Non-US Bitcoin Miner Gets Caught Censoring Transactions

The Bitcoin community is up in arms after news broke that a non-US mining pool was excluding OFAC-sanctioned transactions.

Pseudonymous Bitcoin developer 0xB10c posted on Nov. 20 that his mining pool observer project had flagged six excluded transactions during September and October. Although two of these (from the ViaBTC and Foundry pools) were likely false positives, he wrote, four transactions were excluded from blocks.

This appears to be the first time a non-U.S. actor has complied with U.S. sanctions and has drawn many to speculate about whether the Bitcoin blockchain is, in fact, censorship-resistant.

The F2Pool mining pool, which is based in China, although it sources hashrate from all over the world, was singled out as the firm excluding the OFAC-sanctioned transactions.

One of its co-founders, Chun Wang, confirmed the news when he posted on Twitter that the filtering patch had been disabled. He said it’s only temporary “until the community reaches a more comprehensive consensus on the topic.”

Who the actual addresses belong to remains to be seen, despite Wang’s now-deleted social media post stating he “has every right to not confirm any transactions from Vladimir Putin and Xi Jinping.”

Wang refused a request for comment from The Defiant.

OFAC-compliant blocks are not uncommon in the broader crypto ecosystem, however.

According to MEV Watch, 32% of Ethereum blocks are OFAC-compliant, down from a yearly peak of 51% in August. Towards the end of last year, the blockchain hit an all-time high of nearly 80%.

‘Credible Risk’

Censoring transactions is a touchy topic in the crypto ecosystem, and the news of F2Pool excluding transactions caused many renowned names to speak up about the situation.

Ari Paul, renowned crypto investor and CIO of BlockTower Capital, wrote today that although the transactions did get mined, he called the possibility of censored transactions like the aforementioned by F2Pool a “credible risk.”

His views were echoed by crypto researcher Chris Blec, who reckons this is just the beginning, claiming that more censorship is inevitable. The solution? “Vote with your feet,” he said, urging miners not to support the pool.

Privacy-Preserving Tools

Both also encouraged users to focus on mixing services and privacy tools as helping to fight back against these types of situations. It might be difficult, however, given recent moves by governments around the world that aim to ban these types of platforms.

Crypto mixers, for example, have been under fire by the U.S. government, especially after authorities sanctioned Tornado Cash – a crypto mixer that helped anonymize user transactions – in early August 2023, apprehending the developers that had created the open-source project.

Privacy, however, might not be so easy to come by, especially in light of the Tornado Cash situation. When the DOJ took down the project, two top crypto infrastructure providers, Infura and Alchemy, blocked access to the mixer.

Although Bitcoin has not lived through these types of events yet, that doesn’t mean the network is in the clear.

Paul proposed that the crypto community at large should be exploring how to incentivize hashrate to exit regulated companies – like F2Pool – although the trend seems set in place.

All that said, and despite claims that the Bitcoin network is headed towards an exclusionary future, 0xB10c thinks those fears are overblown.

“A single pool filtering transactions does not affect the censorship resistance of the Bitcoin network as a whole,” they wrote.