F2Pool Controversy: Censorship Concerns Threaten Bitcoin’s Core Principles

The third-largest Bitcoin mining pool, F2Pool, has come under scrutiny for allegedly censoring transactions originating from an address sanctioned by the US Treasury Department. This marks a significant development, as it brings censorship concerns to the foundational layer of Bitcoin, challenging its core principle of resistance to censorship.

The accusation surfaced when a Bitcoin developer known as 0xB10C, running the website “Miningpool.Observer,” detected missing transactions in F2Pool’s blocks. This developer utilized a method involving a list of “missing transactions” to simulate the next block using Bitcoin Core’s standard algorithm. By comparing simulated and actual blocks, any absent transactions could be identified.

In September and October, 0xB10C observed instances where ViaBTC and Foundry ignored transactions from addresses listed on the US OFAC sanctions. While plausible explanations existed for these omissions, the situation with F2Pool raised more concerns. F2Pool allegedly omitted transactions attempting to spend Bitcoins from an address associated with a Chinese drug smuggler in multiple blocks, leading to the conclusion that the pool was filtering transactions.

The F2Pool founder, Wang Chun, initially acknowledged the transaction filtering through a tweet but later deleted it. He then shifted blame from the pool to the system, advocating for the development of a censorship-resistant protocol. This incident raises questions about the potential transition from a censorship-resistant network to a censored one, particularly as major pools like Antpool and Foundry already verify the identity of their miners.

The ethical dilemma arises as pools exercise their right to confirm or reject transactions. While some argue that refusing transactions from criminals is an ethical decision, others contend that Bitcoin’s resistance to censorship should take precedence as a greater good. As long as individual miners make these decisions, the impact is limited. However, a scenario of “hard” censorship, where pools actively reject blocks containing output from sanctioned addresses, is conceivable in the long term.

In conclusion, the F2Pool incident has sparked concerns about the potential erosion of Bitcoin’s resistance to censorship at its foundational layer, emphasizing the need for ongoing vigilance within the crypto community.