Concern among Bitcoiners about new mining pool ‘censoring’ BTC transactions

A new mining pool is censoring Bitcoin’s transactions by choosing which ones to include in the blocks produced.

The blockchain analysis platform, BlockSeer, launched the private beta version of a new Bitcoin mining pool (BTC) that censors blacklisted wallet transactions.

The pool will use BlockSeer and Walletscore tagging data among other verified sources, such as the U.S. Office of Foreign Assets Control (OFAC) blacklist for crypto currencies, to identify BTC transactions it does not want to process. The pool also requires all miners to pass Know Your Customer (KYC) protocols. DMG’s director of operations, Sheldon Bennett, stated:

“The pool is focused on being devoid of known nefarious wallet transactions that use this medium in ways that continue to sully the reputation of crypto currencies, specifically Bitcoin, in society, as well as prevent their widespread adoption”
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Former Monero lead developer Riccardo Spagni (@fluffypony) suggested on Twitter that this could be the start of a slippery slope. He speculated that censorship of transactions from Bitcoin’s mining pools may become widespread as a result of regulatory pressure and said the concern was that “regulators who look at this and think it’s a good idea ‘for extreme cases like the OFAC cryptomoney list’, then it becomes enforceable.

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

“Things like p2pool & Stratum v2 make it virtually unenforceable, and I’d rather rely on that than a hope and a prayer.
P2pool is a decentralised Bitcoin mining Bitcoin Machine pool that was established in 2011. Braiins’ draft Stratum V2 is a complete overhaul that implements BetterHash, a secondary protocol that allows the mining pool components to decide the composition of the block they will mine, rather than pools that have control over which transactions to include in each block. This should make pool censorship impossible. According to Braiins co-founder Jan Capek, the draft still needs a formal review, but will receive grants from Square Crypto for further development.

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The founder of the Wallet Scrutiny website, Leo Wandersleb, suggested that the “slippery slope” of censorship “will lead to a soft bifurcation” where pools that follow this approach will reject building “on blocks that do not use their filters”.

In August 2019, Bitcoiner Eric Voskuil predicted that government pools will extract at a loss to censor, while black market pools will reap the black market rates.

Not everyone is convinced that transaction censorship can be enforced without the majority of miners supporting it. BlockTower’s CIO Ari Paul said that even if only one miner fails to comply, there is a possibility of blacklisted transactions, but he added:

“He added: “However, there is a problem: 99% (or 51%) could choose to orphan any block with a blacklisted address, but this requires collusion.
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Erik Voorhees, believes that the time will come when transaction censorship will pose a serious threat to Bitcoin:

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