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16 November 2020 06:37

Bitcoin Cryptocurrency exchange St Leonards-on-Sea

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China’s leadership in the Bitcoin mining industry will be challenged

A new bitcoin mining pool, launched in beta by analytics platform Blockseer, will refuse to process transactions that involve certain blacklisted wallet addresses, in a bid to ensure it does not inadvertently facilitate criminal activity. The pool will use Blockseer and Walletscore forensics data, as well as the United States OFAC blacklist for crypto, to filter out any transactions considered "nefarious" from blocks posted by the group. According to DMG, parent company of Blockseer, all contributors to the new bitcoin mining pool are also required to pass Know Your Customer (KYC) protocols, thereby preserving the "utmost level of transparency, auditability and corporate governance." Blockseer's pool brings a new compliance-focused standard to the industry, not only in the data the pool provides to its users, but also in the Bitcoin blocks it mines on the network," explained Sheldon Bennett, COO at DMG. "The pool is focused on being devoid of transactions from known nefarious wallets which use this medium in ways that continue to sully the reputation of cryptocurrencies." However, as difficulty rose (a reflection of increased competition on the network), individual miners were squeezed from the market, paving the way for bitcoin mining pools that aggregate the compute resources of a vast number of individuals. The idea of a mining pool able to censor "nefarious" transactions may seem like an unqualified positive, but some quarters of the Bitcoin community fear the Blockseer mining pool could set a precedent that undermines the core ethos of the project.

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However, allowing a centralized entity - in this case, the Blockseer mining pool - to adopt the role of transaction arbiter acts to water down these core tenets. Others have suggested that the ability to censor certain transactions might also give regulators the impetus to make further demands that eat into the advantages of the censorship-resistant bitcoin payments system. Key Takeaways Blockseer Mining pool will mine blocks that only include filtered transactions. The mining pool will reject transactions from blacklisted wallets. Twitter commentators said that regulators will use the example of Blockseer to force other Bitcoin mining pools to perform transaction censorship.

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Blockseer, a U.S.-based subsidiary of DMG Blockchain Solutions, recently announced a private beta version of a new Bitcoin mining pool. The Blockseer Mining Pool will censor transactions from blacklisted wallets and mandate miners to undergo KYC, according to marketing materials. New blocks generated by the Blockseer pool will only include filtered transactions. The filters will be based on the data provided by Walletscore, the company's own blockchain forensic tool, and other sources like blacklisted Bitcoin wallet addresses. Regulators such as the U.S. Treasury Department's Office of Foreign Asset Control (OFAC) blacklists bitcoin wallets which they have connected to criminal activity.

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OFAC has already blacklisted 20 new Bitcoin addresses owned by a North Korean hacking group in May 2020, for example. Blockseer said the company wants to comply with OFAC and make sure its mining pool also rejects transactions from blacklisted wallets. "Blockseer's pool brings a new compliance-focused standard to the industry, not only in the data the pool provides to its users, but also in the Bitcoin blocks it mines on the network. The pool is focused on being devoid of transaction from known nefarious wallets." Riccardo Spagni, the previous lead maintainer of Monero, said, "it's only a matter of time till most Bitcoin mining pools are forced to do this transaction filtering." It's only a matter of time till most Bitcoin mining pools are forced to do this transaction filtering. According to Juraj Bednar, Co-Founder of Hacktrophy, a situation where a mining pool decides not to include dirty transactions sets a dangerous precedent.

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Even though pools make Bitcoin mining more profitable for individual miners, they have been criticized for being very centralized. Because mining pools are centralized, they can be forced to comply with regulations. Spagni said that to counter this trend, Bitcoin developers should implement new privacy features, and miners should adopt decentralized Bitcoin mining pools to keep the network free. China's leadership in the Bitcoin mining industry will be challenged If you talk about (BTC) mining, you have to talk about China. China has become a giant in the Bitcoin mining ecosystem with major mines and pools, quick, cheap labor and a majority control of the world's hashing power.

But as more miners started turning on and the Bitcoin mining difficulty rose, higher levels of computing power and electricity was needed to solve the equations and reap the reward. Launched less than seven months back, Binance Mining Pool is currently the 4th largest one with a hash rate share of 11.36% after Antpool, Poolin, and F2Pool. The leading spot cryptocurrency exchange Binance launched its own mining pool in April this year, which at the time was the 11th largest one, accounting for less than 4% share. At the time when the pool finally went public, Spencer Noon of DTC Capital had shared his skepticism towards saying the "galaxy brain power move" by Binance CEO Changpeng Zhao makes him nervous because this might led to exchange-owned mining pools to "prioritize their own transactions or even censor transactions to competitor exchanges." Recently, as we reported, a new Bitcoin mining pool actually promotes censoring certain Bitcoin transactions, which the community is against. The increased market share is achieved by Binance amidst the bull run with Bitcoin up 120% YTD and ETH 253%. Binance.US is an independent entity that is fully compliant in the US, according to Zhao, who said in an interview with Bloomberg that they are hopeful they will be able to get the licenses to offer its services in other left-out states as well. Recently, as we reported, Binance started blocking the users who are US citizens, which according to Zhao, they have "always" done. As for China making new moves to regulate the crypto market, it doesn't impact Binance's operations because the exchange is not in Hong Kong, said Zhao.

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