About Bitcoin censorship

Most people who are only superficially familiar with cryptocurrencies think that Bitcoin is a completely independent network that no one can control. But that is only partly true. A new mining pool, Blockseer, has announced that it is going to censor Bitcoin blockchain transactions, preventing transfers from wallets on blacklists of banned addresses. The pool takes these lists from the U.S. Office of Foreign Assets Control, which is not surprising since the pool is owned by a U.S. company. For example, the list already includes some North Korean addresses. In order to connect to the pool, miners are required to go through the KYC procedure. This all sets a dangerous precedent – if one pool can censor Bitcoin, why not make everyone else do it too?

But that’s not really the only option for censorship, and there are so many ways to make the Bitcoin network difficult to operate. Let’s look at all of them.

1. basic internet protocol layer. Like almost everything on the Internet, Bitcoin runs on a standard TCP/IP protocol. States can censor it through Internet service providers if they so desire.

2. Consensus dominance. Despite Bitcoin’s tremendous success in decentralization, and the enormous amount of resources miners have devoted to keeping the network running, the ability of states is still incomparably greater. They can use as much computing power as they need, because states can print money and buy equipment with it, but regular miners cannot. In addition, big corporations like Amazon and Microsoft with their cloud computing could also get Bitcoin under their control.

3. legal ban. Everyone remembers the effect that China’s 2017 Bitcoin ban had. But China’s example, fortunately, has not been followed. Banning any Bitcoin exchange and circulation is easy – and none of the owners of public crypto exchanges want to get in trouble with the law.

4. Global surveillance. Something like this is already happening. As we all remember, the Bitcoin network, though anonymous, is public. If an address is “exposed” once in any transaction and it is linked to some person, it is possible to analyze and understand where he was sending and receiving funds to that address.

Fortunately, this is all just theory. In practice, Bitcoin has already gained too much weight to try to censor or ban it. It has many supporters, and anyone who tries to destroy the network will encounter opposition from at least a large number of institutions that have invested in cryptocurrencies.

Why censoring Bitcoin makes no sense
Bitcoin has made its way into financial industries around the world. Still remaining an exotic instrument, it finds its way into the portfolios of a large number of retail investors, highnecks and funds. What happens if Bitcoin gets banned?

It would mean that a huge number of people, including influential people, would lose money. Everyone who has developed software or financial instruments based on Bitcoin, such as the global exchange operator ICE, which developed the Bakkt platform, or PayPal, which integrates Bitcoin payments into its service, or all the miners on the Chinese and US stock exchanges, will suffer. The industry would be destroyed. Of course, this will not be allowed to happen, because every commercial field has its own lobbyists who will not let such a scenario happen.

Now let’s look at the other option. Blocking access to the Bitcoin network at the Internet protocol level. Bitcoin uses the standard TCP/IP protocol, usually nodes connect with each other on port 8333. As a theoretical solution to the problem of blocking Bitcoin, ISPs could simply block certain ports on all their users. Of course, this would require very much coordination between states and ISPs, and would not solve the problem. Despite the fight against the darknet, it still exists and anyone can get into it using specialized software like Tor. Bitcoin can exist in the same way. In addition, there are now solutions like satellite servers to make Bitcoin work without the internet, like Blockstream Satellite. But in any case, such measures are unlikely to be necessary, since even China, which controls everything, is not trying to ban Bitcoin completely.

Another option is for governments or corporations to control the network through resource dominance among miners. This problem is solved very simply – a fork and a switch to another chain plus a change in the mining algorithm. So far, no one has been able to control Bitcoin. And most likely, no one will be able to control it.