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Author Topic: OFAC-Sanctioned Transactions Being Censored  (Read 1842 times)
titular (OP)
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November 23, 2023, 06:54:53 AM
Last edit: November 23, 2023, 09:38:12 AM by titular
Merited by mindrust (20), NotATether (10), o_e_l_e_o (8), pooya87 (5), LoyceV (4), dkbit98 (3), DooMAD (2), Pmalek (2), hosseinimr93 (2), PrivacyG (2), vapourminer (1), Lucius (1), DdmrDdmr (1), Z-tight (1)
 #1

Recently I was scrolling on Twitter(X) and I came across something rather interesting..

A bitcoin developer that I follow on there (@0xB10C) posted this on his page. [1]

Given the community's commitment to upholding the censorship resistance of our network, I deemed it appropriate to conduct a thorough reading.


Here's what I found:

Firstly, the developers project aims to detect instances where Bitcoin mining pools fail to mine transactions they could have included. The Office of Foreign Assets Control (OFAC), a bureau in the U.S. Treasury Department, is responsible for enforcing economic and trade sanctions aligning with U.S. foreign policy, targeting countries, terrorists, and threats to national security. Over the past weeks, the project identified six missing transactions from OFAC-sanctioned addresses, prompting an investigation into whether these omissions were intentional or had alternative explanations.

The RSS feed reported missing transactions from ViaBTC, Foundry USA, and F2Pool, involving OFAC-sanctioned addresses.The analysis explores various reasons for transactions being absent from blocks, such as network propagation, individual node differences, and pool transaction prioritization. The primary goal is to determine whether mining pools intentionally filter OFAC-sanctioned transactions and assess the impact on Bitcoin's censorship-resistant properties.

One missing transaction from ViaBTC's block 808660 was due to the prioritization of other transactions by ViaBTC's Bitcoin Transaction Accelerator, indicating it was not intentionally filtered. Foundry USA's block 813231 did not include a sanctioned transaction due to potential delays in transaction propagation. Again, unintentional.
According to the report, the analysis suggests that F2Pool omitted transactions from OFAC-sanctioned addresses in blocks 810727, 811791, 811920, and 813357. The reasons for the omission vary for each block, but the common thread is the likelihood of intentional filtering by F2Pool. Here's a breakdown of the reasons for the omission in each block:

Block 810727:

F2Pool did not include this transaction, and instead, another transaction was included. The report suggests that the missing transaction had a slightly higher fee rate but was 3 vBytes smaller than the included transaction. Despite the fee rate advantage, the larger transaction was chosen.

Block 811791:

The report indicates that F2Pool omitted this transaction, and despite having enough space in the block, it was likely intentionally filtered. The presence of extra transactions in the block did not affect the inclusion of the sanctioned transaction, making intentional filtering more plausible.

Block 811920:

F2Pool did not include this large consolidation transaction in the block, and the report suggests that the transaction might not have propagated to F2Pool in time, but it's also likely that it was intentionally filtered. The transaction was marked as "recently broadcast" on mempool.space.

Block 813357:

F2Pool excluded this consolidation transaction from the block, and the report indicates that, similar to the case in block 811791, it's likely intentionally filtered. The transaction had been in the node’s mempool for more than 25 minutes, making it less likely that it wasn't known to F2Pool when building the block.


In summary, the report concludes that these transactions were likely intentionally filtered by F2Pool, This raises the question of why F2Pool, a pool with origins in Asia, is the first pool to filter transactions based on US OFAC sanctions, especially considering that other transactions with similar or lower fee rates were included in the blocks.

The original report can be found here. I highly encourage giving it a read. [2]

----------

I find myself uncertain about how to interpret all of this information. Despite the seemingly small number of just six transactions, the fact that such situations are possible raises concerns. I'm grappling with whether this should be a cause for worry in the future or if it's perhaps an overblown issue. The writer of the report leaves us with this:

Quote
The Bitcoin network, however, continues to work as normal. A single pool filtering transactions does not affect the censorship resistance of the Bitcoin network as a whole. Further monitoring of the transaction selection of mining pools allows identifying when more pools start to filter transactions based on, for example, OFAC sanctions. It also allows miners pointing their hashrate to these pools to make an informed decision on switching to a different pool if they don’t agree with a pool’s (unannounced) filtering policies.


[1] https://x.com/0xB10C/status/1726964430460588201?s=20
[2] https://b10c.me/observations/08-missing-sanctioned-transactions/





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November 23, 2023, 07:40:44 AM
 #2

It would be really bad if this is true.
Which would mean they might have likely found a loophole.
Always been paranoid towards the growing hash of top mining pools.
Let's see their reply
Hopefully it can circumvent our worries.
If they really good in business they wouldn't try to beat the Blockchain protocol
Long term benefit is better than short terms.
More diversification of mining pools still needed.

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November 23, 2023, 02:33:56 PM
Merited by DooMAD (2), pooya87 (2)
 #3

Here is the now-deleted tweet from the founder of F2Pool confirming they are blacklisting transactions:



Let's not pretend this has anything to do with him caring about whose transactions his pool is confirming. This has everything to do with complying with regulations to protect themselves at the expense of the community and the network. Anyone who is mining on F2Pool should be urgently moving to another pool which is not actively attacking bitcoin. Only a drop in hashrate and therefore a drop in their profits will stop F2Pool continuing down this road.
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November 23, 2023, 02:47:35 PM
 #4

@Satofishi is the founder?
No wonder he was tagged a lot in the post.
So they couldn't even bring a concrete reason.
Quote
Let's not pretend this has anything to do with him caring about whose transactions his pool is confirming.
I'm curious how could he tell they are terrorist
Is it written in their wallet address?

I saw his tweet but thought it was a reply against CZ's action
Turns out he is trying to reduce his crime
By comparing it with another criminal
IMO, his action is way worse than CZ.
With percentage like that he's like this
How would he act if it was 45%.

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November 23, 2023, 03:38:33 PM
 #5

This looks bad. If certain bitcoin transactions start to be censored on the basis of suspicions, we are in trouble.

I find myself uncertain about how to interpret all of this information. Despite the seemingly small number of just six transactions, the fact that such situations are possible raises concerns. I'm grappling with whether this should be a cause for worry in the future or if it's perhaps an overblown issue. The writer of the report leaves us with this:

Quote
The Bitcoin network, however, continues to work as normal. A single pool filtering transactions does not affect the censorship resistance of the Bitcoin network as a whole. <...>

This is the best part of the news. As long as there are no pools that mimic this, as long as there is a large majority that resists, bitcoin transactions will remain uncensorable, because transactions that a censor miner decides not to mine will end up being mined by others.

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November 23, 2023, 03:47:16 PM
Merited by pooya87 (2)
 #6

When you have miners censoring addresses, it is like wallets [backends] (eg. Wasabi) censoring addresses - there is certainly no rule that requires miners to censor addresses, and there is enough competition that anyone who engages in this silly blacklisting is going to miss out on fees.

It is being altruist, in a greedy environment. From a game theory perspective, it is not sustainable.

*Also, fuck F2Pool. I could at least understand why a wallet would do it, but for a bitcoin miner to violate the decentralization of the network they directly profit from is a mortal sin.

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November 23, 2023, 04:20:50 PM
 #7

~snip~
In summary, the report concludes that these transactions were likely intentionally filtered by F2Pool, This raises the question of why F2Pool, a pool with origins in Asia, is the first pool to filter transactions based on US OFAC sanctions, especially considering that other transactions with similar or lower fee rates were included in the blocks.

I believe that the reason for this is that the US obviously has a much greater influence in that part of the world, whether it is pressure coming from politics, or they have something with which they hold that pool in their hands. In addition, it is much smarter to start experimenting in someone else's backyard and see how things will develop, and only then implement such measures in US mining based pools.

However, I remembered that we already had a similar discussion, only that time it was MARATHON pool, which was actually the first to mine something they called "clean block". Although this is bad news, MARA AND F2Pool currently have about a 15% share of all mined blocks.



MARA Pool mined its first 'clean' block today

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November 23, 2023, 04:53:36 PM
 #8

Although this is bad news, MARA AND F2Pool currently have about a 15% share of all mined blocks.

But there is also Foundry with 27% and that one is a closed pool with only big guys in the US mining, mainly companies listed on the stock exchange, and those will need just a hint or an email from the ones overseeing these and they will start censoring too, the percentage of those transactions is so small it won't even make a tiny dent in their revenue.
What I'm grabbing my popcorn for is the moment they stop with the backlisting and start with the reverse thing, whitelisted addresses only in their blocks, so unless you do KYC with every single one of them wit all your addresses you might have to think of solo mining  Grin. And it's going to happen, I'm 99% sure they are already thinking of it but are just testing the waters for a while with smaller measure for a while, then, some will have a shock realizing how little decentralization we have in this aspect.

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November 23, 2023, 05:01:33 PM
Merited by titular (1)
 #9

As long as there are no pools that mimic this, as long as there is a large majority that resists, bitcoin transactions will remain uncensorable, because transactions that a censor miner decides not to mine will end up being mined by others.
There is a significant difference between "uncensorable" and "not currently being censored". One of the main tenets of bitcoin is that it is supposed to be uncensorable. If 51% of the hashrate goes the same way as F2Pool and refuses to mine any transactions the US government tells them not to, then that is very much not "uncensorable". That is the death of bitcoin as at that point only government approved transactions are allowed to be mined.

This is the ultimate result of people not caring about their privacy, of most addresses on the network being linked to someone's KYC, of everyone using centralized exchanges and giving them all the control, and of people believing that blockchain analysis is anything other than complete bullshit. People like me have gone on and on about privacy, about censorship resistance, about self custody, about not using centralized exchanges for years, but the fact is that most people in this space care more about fiat profits than they care about what bitcoin was designed to be. This is the result. A government permissioned network.
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November 23, 2023, 05:52:11 PM
 #10

I've gotta say, this is kinda worrying. Miners go against their interest in receiving fees from transactions by censoring certain transactions.
Maybe it was to be expected that a few pools would start doing this, but finding out that most of the big pools have started doing this around the same time? That's even more worrying.

I'm starting a thread to showcase which pools are NOT censoring transactions anymore. Feel free to drop by:
https://bitcointalk.org/index.php?topic=5475228.0

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November 23, 2023, 06:03:26 PM
 #11

I don't know what you guys are thinking but as a general user of Bitcoin, I am shocked that this can be done. How is it possible that they can hide the transaction or not show it on a chain? Or does this post mean that a specific pool did not pick it but was processed via another pool? I am just trying to understand the significance here. Anything that is broadcasted on the blockchain has to get included in a block so that it can be confirmed and then the whole process completes with a seed. Right?

I've gotta say, this is kinda worrying. Miners go against their interest in receiving fees from transactions by censoring certain transactions.
Maybe it was to be expected that a few pools would start doing this, but finding out that most of the big pools have started doing this around the same time? That's even more worrying.

I'm starting a thread to showcase which pools are NOT censoring transactions anymore. Feel free to drop by:
https://bitcointalk.org/index.php?topic=5475228.0

Also, how are they able to censor it? What is the technology that they are implying here that is calling them to do so? Until now I thought we were on a public ledger meaning anything that is sent or received can be seen on the chain if we know the BTC address. From where is the topic of censorship stated or was it included in the white paper already?  I would say I am still #weakintechnicals
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November 23, 2023, 06:14:49 PM
 #12

Although this is bad news, MARA AND F2Pool currently have about a 15% share of all mined blocks.

But there is also Foundry with 27% and that one is a closed pool with only big guys in the US mining, mainly companies listed on the stock exchange

Yeah, as soon as I saw the list of ViaBTC, Foundry USA, and F2Pool and the topic heading regarding censoring transactions, I naturally jumped to the conclusion that Foundry was likely to be the guilty party.  Simply because "America doing insular America-type-stuff" seemed to make sense to me.  Really surprised (and disappointed) to see it's actually F2Pool.  It seems they're now an insult to their own legacy.  What a spectacular fall from grace.

Echoing calls for independent miners to consider migrating to other, more ethical, pools (profitability margins permitting). 

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o_e_l_e_o
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November 23, 2023, 06:27:55 PM
 #13

How is it possible that they can hide the transaction or not show it on a chain? Or does this post mean that a specific pool did not pick it but was processed via another pool?
They simply choose not to include the transaction in any of their blocks, so it remains unconfirmed until another non-censoring pool (hopefully) includes it in one of their blocks.

What is the technology that they are implying here that is calling them to do so?
The US government publish a list of addresses they want to censor. The mining pool refuses to include any transaction with pays bitcoin to or from any of these address.
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November 23, 2023, 07:10:29 PM
 #14

Also, how are they able to censor it? What is the technology that they are implying here that is calling them to do so? Until now I thought we were on a public ledger meaning anything that is sent or received can be seen on the chain if we know the BTC address. From where is the topic of censorship stated or was it included in the white paper already?  I would say I am still #weakintechnicals
Miners host their own full nodes and chose which transactions to include or exclude from the blocks they mine based on their own arbitrary criteria. This time around certain miners chose to exclude certain transactions because they're associated with addresses on the OFAC list.

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November 23, 2023, 07:27:30 PM
 #15

Is this the second mining pool or the third that add OFAC list filter? It is unfortunate that these pools respond to pressure from the United States, but this will not change the nature of the decentralization of the network. If there remains one mining pool that does not adhere to these legislation and can be managed in countries that have a political stance towards the United States, then all the other mining pools will be forced to build on top of that block, but this means that transactions transmitted from addresses in OFAC blacklist will take longer on average than all transactions from other addresses.

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November 23, 2023, 07:43:45 PM
 #16

If there remains one mining pool that does not adhere to these legislation and can be managed in countries that have a political stance towards the United States, then all the other mining pools will be forced to build on top of that block
No, it doesn't. If censoring mining pools have 51% of the hashrate, then they can permanently exclude any transaction they wish. If a normal mining pool mines a block which includes a "blacklisted" transaction, then the censoring mining pools with a majority of the hashrate can simply ignore that block and re-org it out with 100% certainty.
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November 23, 2023, 08:02:55 PM
Merited by o_e_l_e_o (4), hosseinimr93 (2)
 #17

Ultimately it will come down to how different people understand the words freedom and decentralization. Did you notice how in his tweet he defends his freedom of choice, as the right to filter transactions and choose to exclude Xi and Putin. This means that if his pool ever has the majority of hash power, he'll be able to stop you and me from transacting because he's now the king of bitcoin. He'll say for instance that if people from Russia want to transact they have to pay a ransom of whatever billions of dollars or he'll keep blocking them because that's his right given by "freedom." If he doesn't want you to transact, you won't.

We don't need someone to tell us who can ad who cannot send their bitcoin through the network. I may not like Puting, but if he bought bitcoin, mined it, or received as a gift, he should be able to use it.
It's not up to us to decide whose coins get tainted and who gets to transact. I guess people will once again have to vote with their mining power and make sure pools run by self-proclaimed dictators never get enough power to threaten the network.


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November 23, 2023, 08:06:59 PM
 #18

No, it doesn't. If censoring mining pools have 51% of the hashrate, then they can permanently exclude any transaction they wish. If a normal mining pool mines a block which includes a "blacklisted" transaction, then the censoring mining pools with a majority of the hashrate can simply ignore that block and re-org it out with 100% certainty.
That's a '51% attack' isn't it, could it be that easy for the BTC network to move from censorship resistant to censorship, because that's what it means if what you said above happens. I don't know the total hashrate controlled by censoring mining pools, but i think individual miners would withdraw from censoring mining pools if it ever gets to this point, that would surely reduce the hashrate they control.

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November 23, 2023, 08:12:17 PM
Last edit: November 23, 2023, 10:59:33 PM by alani123
 #19

If there remains one mining pool that does not adhere to these legislation and can be managed in countries that have a political stance towards the United States, then all the other mining pools will be forced to build on top of that block
No, it doesn't. If censoring mining pools have 51% of the hashrate, then they can permanently exclude any transaction they wish. If a normal mining pool mines a block which includes a "blacklisted" transaction, then the censoring mining pools with a majority of the hashrate can simply ignore that block and re-org it out with 100% certainty.
Well, they can. OFAC compliant pools seem to control the vast majority of the hashrate right now*. If they want, they could fork the network and maintain the longest chain even now. But will they?

They're already losing out on fee revenue by excluding otherwise perfectly valid transactions from their blocks just because of OFAC. Hard forking by completely ignoring perfectly valid blocks just because they include transactions by BTC addresses in the OFAC list would likely create a very big debate.

Core developers would have to decide which chain to support, big services would have to announce their recognition to what they see as the main BTC etc. It would be wild to see. Miners stand to lose a lot of revenue.
I think big pools will just chose to filter transactions without forking. This status quo maintains their revenue and they can also claim non-participation in BTC "money laundering".

* Please read the source article more carefully and get confused like I was.
The only pool we can say with some certainty that is currently filtering BTC transactions is F2POOL. The others mentioned are false positives. F2POOL control maybe 12% of the network hashrate at the moment. Together with MARA pool which in 2021 had openly stated to be mining OFAC compliant blocks, although we're not sure if they still do, would make up around 16% in bitcoin's hashrate.

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November 23, 2023, 09:19:03 PM
Merited by o_e_l_e_o (4)
 #20

That's a '51% attack' isn't it, could it be that easy for the BTC network to move from censorship resistant to censorship, because that's what it means if what you said above happens. I don't know the total hashrate controlled by censoring mining pools, but i think individual miners would withdraw from censoring mining pools if it ever gets to this point, that would surely reduce the hashrate they control.

Yes that’s purely a 51% attack (something we thought could take ages or high computational power to make it happen  ). The two mining pools which are been linked to be censoring transactions is the F2Pool (11.6%) and Mara (3.8%) with both having a combined hash rate of 15%, so just as you said if the individual miners actually leave either of the pools and join the other pools that do not censor transactions then it will weaken thr hashrate of the pools and could take them out of the market. But the question remains will they leave and join others? Then the concern again is what if the government is able to get other big pools like Foundry ( which is US based mining pool ) and Antpool into their side, then the whole decentralization advantage that bitcoin possess will be gone. Something we have all thought will never happen, but due to maybe greed of some pools it almost right before us

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