First Bitcoin mining pool Blockseer will censor transactions

  • The mining pool of DMG’s Blockchain Solutions subsidiary, Blockseer, will censor Bitcoin transactions to comply with regulations.
  • Monero developer Riccardo Spagni predicts more control over Bitcoin transactions and proposes an increase in network privacy.

A few weeks ago, DMG Blockchain Solutions announced the creation of a new mining pool. Part of its U.S. subsidiary, Blockseer, the mining pool has been created to meet and “exceed” U.S. government Office of Foreign Assets Control (OFAC) regulations regarding Bitcoin transactions.

Therefore, Blockseer’s mining pool will only validate transactions from addresses that are not blacklisted by OFAC and will require its users to go through a Know Your Customer (KYC) process. In this way, DMG seeks to “provide the highest level of transparency, auditability and corporate governance” to the Bitcoin network.

DMG’s mining pool will use a company data collection tool called Walletscore. This tool will be used in conjunction with information provided by OFAC to filter out any transactions related to theft, fraud, money laundering, or other illegal activity. DMG CTO Adrian Glover said:

We built the pool on the technology platform that drives our mine management platform, thus creating a unified user experience for our customers, and enabling us to quickly add features to both products. In the near-term future, we will be providing audit ready reports and irrefutable proof of our customers’ mining revenue, directly from our user interface. For DMG, the launch of the pool is only the beginning, our team will continue to work hard on adding all of the revenue, cost tracking and projection information that miners look for.

Bitcoin miner migration, less user privacy?

DMG’s initiative could follow a trend of reordering mining pools globally. These have a large presence in Asia, specifically in China. However, the Asian giant continues to put pressure on the crypto market and its related activities.

In a recent report, Wu Blockchain claimed that miners in China suffered huge losses after having problems paying their electricity bills. The report states and makes the following prediction:

(…) a large number of bank cards were frozen and even suffered heavy losses.This will accelerate the transfer of cryptocurrency mining from China to the United States, Kazakhstan and other countries.

Wu Blockchain has also been reporting on the attack that the exchanges have suffered and the entities that, in spite of their close relationship with China’s Communist Party (CCP) have been affected by the hardening of the measures against cryptocurrencies. In that sense, more mining pools could be encouraged to form US-based mining pools similar to Blockseer’s.

Monero‘s former chief maintainer, Riccardo Spagni, has said it is only a matter of time before “most mining pools are forced to make these filtered transactions”. Spagni proposes using solutions such as p2pool centered on Stratum v2 and adding more privacy to Bitcoin.

Hacktrophy co-founder Juraj Bednar believes that governments could take the first step towards censoring Bitcoin by implementing oversight measures for mining pools. Bednar claims that miners have greater incentives to follow regulations than to oppose them because of the heavy investment they make in mining hardware, infrastructure, data centers, and taxes. Therefore, he adds:

If the government comes in and says you can’t mine the blocks that spend these UTXOs, or you’ll lose either a bank account, exchange account, business permit or go to jail for money laundering, most of the big miners would comply. Blockseer is just a first example.