What is Bitcoin?

In his original whitepaper, Nakamoto defined Bitcoin as “a purely peer-to-peer version of electronic cash…The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.”

In other words, Bitcoin is a network of nodes called miners. These miners are the peers in the peer-to-peer. Simply put, someone who would like to send a Bitcoin transaction requests one of these miners to do so by broadcasting his request to all miners in the Bitcoin network. Miners compete for these transaction requests as inputs to blocks. Blocks are containers for transactions. Only one block is issued every ten minutes. Each block provides a fixed compensation to miners (called a block reward) and variable fee determined by supply and demand. Blocks are won by miners allocating large quantities of computing power (called hashpower or hashrate) to solving an arbitrary math calculation. Whichever miner solves it first, gets the block to process transaction requests and receives the block reward and the variable fees. This new completed block is broadcast to all other miners who then accept it as part of the historical accounting record. The miners, or peers, thus form consensus on that new block’s legitimacy that all future blocks will be sequentially added on top of in the same method. Hence, blocks on a blockchain.

The crux of Bitcoin is the system of miners. Already, the conventional notion that Bitcoin is a payment processor without middlemen is debunked. The miners are the middlemen. The miners are the peers, not the users. Nakamoto sought to evade this categorization through his conception of miners that rests on free market assumptions. The main assumption is that miners will include all transaction requests because it maximizes their revenue given that users often provide an additional variable fee. Additionally, Bitcoin’s structure incentivizes competition and honest processing which counteracts bad actors and censorship.

For example, it would be counter to the long-term interest of miners, with large sunk costs, to commit blockchain fraud which would diminish the asset value of their Bitcoin holdings and the overall system. These assumptions must be in place for the theory of Bitcoin, as a censorship-resistant decentralized form of money, to be real. Unfortunately, when one investigates them, the theory gets less believable.

Miners don’t have to include every transaction request. Yes, miners can and do censor Bitcoin transactions. Malte Möser is a senior software engineer at Chainalysis, a blockchain data analysis firm, and received a PhD in Computer Science from Princeton University. Arvind Narayanan is a professor at Princeton and is the director of its Center for Information Technology Policy. In their paper entitled Effective Cryptocurrency Regulation Through Blacklisting, they explain how Bitcoin is not inherently censorship-resistant.

Bitcoin addresses are akin to bank accounts inside the Bitcoin system. Miners can create blacklists of addresses to exclude from each new block. However, since new addresses can be easily created, Möser and Narayanan recommended a more effective method. They suggested “instead of blacklisting addresses, an effective blacklist needs to contain individual transaction outputs (think coins)…As transfers in Bitcoin reference the origin of the funds they are spending, it is possible to follow money derived from illicit activity from one transaction to the next. By requiring intermediaries in the Bitcoin ecosystem to check the origin of coins against the blacklist before accepting them,” effective financial censorship can be achieved.

Do not get lost on debates regarding “how should” miners consider these methods. The pertinent issue is that miners “can” technically engage in blacklist-style censorship which orthodox Bitcoin narratives would suggest is technically impossible. Rather than users directly sending and receiving digital cash, miners act as an intermediary that can subjectively decide to ban users whether at the address level or the more effective output (coin) level. Not only is this true on a theoretically level, it is true in the historical record.

Read more about how Bitcoin miners censor transactions in my longer essay below. You can also learn about the full scope of what Bitcoin really is, not just what the hype merchants sell you.

Money by Vile Means

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July 30, 2025

“For I can raise no money by vile means. By heaven, I had rather coin my heart and drop my blood for drachmas than to wring from the hard hands of peasants their vile trash by any indirection.” Brutus said this in Act IV, Scene III of Shakespeare’s Julius Caesar