The introduction of a new “censored” Bitcoin mining pool has caused concern among some Bitcoiners. They believe that it could be a harbinger of future developments.
Will Bitcoin soon be threatened with censorship by regulatory authorities? And why should it be bad at all to exclude so-called “bad actors” from the network?
In this article we will take a closer look at the latest developments in the Bitcoin mining scene and look for answers to the above questions.
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First BTC mining pool tests censorship on Bitcoin
The blockchain analysis platform BlockSeer has introduced the private beta version of a new Bitcoin mining pool (Blockseer Mining Pool), which censors transactions from blacklisted BTC wallets .
The pool will use BlockSeer’s and Walletscore’s labeling data along with other verified sources, such as the United States Office of Foreign Assets Control (OFAC) blacklist for crypto, to identify BTC transactions that it does not want to process. The pool also requires all miners to go through Know-Your-Customer (KYC) protocols. DMG’s COO Sheldon Bennett stated:
The pool is focused on not getting transactions from known nefarious wallets that use this medium in a way that continues to tarnish the reputation of cryptocurrencies, particularly Bitcoin, in the mainstream and impede widespread adoption.
Why such developments are a ‘slippery development’
Former Monero lead developer Riccardo Spagni (@fluffypony) noted on Twitter that this could be the start of a slippery development. He speculated that bitcoin mining pools’ transaction censorship could spread due to pressure from regulators. He indicated that this was a cause for concern. Regulators who look at this and think it is a good idea to take action ‘for extreme cases like the OFAC crypto list’ could make censorship on Bitcoin enforceable.
Instead , Spagni suggested that more privacy on Bitcoin would prevent this, adding:
Things like p2pool & Stratum v2 make it practically unenforceable and I’d rather rely on it than on a hope & prayer.
P2pool is a decentralized bitcoin mining pool that was founded in 2011. Braiins’ Stratum V2 draft is a complete overhaul that BetterHash implements. BetterHash is a secondary protocol that allows the constituents of the mining pool to decide on the composition of the block they will mine, rather than allowing pools to control which transactions are included in each block. This should make pool censorship impossible. According to Braiins co-founder Jan Capek, the draft has yet to be formally examined. However, he will receive grants from Square Crypto for further development.
Wallet Scrutiny website founder Leo Wandersleb commented that this “slippery development” of censorship will lead to a soft fork where pools that follow this approach will refuse to “build on blocks that don’t use their filters” .