Protecting Bitcoin's Censorship Resistance
How economic incentives and the build-out of Stratum V2 help to keep the Bitcoin network censorship resistant.
Advancing Stratum V2
In our previous piece, The Ethereum Merge: Risks, Flaws and The Pitfalls Of Centralization, we highlighted the centralization and lack of censorship resistance risks associated with Ethereum’s projected proof-of-stake transition. Transaction and address censorship is the real risk to any decentralized protocol and must be protected at all costs. Without it, the protocol will become increasingly centralized over time and fail. One of the latest and most important Bitcoin efforts to limit centralized attack vectors and to further increase decentralization is the rollout and implementation of Stratum V2.
As individual mining has become more difficult and competitive over time, Bitcoin mining has shifted to a model of pooled resources which dramatically reduces the volatility of payouts. Miners join pools, paying a service fee to the pool and in return, receive a consistent share of block reward payouts relative to their hash provided.
Stratum (known as Stratum V1) is the messaging protocol between miners and pools that’s been around since 2011. In Stratum V1, pools are responsible for ordering and selecting transactions. Full implementations of the Stratum V2 would give that power to miners instead.
As of today, nearly all of Bitcoin’s transaction ordering and selection rests in the hands of a few pool operating nodes. This dynamic gives a small number of pool operators the ability to double-spend or even censor transactions without owning any ASICs hardware. There’s much more to Stratum V2 than solving this problem but arguably it's the most important feature of the protocol. Allowing individual miners to select transactions in a block would counter any nefarious censorship attempts from pool operators in the future.
Although Stratum V2 is a promising Bitcoin tool, its adoption will likely take years as initial implementations are not ready for deployment at scale yet. There is also an adoption obstacle with getting ASIC manufacturers to change their default OEM (original equipment manufacturer) firmware designs to incorporate Stratum V2. More detailed resources on Stratum V2 can be found from Braiins and Galaxy Digital.
The Marathon OFAC Block
Bitcoin has already faced an instance of a major public miner, Marathon Digital Holdings, mining a “clean” block that adhered to U.S. regulations across anti-money laundering (AML) and Office of Foreign Assets Control (OFAC’s) standards back in May 2021. After immediate community backlash, Marathon quickly reversed this strategy, with CEO Fred Thiel highlighting the following:
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