square Crypto for further development.

Founder of the Wallet Scrutiny website Leo Wandersleb suggested the “slippery slope” of censorship “will lead to a soft fork” in which pools following this approach will reject construction “on blocks that do not use their filters”.

In August 2019, Bitcoiner Eric Voskuil predicted that government pools will mine at a loss to censor, while black market pools will collect black market fees.

Not everyone is not convinced that transaction censorship is enforceable without the majority of miners supporting it. BlockTower CIO Ari Paul said that even if only one miner is non-compliant, there is an option to blacklist transactions, but added:

“However, there is a problem: 99% (or 51%) may choose to orphan any block with a blacklisted address, but that requires collusion.”

Erik Voorhees, you think There will come a time when transaction censorship poses a serious threat to Bitcoin:

“This is not an imminent problem, but it is coming. Now is the time to prepare. “