When it comes to the allure of Bitcoin, one of its central propositions resides in its imperviousness to censorship. Amidst the fervor surrounding this topic, the phrase “censorship resistant” seems to resonate more than “censorship proof” – and for good reason. While an individual miner may have the capability to censor specific transactions by excluding them from the blocks they mine, they do not possess the power to prevent other miners from incorporating those transactions into their own blocks once discovered.
While Bitcoin demonstrates resilience against censorship, it cannot claim immunity to it. Any miner can opt to censor transactions at will, although this decision is not free from potential consequences, including revenue loss if alternative transactions with comparable fees are scarce. Nevertheless, this does not hinder the global system from processing the censored transactions unless two conditions are met: either the censoring miners hold the majority hashrate in the network, or they utilize this advantage to orphan the blocks of miners who choose to validate the censored transactions.
However, such an action would lead to financial detriment for the majority of miners participating in the blocking. Each time a blocked transaction is processed, it elongates the period until the subsequent block’s discovery, thereby diminishing the average income of the censoring miners. This scenario persists until either the minority acquiesces or expands its hashrate, prompting the current majority to relent.
Imagine a circumstance where a subset of miners in the minority elects to censor specific transactions from their blocks. This decision diminishes the blockspace accessible to those transactions, instigating a swifter saturation of fee pressure compared to other transaction types. As a result, the fees for such transactions will escalate at a faster rate, causing a revenue influx solely for the minority of miners who validate these transactions.
In contrast, transactions failing to surpass the available blockspace will subject all miners to a generally uniform level of income. However, should the censored transactions exceed the blockspace, creating a fee escalation, the resultant revenue growth will belong exclusively to the minority of miners.
This disparity places the minority in a financially advantageous position, though one which is clearly unsustainable. Over time, one of two outcomes will materialize: the minority’s reinvestment in hashrate will expand their share, or miners will defect from the majority to swell the minority’s hashrate. Consequently, the hashrate of the minority will burgeon due to enhanced fee revenue, until both sets of miners attain similar income levels.
This fluctuation in fees will drive the growth of the minority’s hashrate until reaching an equilibrium where the demand for blockspace finds parity between the censored and uncensored transactions. This equilibrium continues until the demand for censoring transactions surpasses the available blockspace, thereby initiating another cycle where miners validating the censored transactions enjoy greater revenue.
This pulsating dynamic epitomizes Bitcoin’s resistance to censorship. It doesn’t hinge on the lack of capability among miners to censor transactions, but rather the market dynamics that incentivize miners to validate transactions others choose to shun. It’s plain and simple. Unless miners act irrationally—a premise which undermines Bitcoin’s entire security model—some will inevitably incorporate these transactions and reap the additional revenue.