Bitcoin Miner Transaction Fee Efficiency and Network Anticensorship

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The ability of Bitcoin miners to collect transaction fees efficiently is a critical factor in maintaining network security, decentralization, and economic incentives. This analysis explores how effectively miners select transactions to maximize fee revenue, compares performance across different Bitcoin Core versions and real-world mining pools, and investigates the broader implications for Bitcoin’s resistance to transaction censorship. By leveraging the getblocktemplate command, we evaluate candidate block construction without performing actual hashing, enabling a granular assessment of transaction selection strategies.

Understanding Bitcoin Miner Revenue Optimization

Bitcoin miners earn income from two primary sources: block subsidies (newly minted BTC) and transaction fees. As block rewards halve every four years, fee income becomes increasingly significant. To maximize profitability, miners aim to include the highest-fee-paying transactions in their blocks while adhering to block weight limits.

In theory, miners should follow a profit-maximizing transaction selection strategy—prioritizing transactions with the highest fee per virtual byte (sat/vB). However, real-world deviations can occur due to software inefficiencies, latency, or intentional policy decisions such as transaction filtering or censorship.

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Despite its importance, there has been limited public research evaluating how closely real miners adhere to optimal fee collection. This study fills that gap by analyzing candidate blocks generated using Bitcoin Core's built-in getblocktemplate command—a tool developers use to simulate block creation based on local mempool data.

Methodology: Simulating Candidate Block Construction

To assess transaction selection efficiency, we ran the getblocktemplate command every 20 seconds over a 15-day period in January 2021 using two versions of Bitcoin Core:

Each generated template was stored in a database for comparative analysis. Our setup included:

We compared our locally generated templates against actual mined blocks by matching timestamps within a one-second precision window. Since templates were produced every 20 seconds, our backtracking window averaged 10 seconds—giving real miners a slight advantage due to potential new transactions entering the mempool during that interval.

This approach allows us to benchmark theoretical maximum fee capture against real-world performance, offering insights into miner behavior and potential inefficiencies.

Bitcoin Core Evolution: Fee Collection Gains Over Time

Our analysis reveals a 40.3% increase in average transaction fee revenue when comparing Bitcoin Core 0.20.0 to version 0.10.3. This improvement stems from algorithmic enhancements and protocol upgrades introduced between 2015 and 2020, including:

While SegWit significantly impacts fee efficiency, it also introduces a new transaction format not supported in older clients. Therefore, part of the observed gain reflects structural changes rather than pure optimization improvements.

The evolution of Bitcoin Core’s transaction selection logic demonstrates continuous progress toward more efficient block construction.

Despite these advances, even modern implementations leave room for marginal gains—highlighting ongoing opportunities for refinement in mining software.

Real-World Miners vs. Theoretical Optimal Blocks

When comparing our locally generated blocks (using Bitcoin Core 0.20.0) to actual mined blocks during the same period, we found that our simulated blocks collected 0.15% more in fees on average—earning 0.777 BTC per block versus 0.775 BTC for real miners.

This slight edge suggests that despite their time advantage, some real miners do not fully optimize fee collection. Contributing factors may include:

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The distribution of differences shows most blocks are closely aligned, but occasional deviations indicate inconsistent optimization across the network.

Mining Pool Performance Benchmarking

We further analyzed individual mining pools to evaluate their fee optimization capabilities:

These variations, though small per block, accumulate significantly over time—especially given shrinking profit margins in the mining industry.

Such disparities underscore the importance of technical excellence in mining operations and raise questions about whether underperforming pools might be deviating from profit-maximizing strategies for non-economic reasons.

The Emerging Threat of Transaction Censorship

In October 2020, DMG Blockchain announced plans to launch a mining pool that would censor certain transactions, citing regulatory compliance. Shortly after, Marathon Patent Group expressed intent to join the initiative. While this pool has not yet mined any blocks, the proposal marks a pivotal moment in Bitcoin’s evolution.

Similarly, Foundry USA has launched a North American-based mining operation focused on regulatory alignment—but without evidence of transaction filtering.

If miners begin rejecting transactions based on policy rather than economics, Bitcoin’s core value proposition—censorship resistance—could be compromised.

Potential censorship pathways could evolve from:

  1. Blacklists (blocking specific UTXOs)
  2. Whitelists (only allowing pre-approved addresses)
  3. Isolation of non-compliant blocks (creating de facto forks)

Historically, Bitcoin’s major conflicts centered on scaling (e.g., block size debates). The next ideological battle may revolve around privacy and transaction freedom.

FAQs: Addressing Key Questions

Q: What is getblocktemplate and why is it useful?
A: It's a Bitcoin Core RPC command that generates a candidate block template based on the node’s mempool. Researchers use it to simulate optimal block construction without mining, enabling performance benchmarking.

Q: Does better fee collection mean a miner is more profitable?
A: Generally yes—assuming hash power is constant, higher fee collection increases revenue per block. However, delays in block propagation or connectivity issues can offset gains.

Q: Can transaction censorship be detected through fee analysis?
A: Yes. Deviations from expected fee-maximizing behavior—such as consistently excluding high-fee transactions—can signal potential censorship and warrant deeper investigation.

Q: Is Bitcoin’s censorship resistance guaranteed?
A: Not inherently. As Eric Voskuil argues, “Censorship resistance is a property of transaction fees.” Sufficient fee premiums incentivize miners to ignore external pressure and prioritize profit.

Q: How does SegWit affect fee optimization?
A: SegWit reduces transaction size (in weight units), allowing more transactions per block and improving fee efficiency. It also enables more accurate fee estimation, enhancing selection accuracy.

Q: Will fee-based censorship resistance hold long-term?
A: It depends on market dynamics. If institutional demand drives compliance-oriented mining, economic pressure may shift unless users are willing to pay premium fees to bypass filters.

Conclusion: Preserving Bitcoin’s Economic Incentives

This study confirms that while most miners align closely with profit-maximizing behavior, measurable inefficiencies exist—even among major pools. More importantly, proposed transaction-filtering policies represent a structural risk to Bitcoin’s foundational principle: permissionless and censorship-resistant transactions.

As block rewards decline, transaction fees will play an ever-larger role in securing the network—and preserving its ideological integrity. The community must remain vigilant, using tools like getblocktemplate analysis to monitor for deviations from economic rationality.

Ultimately, Bitcoin’s resilience may not stem from technology alone, but from the collective willingness of users to pay fees that make censorship economically unviable.

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