On The Crypto Con, I’ve published several articles that attempt to make it clear that Bitcoin today is the antithesis of what Bitcoin was intended to be, as per the original Bitcoin whitepaper. This is important, especially if you are someone who plans to invest in Bitcoin on the basis that the cryptocurrency is decentralized, censorship-resistant, and designed to be free for anybody to use, independently of any third-party oversight or interference.
What I didn’t realize when launching The Crypto Con is just how far Bitcoin has already strayed from Satoshi Nakamoto’s original vision for the cryptocurrency. When it comes to censorship resistance, for example, it can already be proven that Bitcoin transactions are far from tamper-proof.
Third Biggest Bitcoin Mining Pool Colludes With U.S. Government to Censor BTC Transactions
Can foreign governments prevent a Bitcoin address you are using from receiving or sending funds? The very idea is antithetical to the core principles of Bitcoin. However, the simple answer is yes, they can.
The first to report on this matter was the Bitcoin developer B10C in November 2023. As part of their own miningpool-observer project, B10C was able to identify that F2Pool, one of the world’s top three mining pools, was applying a filter to prevent certain Bitcoin transactions from processing. More specifically, the transactions F2Pool was filtering were all being sent to or from addresses on the U.S. government’s Office of Foreign Assets Control (OFAC) list.
If a Bitcoin address appears on the OFAC list, this means that U.S. authorities are attempting to apply sanctions to the person or group operating the address in question. There might also be legitimate reasons for this. However, it is important to focus on three key points here:
- Bitcoin benefits from global decentralization. The Office of Foreign Assets Control, therefore, has no way to enforce the confiscation or freezing of any BTC being sent to or from any wallet.
- F2Pool operates out of Asia. F2Pool, therefore, has no legal obligation to comply with OFAC requests to freeze or interfere with any BTC wallet transaction.
- Immutable transactions that are impossible to reverse or censor were once one of the key reasons Bitcoin had value. Let’s remember, for example, that WikiLeaks was the first major adopter of Bitcoin after WikiLeaks was blacklisted by PayPal and every other global payment processor at the behest of the U.S. government.
How Did F2Pool Censor OFAC Transactions & Why Did They Try To?
By F2Pool’s own admission, censoring transactions going to or from OFAC addresses was easy. The pool’s co-founder, Chun Wang, simply put a transaction filtering patch to use, which took hashing power away from transactions going to or from known OFAC addresses. This effectively left transactions in limbo.
As for why F2Pool made the decision to help OFAC attempt to block Bitcoin transactions in the first place, we will likely never know. All we do know for certain is that this has already taken place. There is, therefore, now a precedent for mining pools working to undermine the integrity of the Bitcoin blockchain as we know it. Let us also remember that F2Pool, on average, currently processes 14% of global BTC transactions.
I’m Not a Criminal – Why Should I Worry About Whether Bitcoin is Censorship Resistant?
As the old saying goes, “If you have nothing to hide, you have nothing to fear,” right? Well, not really.
Let us not forget that just a few years ago, the Canadian government set about freezing the bank accounts of people protesting COVID-19 mandates. Likewise, as already noted with regard to WikiLeaks, one of the first things even supposedly democratic governments do to whistleblowers is decouple them from their finances.
The simple fact is that Bitcoin, by nature, was intended to be resistant to such state interference. Now that we know it isn’t, we need to think about what this means for the future of the currency.