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Blockchain’s Consensus Problem: Bitcoin Mining Pool F2Pool Accused Of Censorship
The Bitcoin community is in a state of uproar following allegations of transaction censorship by a non-US mining pool, F2Pool.
A non-US mining pool, F2Pool, has reportedly censored four transactions in October 2023, sparking controversy in the Bitcoin community.
F2Pool, a China-based firm with global mining hashrate sources, was identified as the entity excluding OFAC-sanctioned transactions.
Co-founder of the pool, Chun Wang, confirmed the news via Twitter, stating that the filtering patch was temporarily disabled pending community consensus.
OFAC-compliant blocks are not a rare occurrence in the broader crypto ecosystem, with 32% of Ethereum blocks being OFAC-compliant, albeit down from an annual peak of 51% in August 2023.
At the end of the previous year, the blockchain hit an 80% all-time high.
Renowned crypto investor Ari Paul and crypto researcher Chris Blec have voiced concerns over the situation, urging miners not to support pools that engage in censorship and to focus on privacy-preserving tools.
However, the viability of these tools is under question due to increasing government crackdowns on crypto mixers, such as the recent sanctioning and subsequent apprehension of the developers behind Tornado Cash.
Despite mounting concerns over the future of the Bitcoin network, pseudonymous Bitcoin developer 0xB10c believes that the fears are overstated.
They assert that the censorship actions of a single pool do not compromise the overall censorship resistance of the Bitcoin network. Read more here.
Decentralization in crypto: A goal misunderstood.
Blockchain’s 51% paradox: Power, trust, and the fight to keep decentralization.
Decentralizing Ethereum: Vitalik Buterin’s 10-20yr long roadmap for a simpler, resilient network.
Centralized vs decentralized digital networks: Some key differences.
How Does Zucoin Solve Blockchain’s Consensus Problem?
There are censorship problems with traditional cryptocurrencies like Bitcoin, especially the reported transaction censorship by F2Pool, causing significant unease.
Do all cryptocurrency systems have this issue?
Could a ground-up system like Zucoin avoid such issues?
Zucoin differs from Bitcoin as its Splitchain network runs on a truth-finding algorithm, not a consensus-based one, making it resistant to the censorship actions of a 51% majority.
So even if a majority are attempting to block a transaction, so long as a single honest network node can be found with accurate transaction data being cached, peers are still able to self-validate and continue transacting.
This holds especially true when anxiety is growing over the privacy issues of common technology and censorship concerns.
Zucoin employs two-factor authentication (2FA) for protection, built into every transaction on its Splitchain network, needing approval from both sender and receiver.
This prevents accidental transfers and cuts down on spam, improving safety and autonomy.
As the network grows and continues to decentralize with more participants, it should move responsibility away from smaller centralized groups and back into the hands of people using the platform.
This doesn’t happen with consensus-based crypto systems.
Note that many others in the crypto community, including the Zucoin team, have for many years questioned the blocking of individual transactions as a potential gateway into censorship.
The argument from Bitcoin’s creator was that the financial incentive wasn’t there.
When asked the question “If one node is ignoring all spends that it does not care about, it suffers no adverse consequences.”
The anonymous Bitcoin creator responded “With the transaction fee-based incentive system I recently posted, nodes would have an incentive to include all the paying transactions they receive. —Satoshi Nakamoto”.
Expecting that the top miners and validators would want to process as many transactions as possible, to maximise fees network validators earn for validating transactions, misses out on a subtle key point.
It’s this: The blocking and censorship of specific individuals from being able to transfer, while allowing everybody else through.
If enough miners and validators pool their resources together and become a major player in the formation of the next block of transactions, using blockchain’s consensus mechanism, they get to choose what is allowed in and what isn’t.
While most users will get through, for a selected group of individuals, they might keep getting blocked.
A true alternative to blockchain can’t have consensus.
A voting mechanism isn’t truth.
It’s opinion.
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All the best,
—Rob
MyZucoins
Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.