Cryptocurrency Miners Have Made Over $330 Million Mining Empty Blocks

Cryptocurrency miners have, across the most popular proof-of-work (PoW) blockchains, made over $300 million mining empty blocks, not securing their network. The problem has been slowly decreasing, however.

According to blockchain research firm Diar, revenues coming from empty blocks were a “negligible portion of total revenues,” but have surpassed the $300 million mark.  In total, miners have made over $21 billion since the start of each blockchain, with Bitcoin accounting for over half of that amount.

The report reads:

Despite a year-on-year decline in the number of empty blocks being solved for Bitcoin, miners have now exceeded $100Mn in revenue since 2012 providing no real value to the network

Per Diar’s report, the number of empty blocks being mined across the cryptocurrency space has halved since 2016, and dropped by almost 20% last year, compared to 2017. In total, Litecoin has rewarded miners with $125 million for solving empty blocks, while Ethereum rewarded them with $113 million, and Bitcoin with little over $100 million.

Ethereum miners, the report adds, earned over $67 million from empty blocks in 2017, when the prices of most cryptocurrencies surged to new all-time highs. This, per Diar, is “by far the greatest reward for a full year across all blockchains.” Since then, ETH has seen a 95% drop in empty blocks mined.

Mining less empty blocks has been helping the Bitcoin network’s fees get lower, as “more blocks are finding transactions.” Compared to Bitcoin, BCH has seen an additional 3,335 empty blocks since August of 2017 – when it forked off the Bitcoin blockchain – despite having less transaction volume.

The report adds the figures should be alarming, as miners have essentially been earning the equivalent of $5 million per month for doing nothing.

The value that is being rewarded for empty blocks should strike alarm bells as revenues across major networks have earned miners for Proof-of-Nothing with $335Mn - the equivalent of $5Mn per month.

PoW-based blockchains reward miners with a specific amount of cryptocurrency per mined block, along with the fees from the transactions included in said block. Diar notes that while the fees today are a small incentive for miners, as rewards drop because of halving events, they will matter in the future.

Fees on the Bitcoin blockchain notably hit an all-time high in December of 2017, when BTC itself got close to the $20,000 mark. Since then, they’ve been dropping because of a decrease in empty blocks, SegWit adoption, transaction batching, and increased Lightning Network adoption.

Israel Bitcoin Association Petitions Banks to Reveal Crypto Policy

Neil Dennis

A number of Israel's bitcoin traders have already filed lawsuits against the country's banks and on Monday traders lodged a formal petition demanding that the financial industry explains its cryptoasset policy.

Israel's banks have barred the country's crypto investors from depositing the returns on their bitcoin and other digital currency investments due to the nation's strict laws on money laundering and the financing of terrorism.

In recent months banks have even blocked investors who are known to trade cryptoassets from opening accounts, according to a report by Israeli business journal Globes.

Central Bank Warning

Israel has seen strong growth in digital currency investment in recent years and in 2014 the Bank of Israel, the nation's central bank, issued a warning - in co-operation with the Tax Authority and several regulatory agencies - about the dangers associated with the use of virtual currency, including fraud and money laundering.

Taking aim directly at financial services providers, the statement said:

As the use of virtual currencies enables their anonymous transfer, in many cases evading the need to use financial institutions that are subject  to an anti-money laundering and terror financing prohibition regime, this is an activity with a high risk co-efficient in terms of money laundering and terror financing. Therefore, financial institutions must take this into account within the framework of their risk management policy.

Injunction

Israel's top legal authority is well aware a problem exists. In February 2018, the Supreme Court issued a temporary injunction prohibiting a bank from blocking activities in an account held by a company that engaged in bitcoin trading.

The bank, however, countered the Supreme Court's injunction, citing the 2014 Bank of Israel warning regarding the risks of bitcoin trade. The bank alleged that activities exposing the bank to such unlawful acts might "harm its reputation and public trust in the bank".

While the injunction stood, it did not affect the bank's right to examine individual activities in the account, nor did it affect the bank's ability to take steps to minimize risks associated with the business activities of the company.

Freedom of Information

The freedom of information petition filed in the Jerusalem District Court on Monday by the Israel Bitcoin Association demands that commercial banks make public their policies on cryptoassets.

Jonathan Klinger, legal adviser to the Bitcoin Association, told Globes:

Under the Banking (Licensing) Law, it is the duty of a bank to state to the Bank of Israel the policy under which it refuses to conduct transactions. We therefore contacted the Bank of Israel and asked for this information, but the Bank of Israel did not agree to disclose this policy to us. We therefore decided to petition the court to force the Bank of Israel to provide us with a copy of the policy submitted to it by the banks.

Lawsuits

Last week the Tel Aviv District Court received a petition for approval of a 75 million shekel ($21.3 million) class action suit against Bank Hapoalim that alleges the bank refused a customer seeking to deposit money from the sale of digital currencies.