My goal with this newsletter has not changed since the first issue. I am trying to give you a complete overview of the bitcoin revolution on all levels. I offer articles about the price of bitcoin, opinion articles about bitcoin, but also articles that are a bit more technical to allow you to understand in more detail how bitcoin works.
As such, feel free to ask me your questions in the comments. Every question deserves an answer, because the philosophy of bitcoin is first and foremost to let you figure it all out if you want to. I often get ideas for articles I write based on questions from readers.
Writing this type of article allows me to answer the reader in detail while helping others who may have the same question. Last weekend, a reader asked me a very interesting question about the transaction block added to the bitcoin blockchain on February 1, 2022, which contains no transactions other than the coinbase transaction.
As a reminder, each block of transactions in the Bitcoin Blockchain contains, as the first transaction, the one that miners send to one of their addresses to receive the dig reward. This is called a coinbase transaction. The block 721 366 , mined on February 1, 2022, contained only the bounty that miners had to be paid for their work to secure the grid:
To give you an idea, here's what it usually looks like block of transactions added to the Bitcoin Blockchain:
As you can see, the block usually contains transactions made by users of the bitcoin network. Here's how those transactions will be validated.
The reader who saw this phenomenon happening on February 1, 2022, logically asked me the following questions:
- Is it allowed to dig an empty transaction block?
- Why are bitcoin miners trying to dig empty blocks?
- Is this harming the bitcoin network?
Extraction of an empty block is permitted. This is called SPV Mining.
To answer the first question, it is allowed to mine a transaction block containing only the coinbase transaction. However, by doing so, miners forgo the transaction fee revenue they collect by successfully mining the next transaction block. Therefore, it is not necessarily economically viable to attempt to mine an empty transaction block.
This technique has a name: SPV Mining.
SPV mining means that miners will skip the step of validating the block and the transactions it contains to gain time on their competitors. They will immediately start digging a new block, forwarding the block they just received with the cryptographic signature, the famous hash. Since they have decided to skip the block verification step, they do not know which transactions will be included in this block. They will have to try to dig a block without any transactions except the coinbase transaction. If they don't, they would risk including transactions in their block being dug that were already included in the previous block. Their block would be rejected by the network as it does not enforce the bitcoin protocol rules.
So sometimes miners get lucky and manage to dig a new block directly after a block that will be empty because they started working on it right after they got the hash of the previous block.
SPV Mining is a topic of debate in the community. Some miners refuse to implement this strategy to generate more profits.
It is important to understand that mining pools are in a constant competition where they are always trying to create the longest valid blockchain possible to maximize their profits. Because of this, mining pools have implemented strategies to allocate some of their computing power to SPV Mining.
This practice has been discussed in the bitcoin community for ages. Some say it's part of the game and a normal way to make money from mining bitcoin. Opponents argue that it reduces the transaction validation capacity of the bitcoin network, as empty blocks are mined faster than the average 10-minute delay, which will then increase the difficulty of mining.
It can be seen that there was only one minute instead of the average ten minutes between block 721,365 and 721,366, which was an empty block produced by this SPV Mining practice:
Opponents of this practice also argue that it increases the likelihood that an invalid block will receive more confirmations, which could make the network less reliable for payments as the risk of double spending becomes greater.
Consequently, some mining pools ban the practice while others continue to practice it.
The last point to remember is that the dig checkers do not lose more than 30 to 40 seconds with SPV Mining. In fact, after that time they have had time to confirm the contents of the next block by turning on transactions. This makes SPV Mining less financially profitable than trying to mine the next block with transactions inside. You can think of SPV Mining as trying to win the Bitcoin mining lottery by letting chance work in your favor. If it doesn't work out quickly, bitcoin miners who adopt this strategy focus on the more traditional strategy.
Next time you hear about a story of an empty block in a bitcoin blockchain, you won't be surprised. Better yet, you'll be able to explain to anyone who asks what it is.
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