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.

Crypto Exchange Kraken Working to Add Lightning Network Support Later This Year

Popular cryptocurrency exchange Kraken is working on adding support for Bitcoin’s Lightning Network later this year, according to the firm’s Bitcoin strategist Pierre Rochard.

Responding to a user on Twitter asking the firm for a clear timeline on its plans to add support for the layer-two scaling solution, Rochard confidently responded it’s working on adding it later this year.

Rochard later on retweet a user’s question on what the milestone would be for the Lightning network to be considered “ready,” which implies Kraken – and potentially other cryptoassets trading platforms – have been holding off adding support until the network becomes more stable.

Bitcoin Lightning Network was launched in early 2018 and quickly started being adopted right after, By May 2019, a total of 1,039 BTC were locked on the scaling solution, but the number of bitcoins users were moving off-chain started dropping soon after.

LN's growth over timeSource: DeFi Pulse

Several cryptocurrency exchanges have, however, already rolled out support for the Lightning Network. Bitcoin-to-gold exchange Vaultoro added support for it in May 2018, while South American crypto exchange Buda added them in October 2018.

While several other cryptoassets exchanges have since added support for the Lightning Network as well, the oldest cryptocurrency trading platform that added support was Bitfinex. Kraken would be one of the oldest exchanges supporting it as well.

The Lightning Network is supported by various Bitcoin community members as the cryptocurrency’s best scaling solution, as it takes payments off-chain. Another prominent scaling solution, now widely supported by Bitcoin Cash proponents, is to increase the block sizes on the network.

Featured image by Josep Castells on Unsplash