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Thursday, December 3, 2020

‘Exclusive mining’ could have negative implications for the Blockchain industry, say experts

Dr. Elias Strehle of the Blockchain Research Lab and Lennar Ante of the University of Hamburg recently warned that blockchain nodes engaging in exclusive mining “have no incentive to forward new transactions to their peers.”

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They speculated that crypto miners may as an alternative be incentivized to keep transactions confidential “in the hope of being the only one who can earn the associated transaction fees.”

Exclusive mining, which is really a type of collusion between a transaction initiator and an individual miner or pool, uses private channels to confirm transactions rather than broadcasting them on the public blockchain. It is only when they are recorded in a block that public blockchain that users become aware of such transactions.

The authors so-called that, since transaction costs represent regular income for miners, “significantly increased transaction costs could be used to launder money” by colluding with a miner.

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As a result, criminals may see smaller blockchain networks “as more suitable vehicles for money laundering or tax evasion via exclusive mining”, the researchers noted.

Dr. Strehle and Ante identified two other possible motivations for engaging in exclusive mining: reducing transaction cost volatility and hiding unconfirmed transactions from the network to prevent frontrunning.

In June, Cointelegraph reported on a number of mysterious transactions that have stumped the wider community. Some suggest they could be examples of money laundering, or revenge from the disgruntled exchange employee.

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