Bitcoin censorship for Russian addresses?

[nosferatu8701]

I read this article today that talks about the possibility of bitcoin censorship.

Post this, I had some fundamental questions regarding how the bitcoin network works. Would appreciate if someone could help me understand this.

As per this article: https://tftc.io/martys-bent/issue-1170,

If Russians are able to get transactions included in blocks alongside individuals from countries who are still connected to SWIFT, it sort of makes the chord cutting mute. In an attempt to prevent this from happening it is totally possible that the US government and other NATO governments would try to thrust regulations on the mining industry to keep a blacklist of Russian bitcoin addresses at all times and never mine a block with a transaction that is sent from any of those addresses lest they want to be subjected to harsh punishments for violating sanctions. Worse yet, they could even try to force a whitelist of approved addresses tied to the identities of individuals and make it so mining pools are only allowed to interact with those addresses.

Questions:  

• How do transactions get included in a block?
• Are miners responsible for deciding which transactions are included in a block? I thought miners work towards finding the solution for the block.
• If so, the block must be already created ? Who created this block ?
• When I send a bitcoin transaction, does it get sent to a miner ? How does my client (such as electrum) know whom to send the transaction to?
• What other parameters are taken into consideration while including a transaction into a block for eg. Fee? If so, is it possible that Russian bitcoin addresses can give an incredibly large fee to incentivise miners to include the transaction?
• How would the government know that a USA miner would pick up the block which contains a russian address transaction? What if the block is won by someone in Australia? Can Russia mine their own blocks and add to the Bitcoin network?

 

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

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[LoyceV]

How do transactions get included in a block?
Are miners responsible for deciding which transactions are included in a block? I thought miners work towards finding the solution for the block.

Miners maximize their income, so they pick the transactions with the highest fee (per (v)byte).

If so, the block must be already created ? Who created this block ?

Miners create the blocks.

When I send a bitcoin transaction, does it get sent to a miner ? How does my client (such as electrum) know whom to send the transaction to?

The keyword is "mempool". All transactions are shared with all miners, but miners are free to pick them as they please.

What other parameters are taken into consideration while including a transaction into a block for eg. Fee? If so, is it possible that Russian bitcoin addresses can give an incredibly large fee to incentivise miners to include the transaction?

There are no "Russian Bitcoin addresses". Bitcoin doesn't have a nationality. But yes, anyone can pay a higher fee to get miner's priority.

How would the government know that a USA miner would pick up the block which contains a russian address transaction? What if the block is won by someone in Australia? Can Russia mine their own blocks and add to the Bitcoin network?

Many miners are anonymous, and generally miners are quite mobile: if China bans them, they take their hardware and move elsewhere.

There's a more fundamental problem with this: governments long wanted control over Bitcoin. If they manage to force miners to do what they want, Bitcoin is basically over.

[AB de Royse777]

There's a more fundamental problem with this: governments long wanted control over Bitcoin. If they manage to force miners to do what they want, Bitcoin is basically over.

Haven't they done everything they could in the last over 10 years? Bitcoin is going nowhere, not in the near future. In fact bitcoin is the solution for the new economy which many government do not want at all especially the US. These centralized exchanges are playing a key role for government censorship. Bitcoin community needs to do something to eliminate these centralized exchanges to enjoy the true bitcoin experience.

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

LoyceV already said what I was planning to write. Just a little suggestions - if you have bitcoin then don't keep them in an exchange. Move them to your own wallet.

[hosseinimr93]

As stated by LoyceV, miners are free to select any transaction they want. So, a miner can ignore all transactions made from/to a certain address.

Let's say your address is blacklisted and now you want to make a transaction from that. You pay a high fee, so it's confirmed in the next block.
If the next block is mined by the miner which is censoring the transaction, your transaction won't be confirmed and you have to wait more, so a block is mined by another miner.

In the worst case scenario, the miners that are censoring the transactions own a significant amount of the total hash rate, ignore any transaction including blacklisted addresses and don't add any block to the chain including blacklisted addresses.

In this case, there will be two scenarios:
1. Other miners will do the same thing
2. We will have a hard fork

[nosferatu8701]

Thanks for your answers.

To clarify,

"Russian Bitcoin addresses" meaning addresses which have been identified by the US government / other world governments to belong to rogue countries.

I still am unclear about what happens if miners are told to censor transactions originating from certain addresses.

Let's assume that the Russian government sends a 1500 BTC transaction to China. This transaction goes to the mempool.

Q. If there are 100 miners around the world and 100,000 transactions in the mempool, do all the 100 miners pick up the same 4000 txns in the block sorted by fee? (I read online that a block has approx 4000 txns). I would imagine that all 100 miners would pick up different transactions? If so, I guess there would be different blocks. But the same txn could be picked up by different miners in different blocks. When a block is solved, do other miners drop the block they are solving if the most recent solved block contains a txn that is in their block? If so, does the other non-common txns return back to the mempool?

Now, Let's take an example of Hut8 (BTC mining company in USA).

Q. If the USA government controls these miners and tells them to not pick up transactions from the mempool that belong to the addresses blacklisted by the US government, can't a Russian miner create their own block with the transactions from the mempool ?

Q. What happens Hut8 does not pick up the txns in the block but an Australian miner does?

[LoyceV]

In the worst case scenario, the miners that are censoring the transactions own a significant amount of the total hash rate, ignore any transaction including blacklisted addresses and don't add any block to the chain including blacklisted addresses.

A worse scenario would be if governments force the majority of miners to follow their wishes. Any independent miner could still include any transaction, but the blocks they'll find will be orphaned. That's basically a 51% attack of miners, forcing all other miners to follow.

I don't think it's going to happen though. It's much more likely to just ban individuals from trading with certain countries. Makes me wonder if that's going to include signature campaigns on Bitcointalk.

[nosferatu8701]

There's a more fundamental problem with this: governments long wanted control over Bitcoin. If they manage to force miners to do what they want, Bitcoin is basically over.

Haven't they done everything they could in the last over 10 years? Bitcoin is going nowhere, not in the near future. In fact bitcoin is the solution for the new economy which many government do not want at all especially the US. These centralized exchanges are playing a key role for government censorship. Bitcoin community needs to do something to eliminate these centralized exchanges to enjoy the true bitcoin experience.

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

LoyceV already said what I was planning to write. Just a little suggestions - if you have bitcoin then don't keep them in an exchange. Move them to your own wallet.

Thank you. I have been hearing about Bitcoin since 2009 but mental inertia stopped me from giving a damn about it. I dismissed it as farmville money for 12 years. Never even bothered researching about it.
Finally made the leap in 2021 for purposes I'd like to keep out of this thread 

Yes, I'm using a Ledger but trying to move to multi-sig. I will have a new thread coming up on that today about questions I have regarding that.

[hosseinimr93]

Q. If there are 100 miners around the world and 100,000 transactions in the mempool, do all the 100 miners pick up the same 4000 txns in the block sorted by fee? (I read online that a block has approx 4000 txns). I would imagine that all 100 miners would pick up different transactions?

Once a transaction is included in a block, that's no longer in the mempool and the next block will include new transactions.
So, a miner includes 4000 transactions into a block and they are removed from the mempool.
The next block will be mined (by the same miner or a different miner) and will include 4000 other transactions.

Q. If the USA government controls these miners and tells them to not pick up transactions from the mempool that belong to the addresses blacklisted by the US government, can't a Russian miner create their own block with the transactions from the mempool ?

Miners can include any transaction they want.

I don't think it's going to happen though.

I also don't think that will ever happen. But let's assume it will happen.

Let's say the miners following the rules own 70% of the total hash rate. Miners who own the other 30% are located in sanctioned countries and don't join the 70%.
What do you expect to happen? Will they stop mining? Or there will be a hard fork and they will create a separate chain?

[LoyceV]

Let's say the miners following the rules own 70% of the total hash rate. Miners who own the other 30% are located in sanctioned countries and don't join the 70%.
What do you expect to happen? Will they stop mining? Or there will be a hard fork and they will create a separate a chain?

Assuming this scenario: They can hard fork all they want, but their fork won't be accepted in any country that enforces sanctions. So there's no point in creating the fork.

[o_e_l_e_o]

We have already had a number of mining pools attempt to censor transactions based on some arbitrary "blacklist" that they came up with. See MARA pool as an example of this. What happened in reality was that they were shunned by the community and the miners, and they abandoned this idea after only managing to mine a handful of blocks themselves. Further, any transactions they did censor from their own blocks were simply picked up by other mining pools.

The difficulty in a government trying to censor transactions in this way is two-fold. First of all, they have no way of monitoring every miner operating within their borders. China, for example, have outright banned bitcoin mining, and yet we know that there is still a not-insignificant amount of hash power originating from within China. If China, with their great firewall, can't even shut mining down, then other countries will not be able to monitor what every miner is mining. Secondly, you will never reach consensus around the world for such censorship. Even if the US and EU pass some law, then Russia, China, Kazakhstan, and other Middle Eastern and Asian countries will ignore it. And there are plenty of miners who would ignore such a law, and instead hold firm to one of the founding principles of bitcoin, which is to be censorship resistant.

[pooya87]

Let's say the miners following the rules own 70% of the total hash rate. Miners who own the other 30% are located in sanctioned countries and don't join the 70%.
What do you expect to happen? Will they stop mining? Or there will be a hard fork and they will create a separate a chain?

Assuming this scenario: They can hard fork all they want, but their fork won't be accepted in any country that enforces sanctions. So there's no point in creating the fork.

It is more complicated than that. We aren't talking about an arbitrary fork or a damaging change. We are talking about a fixing change.

If we ignore the uninformed article shared by OP and focus on the underlying issue we can see that the main arguments are about one of the main principles of bitcoin which is being censorship resistant. I'd argue that if a large number of miners started maliciously rejecting certain transactions then this principle is at risk and the community has to react. Meaning even if 70% or more of the hashrate was malicious we still would move ahead with a hard fork that addresses this. Possibly an algorithm change the bricks their ASICs worth billions of dollars (if my math is right, that's 8.3 million ASICs).

[LoyceV]

I'd argue that if a large number of miners started maliciously rejecting certain transactions then this principle is at risk and the community has to react. Meaning even if 70% or more of the hashrate was malicious we still would move ahead with a hard fork that addresses this. Possibly an algorithm change the bricks their ASICs worth billions of dollars (if my math is right, that's 8.3 million ASICs).

I don't think changing the protocol would fix this. Apart from the problem of changing the fundamentals of Bitcoin, it leaves the same problem (still assuming this hypothetical scenario): exchanges won't be allowed to trade it. And even if decentralized exchanges can solve that, if it's against the law, I don't want to become a criminal because of this.

I think Royse777 summed it up nicely though:

Haven't they done everything they could in the last over 10 years? Bitcoin is going nowhere, not in the near future.

If they could have banned Bitcoin, they would have done it by now.

[Cookdata]

• How do transactions get included in a block?

When you initiate a transaction, it must be authorized for evidence of spending by the real owner of the wallet address by presenting a valid digital signature. Your transaction is then spread to the decentralized Bitcoin network (decentralized nodes), the first node validates your transaction, and if it is true, it redistributes it to other bitcoin nodes until it reaches the last node, and lastly, the mining node verifies your transaction to be included in the next block of transactions. That transaction will forever remain in the bitcoin global ledger.

A Transaction >>> Digital signature >>> Bitcoin Network(Nodes) >>> Mining Node >>> Global Ledger

• Are miners responsible for deciding which transactions are included in a block? I thought miners work towards finding the solution for the block.

I remember asking a similar question some weeks ago and the response from ETFbitcoin was: the mining pool choose the transaction.

In practice, mining pool usually is the one who choose the transaction.

• If so, the block must be already created ? Who created this block ?

Blocks (blocks of transactions)  are arranged in a series of numbers, new transactions get added to new block whenever new transactions are created. Miners compete to find the nonce of that transaction, whoever has the most hash rate will likely solve the puzzle and include it in a fresh block.

• When I send a bitcoin transaction, does it get sent to a miner ? How does my client (such as electrum) know whom to send the transaction to?

Check my first illustration.

• What other parameters are taken into consideration while including a transaction into a block for eg. Fee? If so, is it possible that Russian bitcoin addresses can give an incredibly large fee to incentivise miners to include the transaction?

Of course, the fees determine the chances of your transactions to be included in the next block. If I decide to run my node, there is no way of anyone knowing the origination of my transaction with a well-secured VPN.

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

To know how mining works, check this beginner illustration on mining.^[1]


[1] https://learnmeabitcoin.com/beginners/mining

[o_e_l_e_o]

the first node validates your transaction, and if it is true, it redistributes it to other bitcoin nodes until it reaches the last node

Every node verifies every transaction it receives, not just the first node.

Blocks (blocks of transactions)  are arranged in a series of numbers, new transactions get added to new block whenever new transactions are created.

That's not accurate. Whenever a new transaction is created, it is added to the pool of unconfirmed transactions known as the mempool. Miners then pick a subset of transactions out of the mempool (usually the ones paying the highest feerates) to include in the block they are attempting to mine.

Miners compete to find the nonce of that transaction, whoever has the most hash rate will likely solve the puzzle and include it in a fresh block.

Again, not correct. Miners compete to find the nonce (or other variable data) required for the hash of the block in question to be below the current target. Transactions do not have a nonce.

[HeRetiK]

As per this article: https://tftc.io/martys-bent/issue-1170,

If Russians are able to get transactions included in blocks alongside individuals from countries who are still connected to SWIFT, it sort of makes the chord cutting mute. In an attempt to prevent this from happening it is totally possible that the US government and other NATO governments would try to thrust regulations on the mining industry to keep a blacklist of Russian bitcoin addresses at all times and never mine a block with a transaction that is sent from any of those addresses lest they want to be subjected to harsh punishments for violating sanctions. Worse yet, they could even try to force a whitelist of approved addresses tied to the identities of individuals and make it so mining pools are only allowed to interact with those addresses.

Apart from what the others already posted regarding Bitcoin, be aware that it's not like a disconnect from SWIFT is a complete isolation of the Russian banking sector. At the end of the day SWIFT is still "only" a messaging layer, so while it will make international banking more cumbersome for Russian banks, they can still process transactions by other means long before Bitcoin may come into play.

What's going to be more interesting is whether the Federal Reserve and the European Central Bank are going to cut off Russia's access to its foreign currency reserves. If they block Russian transactions of USD and EUR at the settlement layer -- which they can do since USD and EUR settlements between banks need to go through the Fed and ECB respectively -- that's when Russia's banking sector will start hurting. It will also be a reminder of the riskiness of foreign currency reserves and that having a non-governmental supranational currency in reserve may be more valuable than governments currently assume.

[Cookdata]

Every node verifies every transaction it receives, not just the first node.

Sorry if I didn't include that, every node validate the transaction.
If a transaction is true, they return a success message and if false, they reject it and return a message.  

That's not accurate. Whenever a new transaction is created, it is added to the pool of unconfirmed transactions known as the mempool. Miners then pick a subset of transactions out of the mempool (usually the ones paying the highest feerates) to include in the block they are attempting to mine.

Copied that.

Again, not correct. Miners compete to find the nonce (or other variable data) required for the hash of the block in question to be below the current target. Transactions do not have a nonce.

Learn from the Master. Thank you.

[NotATether]

Addresses are not geo-tagged, you'd have to consult a company such as Chainalysis for identity correlation between addresses which could be VERY fuzzy as private keys could be used in more than one country by someone, or (in a particularly unsafe use case), keys are shared between friends in different countries. The best they could do is try to back a mining pool such as Marathon to censor the transactions themselves by giving them more mining rigs.

Then again, this is exactly the kind of problem that exchange KYC is supposed to solve. So let the exchanges take care of matters themselves. It's not like you can easily cash out without exchanges anyway.

[TryNinja]

Ukraine surely does want this to happen, it seems... Not on a block mining level, but directly on the centralized exchanges: Ukraine to issue legal demands on crypto exchanges to freeze Russian accounts

[btcjoe99]

I read this article today that talks about the possibility of bitcoin censorship.

Post this, I had some fundamental questions regarding how the bitcoin network works. Would appreciate if someone could help me understand this.

As per this article: https://tftc.io/martys-bent/issue-1170,

If Russians are able to get transactions included in blocks alongside individuals from countries who are still connected to SWIFT, it sort of makes the chord cutting mute. In an attempt to prevent this from happening it is totally possible that the US government and other NATO governments would try to thrust regulations on the mining industry to keep a blacklist of Russian bitcoin addresses at all times and never mine a block with a transaction that is sent from any of those addresses lest they want to be subjected to harsh punishments for violating sanctions. Worse yet, they could even try to force a whitelist of approved addresses tied to the identities of individuals and make it so mining pools are only allowed to interact with those addresses.

Questions:  

• How do transactions get included in a block?
• Are miners responsible for deciding which transactions are included in a block? I thought miners work towards finding the solution for the block.
• If so, the block must be already created ? Who created this block ?
• When I send a bitcoin transaction, does it get sent to a miner ? How does my client (such as electrum) know whom to send the transaction to?
• What other parameters are taken into consideration while including a transaction into a block for eg. Fee? If so, is it possible that Russian bitcoin addresses can give an incredibly large fee to incentivise miners to include the transaction?
• How would the government know that a USA miner would pick up the block which contains a russian address transaction? What if the block is won by someone in Australia? Can Russia mine their own blocks and add to the Bitcoin network?

 

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

This is making not much sense. the only place i can place "russia" towards some addresses is on a specific binance deposit wallet like https://glasschain.org/btc/wallet/73871491
this one aparently is for russian clients. BUT ironically, ukranian too.

sending Bitcoin around is not a big deal. Cashing it out is. The Sanctions can easily just be inforced on banking level.

Russia also is not a little nation. If Bitcoin would be a serious tool to get around sanctions, we talk here hundreds of billions, probably shooting bitcoin over the 1 million dollar per coin mark and staying there.

lets not lose ourselves in speculation.

[cabron]

I read this article today that talks about the possibility of bitcoin censorship.

Post this, I had some fundamental questions regarding how the bitcoin network works. Would appreciate if someone could help me understand this.

As per this article: https://tftc.io/martys-bent/issue-1170,

If Russians are able to get transactions included in blocks alongside individuals from countries who are still connected to SWIFT, it sort of makes the chord cutting mute. In an attempt to prevent this from happening it is totally possible that the US government and other NATO governments would try to thrust regulations on the mining industry to keep a blacklist of Russian bitcoin addresses at all times and never mine a block with a transaction that is sent from any of those addresses lest they want to be subjected to harsh punishments for violating sanctions. Worse yet, they could even try to force a whitelist of approved addresses tied to the identities of individuals and make it so mining pools are only allowed to interact with those addresses.

Questions:  

• How do transactions get included in a block?
• Are miners responsible for deciding which transactions are included in a block? I thought miners work towards finding the solution for the block.
• If so, the block must be already created ? Who created this block ?
• When I send a bitcoin transaction, does it get sent to a miner ? How does my client (such as electrum) know whom to send the transaction to?
• What other parameters are taken into consideration while including a transaction into a block for eg. Fee? If so, is it possible that Russian bitcoin addresses can give an incredibly large fee to incentivise miners to include the transaction?
• How would the government know that a USA miner would pick up the block which contains a russian address transaction? What if the block is won by someone in Australia? Can Russia mine their own blocks and add to the Bitcoin network?

 

Apologies if my questions are too basic. If there are reading materials that explain in detail how the Bitcoin network works relating to some of the questions I posted above, I'd appreciate it if you can point me in that direction.

This is making not much sense. the only place i can place "russia" towards some addresses is on a specific binance deposit wallet like https://glasschain.org/btc/wallet/73871491
this one aparently is for russian clients. BUT ironically, ukranian too.

sending Bitcoin around is not a big deal. Cashing it out is. The Sanctions can easily just be inforced on banking level.

Russia also is not a little nation. If Bitcoin would be a serious tool to get around sanctions, we talk here hundreds of billions, probably shooting bitcoin over the 1 million dollar per coin mark and staying there.

lets not lose ourselves in speculation.

$1M/Bitcoin would make life better for countries having energy sources like Russia.  Have their own mining farm to pick their transactions wil be a top priority for countries planning to use Bitcoin.  Getting around the sanction will not be a problem anymore even if there is a list of Russian BTC addresses to block.  Aiming for this kind of control over the BTC network is not possible. If it is and will worked against Russia, people will lose trust to BTC.