Last edited August 5, 2022

Can the majority of Full Nodes override a majority of Bitcoin miners if the miners start to censor Bitcoin transactions? No. Not as the code is currently written. This article is a reply to Medium member aa who suggests the nodes hold power in the Bitcoin network.

The essence of my argument is that a majority of Bitcoin miners will comply with a coming regulation from multiple Western governments which will require that Bitcoin miners in their jurisdictions "may not confirm any transaction from an unregulated exchange." Governments know that if they can corral Bitcoin users into regulated exchanges, they can identify all users, collect all taxes, and shut off user access to their Bitcoin for political reasons. Limiting Bitcoin mining to regulated exchanges effectively gives Governments complete control of bitcoin.

One simple regulation, if applied to the majority of the Bitcoin hash rate, will enable the regulating government(s) to control all Bitcoin transactions globally.

This story is a response to questions challenging that statement. It is a reply to comments made on this story.

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"The real power is with the full nodes of the network which is really distributed." Medium.com member aa

The second half of that statement may be true "full nodes of the network … (are) really distributed". Unfortunately, the first half of that statement is at best, only half true because the network cannot run without the miners any more than it can run without the full nodes."The real power is (not) with the full nodes…"?

POINTS OF AGREEMENT

1. "You are talking about miners like they validate and confirm transactions. That's not how it actually works. Miners simply propose blocks … full nodes –(are) the real validators — to accept that block."

We agree that in the Bitcoin network there is a difference between the roles of the miners and the full nodes. We appear to agree that the miners compile blocks of transactions to confirm, and they compete for a monetary reward. The full nodes collect Bitcoin transactions, validate the blocks of transactions that have been confirmed by the miners, broadcast them to the network of other nodes, and maintain the blockchain ledger.

Perhaps we should acknowledge that the terms Miner and Node are sometimes inadequate because a miner can also be a node of the Bitcoin network. In the past mining computers were often full nodes as well as miners. A major separation of nodes and miners occurred as mining equipment was increasingly taken over by application-specific integrated circuits (ASICs). As used here, Miners are ASICs programmed to confirm transactions, Nodes are programmed to validate the blocks, and maintain the public ledger.

(Miner = A Person operating a set of machine instructions that produce a Block =A Valid set of Transactions with Timestamp and Proof)

(Full Node = A set of Machine instructions that performs Validation).

(Confirmation = inclusion of a transaction in a block)

(Validation = the process of determining Conformance to Consensus Rules),

(Soft Fork = A contraction of the set of potentially valid blocks.)

(Hard Fork = An expansion of the set of potentially valid blocks.)

2. "… government can regulate a large mining company to only propose blocks with a certain type of transactions. Sure. But what government cannot regulate is what the actual nodes accept."

Agreed, Bitcoin mining tends to centralize thousands of machines into warehouse locations which makes them susceptible to regulation. Nodes are much more widely decentralized. It will be much harder for a government to force unwanted regulation on the widely spread out full nodes than on the centralized miners. And I agree that governments would have great difficulty enforcing regulation on the widely dispersed and generally freedom-loving Bitcoin nodes. I further agree that the nodes determine the rule set (the code used). Therefore, the full nodes can agree to change the Bitcoin code.

Still, we should acknowledge that the proper functioning of the Bitcoin network requires nodes and miners to work together. The Bitcoin network is designed so that nodes need the miners to confirm transactions. And it is the majority of the miners who determine the blockchain.

3. "nodes –(can) simply blacklist any block coming from (a mining) company (which agrees to censors transactions in compliance with the government's new regulation.) … ('nodes' … are run by people, not by large corporations. … "(Government can't) force me — as someone running a full node — not to upgrade to the latest Bitcoin core which contains a blacklist for mining company X?"

Though it may not be simple, I am willing to assume that Bitcoin nodes can find a way to blacklist transactions.

As Hjalmar Peters pointed out in reply to this article, "there is no obligation for a mining company to identify itself in its mined blocks, and, if there were, there would be no way to make sure that such self-identification is honest."

But we should realize that an agreement between nodes to not accept uncensored transactions would not inhibit the government's regulation of Bitcoin miners. The main Bitcoin blockchain would still be determined by the majority of the mining hash rate, not by the majority of the nodes. If the government can regulate the majority of the mining hash rate, then it can regulate Bitcoin as a whole. It is the larger mining hash rate that determines the blockchain.

4. "UASF (User activated soft fork) is a thing and has been used in the past to bypass miners."

A user-activated soft fork is indeed a thing. It is a backward-compatible change in the rules that makes use of Bitcoin more restrictive. A user-activated fork can add additional restrictions to Bitcoin transactions. However, if the nodes create a soft fork (additional restrictions on transactions) the new rule would not "bypass" the Bitcoin miners that comply with government regulations. Under any backward compatible code (Soft Fork) the miners still confirm transactions, so that even if a clear majority of the nodes support a rule change, the blockchain would necessarily remain determined by the majority of the hash rate, whether the majority of nodes like it or not.

Further, unless the Bitcoin code is hard forked, in a manner that requires different mining equipment, any smaller chain that forks off will be susceptible to the greater hash power of the main chain.

POINTS OF DISAGREEMENT

1. "to simply blacklist any block coming from company X. It's super easy to do this and it requires the cooperation of 'nodes'"

It is debatable that writing and distributing the necessary code is 'super easy'. Here is a contrary view from an experienced Bitcoin miner.

"… Bitcoin's code is protected at every level, both the network itself by miners and nodes, but also in terms of security access to make those changes. There are very, very few people who are able to do this, and they can only do so via consensus and after extensive testing has been carried out by developers."…"Significant changes, such as Bitcoin Taproot upgrade being deployed later this year, take many months (sometimes many years) of planning, testing, agreement, and miners' acceptance to deploy across the network." Bitcoin Miner Jason Deane, in his Medium.com story, "What Can Stop Bitcoin In 2021?"

However, for the sake of this discussion let's assume the node operators agree to change the code so that the majority of nodes will not validate blocks containing censored transactions. It only takes one (1) node and a majority of the miners to create the longest blockchain and make it compliant with government regulation. Then, a different fork agreed to by the majority of nodes has merely created a smaller, weaker fork of the blockchain that is susceptible to the greater hash power of the main chain.

2. "… company X will rather relocate outside of EU/US jurisdiction than to comply. If they comply they will lose all their revenues (as nodes won't accept blocks proposed by them)."

Mining companies will not prefer to relocate to an unregulated jurisdiction. Individuals want freedom, but Institutions want to profit. Some of the largest institutional buyers of Bitcoin have been actively calling for regulation of the Bitcoin network.

"Additional regulatory clarity from the [Biden] administration is going to benefit bitcoin and accelerate institutional adoption of that asset," Michael Saylor said on "Squawk on the Street," stressing as a major bitcoin believer and holder he's looking for "clear, bright-line definitions of digital property versus a digital security versus a digital currency and the operating rules of the digital exchange." CNBC and Bitcoin News

I believe it is an error to assume that Bitcoin miners will lose revenue by complying with government censorship regulations. The majority of Bitcoin mining is controlled by Western corporations. Almost without exception Corporations want regulatory clarity and believe that a clear regulatory environment will increase their profitability.

In any event, the Bitcoin code requires nodes to accept blocks confirmed by the majority of the hash rate whether the node wants them or not. To change that part of the code would require a hard fork.

aa as you have pointed out, there are actually two majorities to consider. The majority of the nodes may indeed disagree with the majority of the mining hash rate.

There are different roles for Bitcoin nodes and miners. The government has no need to get Bitcoin nodes to accept their regulation. What nodes will accept is already precisely determined by the Bitcoin core computer code. Instead, Western governments will regulate the Bitcoin miners by directing which transactions miners are permitted to confirm. Government regulation of Bitcoin does not require changing any part of the Bitcoin code. It requires only law enforcement. The dramatic centralization of miners results in miners being both more inclined toward, and more susceptible to government regulation (control).

If the majority of nodes disagree with the action of the majority of miners, it is worth noting that there only needs to be one node that agrees to support the miners. A tiny minority of one node would be sufficient to enable the majority of miners to continue operating the main blockchain. The Bitcoin code requires following the blockchain with the most confirmations (the greater hash rate), it says nothing about following the majority of nodes.

In any event, a significant percentage of full nodes are managed by the very Bitcoin mining companies and institutions that will choose to comply with government regulation -these are the nodes run by Centralized exchanges and centralized mining operations. No matter how many Nodes vote to change the Bitcoin code, there will be plenty of nodes that stick with the original Bitcoin.

Summary

The bottom line is that just a few Western Governments can regulate the majority of the Bitcoin mining hash rate in a manner that forces all transactions through exchanges. Bitcoin will carry on. However, government regulation of Bitcoin mining will be the death of Satoshi's vision for an open, peer-to-peer monetary system.

The coalition of regulating governments would use their control over exchanges to identify all users of Bitcoin, tax all users of Bitcoin, and freeze the account of anyone who violates the law -or attends a forbidden protest, or posts a forbidden comment on social media.

True Bitcoiners will respond -as aa pointed out in his replies to my original post. He suggests the Bitcoin Core Code could be rewritten to 'Whitelist' for unregulated transactions. The hope is that those of us who share Satoshi's vision will use the new 'Free Bitcoin'. That is likely to occur. Unfortunately, the new Whitelisted 'Free Bitcoin' will have lost its institutional investors. It will be made unlawful to use, buy, sell, accept, access, transfer, or facilitate. Worse, its enemy (the State) will have access to superior hash power. Bitcoin mining computers (ASICs) and Full Nodes work together, -or die together.

The Thing Worse than Rebellion, Is the Thing that Causes the Rebellion

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Credit for the central idea in this article belongs to Medium.com member Hjalmar Peters who provided the following comment to Jimmy Song in response to "Debunking the Empty Block Attack"

"First, replace "empty blocks" with "clean blocks" (i.e. blocks only containing compliant whitelisted transactions). Second, replace "China" with "FATF" (Fiancial Action Task Force). Third, replace "Bitcoin killed" with "Bitcoin castrated". Having done these replacements, you suddenly get an attack that is much more realistic and defies all the arguments brought forward in your article."

FYI, this attack is about to begin: https://stockhouse.com/news/press-releases/2020/10/29/dmg-s-subsidiary-blockseer-launches-bitcoin-mining-pool-focused-on-good

March 2021 Hjalmar Peters,

Additional credit belongs to Medium.com author and remarkable Blockchain analyst Joe Kelly whose articles discussing the Bitcoin Network, have done more to clarify my understanding of Bitcoin, than any other. Thank you Joe! Much appreciated. You've done well.

Special thanks to Medium.com Author Achim Littlepage whose articles on Bitcoin's defenses have been wonderfully instructive. Thank you, Achim! You have provided valuable forewarning.

In order for Bitcoin to persevere, it needs all its parts, the code, the nodes, and the miners. One part will not work without the other.

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