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Third-largest Bitcoin mining pool ‘likely’ censored OFAC-sanctioned transactions

Third-largest Bitcoin mining pool ‘likely’ censored OFAC-sanctioned transactions

One of Bitcoin’s (BTC) core value propositions is it being a censorship-resistance form of money, not subject to arbitrary rule-making. With Bitcoin, anyone who can afford the network fees is supposed to be able to transact permissionlessly.

However, a report from pseudonymous 0xB10C, a Bitcoin developer and owner of miningpool-observer, found data that suggests F2Pool has censored OFAC-sanctioned transactions.

F2Pool is the third-largest Bitcoin mining pool, responsible for 13.7% of all mined blocks in the last 12 months, according to the mempool.space ranking. Essentially, one out of every seven BTC blocks could be mined under a censorship regime if F2Pool actively starts to filter sanctioned transactions.

It is also important to understand that both Foundry USA and AntPool, the two largest mining pools, require KYC from their miners. The identification process makes it more likely that some sort of compliance could happen in the future.

Interestingly, the three entities sum up to 66.19% of the 1-year global hashrate, responsible for two out of every three mined and confirmed blocks in the leading blockchain. This evidences a trending centralization in Bitcoin’s network hashrate.

Bitcoin mining pool ranking and 1-year block discovery.
Bitcoin mining pool ranking and 1-year block discovery. Source: mempool.space

Data suggests F2Pool censored 4 OFAC-sanctioned transactions

In particular, the most recent discoveries shared on November 20 by 0xB10C conclude that F2Pool “likely” intentionally censored four out of six missing OFAC-sanctioned transactions.

Notably, the miningpool.observer identified that a total of six mined blocks had not added an OFAC-sanctioned transaction in September and October 2023.

“One block was mined by the ViaBTC mining pool, another by the Foundry USA pool, and four by F2Pool. An OFAC-sanctioned transaction is a transaction spending from or paying to an address sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control. I maintain a tool to extract a list of OFAC-sanctioned addresses from the Specially Designated Nationals (SDN) list published by the OFAC.”

– 0xB10C

In the report, 0xB10C interprets both the ViaBTC and Foundry USA missing blocks as a “false-positive” due to several factors. Nevertheless, F2Pool’s four blocks suggest the opposite.

Essentially, data indicates that the block heights 810727, 811791, 811920, and 813357 mined by F2Pool deliberately filtered the OFAC-sanctioned transactions despite having a competitive fee related to all other added transactions.

Update: F2Pool co-founder to disable transaction filtering

The F2Pool co-founder, Chun Wang, posted on X on November 22, informing his Bitcoin mining pool will disable the “transaction filtering patch.”

According to Wang’s post, the filter will remain disabled “until the community reaches a more comprehensive consensus on the topic.” This confirms that F2Pool intentionally censored OFAC-sanctioned transactions and raises an alarm that it could happen again in the future.

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