A small thread about Bitcoin censorship and why it probably does not need >50% hashrate.

Imagine you are a honest miner that likes Bitcoin. You create your own blocks, with transactions you choose (Stratum v2 for example).

You _know_ for sure that 10% of hashrate is censoring transactions according to publicly available blacklist of UTXOs. And they also orphan blocks that include censored transactions.

There is a new block ahead, with a blacklisted UTXO with high enough fee that you would include it in a block. The fee is 5 USD (~30k sats) higher than the next transaction that does not make it into the block. You would love to be a good Bitcoiner and include the tx. However...

If you find a block that includes this tx, you are risking that it will not be in the best chain. 10% of hashpower will straight orphan the block. Then it's a bet if your tx will be in the best chain. But 10% will choose the chain where your block is an orphan, others it's ~50%?

Upside: 5 USD more in transaction fees, good feeling that you are a good non-censoring Bitcoiner.

Downside: 6.4BTC in block reward with 10%*50% probablity.

Cost-benefit analysis in USD: 5+(value_of_being_good_bitcoiner)-0.1*0.5*6.4*16000.

If you value being a good bitcoiner at 1k USD, the cost benefit is a negative 4115 USD. So maybe it is a good idea not to include this transaction. It does not matter if _you_ think it's a good idea. If others do so, the 10% goes up. With 20% hashrate censoring, it's -9235 USD.

Also note, that nodes that are censoring are excluding the non-censoring hashrate, meaning more rewards for them. So if you join the dark side and also orphan the non-censoring chain, you will make even more in block rewards. Everyone is motivated to kick out hashrate.

This is a case of minority rule, as described in "The most intolerant wins: Dictatorship by a small minority" by @nntaleb. https://medium.com/incerto/the-most-intolerant-wins-the-dictatorship-of-the-small-minority-3f1f83ce4e15

So in conclusion, a small minority of miners enforcing censorship one block back could successfully introduce censorship and make more money doing so. Even the honest miners would comply if they are motivated by profit.

I did a write-up of this in an article that is even longer than this thread. I just wanted to explain that this is not about "51% could introduce censorship" (and please, say >50%, 50.23% is more than 50% too!). https://juraj.bednar.io/en/blog-en/2020/11/12/how-could-regulators-successfully-introduce-bitcoin-censorship-and-other-dystopias/

@threadreaderapp unroll please