Paper title: Dissecting Bitcoin and Ethereum Transactions: On the Lack of Transaction Contention and Prioritization Transparency in Blockchains
Abstract: In permissionless blockchains, transaction issuers include a fee to incentivize miners to include their transaction. To accurately estimate this prioritization fee for a transaction, transaction issuers (or blockchain participants, more generally) rely on two fundamental notions of transparency, namely contention and prioritization transparency. Contention transparency implies that participants are aware of every pending transaction that will contend with a given transaction for inclusion. Prioritization transparency states that the participants are aware of the transaction or prioritization fees paid by every such contending transaction. Neither of these notions of transparency holds well today. Private relay networks, for instance, allow users to send transactions privately to miners. Besides, users can offer fees to miners via either direct transfers to miners' wallets or off-chain payments -- neither of which are public. In this work, we characterize the lack of contention and prioritization transparency in Bitcoin and Ethereum resulting from such practices. We show that private relay networks are widely used and private transactions are quite prevalent. We show that the lack of transparency facilitates miners to collude and overcharge users who may use these private relay networks despite them offering little to no guarantees on transaction prioritization. The lack of these transparencies in blockchains has crucial implications for transaction issuers as well as the stability of blockchains. Finally, we make our data sets and scripts publicly available.
Some Mining Pool Operators (MPO -- or simply miner) offer transaction acceleration services in Bitcoin where transaction issuers can pay miners off-chain (privately) to get their transactions included ASAP, frontrunning other transactions in the queue. Examples of such services include [3; 4; 5]
Then, after publishing the paper "Selfish & opaque transaction ordering in the Bitcoin blockchain: the case for chain neutrality,"[1 and 6], which shows that MPOs deviate from some common assumptions in Bitcoin, I decided to investigate further some of the transactions accelerated by MPOs. So I did a bunch of empirical experiments and noticed that these services work pretty well.*
I also noticed that some Bitcoin transactions include arbitrary data through the OP_Return opcode, which enables applications to be built on top of the Bitcoin blockchain. For example, the Omni Layer (https://omniexplorer.info) allows users to issue transactions that send USDT to other Omni addresses. However, on the Bitcoin blockchain, the transaction input/output is worth only a few dollars, making it hard for transaction monitoring systems to track the actual value of transactions.
For example, the following txid "ba05a61af97424b340358c2d97080236767ee5b9811d90773f86c35b1ce7f022" sends 13 million USDT through Omni but in the Bitcoin it shows an output of 27,072.48 USD where 27,058.87 USD is a change and a fee of 1 USD. We can retrieve the Omni value by parsing the OP_Return tx output from Bitcoin tx data.
The PDF file (see [2]) shows a draft of a preliminary analysis where for all 313,575,387 transactions issued and mined in Bitcoin from Jan 2018 to Dec 2020, 42,832,713 (13.66%) contain OP_Return opcode, where:
- 17,993,300 txs belong to Omni Layer Protocol (an average of ~111 txs per block), representing 5.74% of all issued txs and 42% of all OP_Return opcode transactions. Of all Omni txs, 97.27% belong to the Tether USDT token.
- From our set of inferred to be accelerated transactions (following methodology in [1]), we have that 1805 OP_RETURN txs were accelerated. From this set, 1740 accelerated txs belong to Omni Layer Protocol. 1739 txs belong to Tether token (USDT) and 1 to Omni token.
Question: I understand users would want to accelerate the inclusion of transactions in DeFi (e.g., in Ethereum), but why would someone want to accelerate Bitcoin transactions?
I'm still struggling to find reasons why someone would want to pay for the acceleration of Bitcoin transactions.
Thank you in advance for your time and any insights you have!
Abstract: In permissionless blockchains, transaction issuers include a fee to incentivize miners to include their transaction. To accurately estimate this prioritization fee for a transaction, transaction issuers (or blockchain participants, more generally) rely on two fundamental notions of transparency, namely contention and prioritization transparency. Contention transparency implies that participants are aware of every pending transaction that will contend with a given transaction for inclusion. Prioritization transparency states that the participants are aware of the transaction or prioritization fees paid by every such contending transaction. Neither of these notions of transparency holds well today. Private relay networks, for instance, allow users to send transactions privately to miners. Besides, users can offer fees to miners via either direct transfers to miners' wallets or off-chain payments -- neither of which are public. In this work, we characterize the lack of contention and prioritization transparency in Bitcoin and Ethereum resulting from such practices. We show that private relay networks are widely used and private transactions are quite prevalent. We show that the lack of transparency facilitates miners to collude and overcharge users who may use these private relay networks despite them offering little to no guarantees on transaction prioritization. The lack of these transparencies in blockchains has crucial implications for transaction issuers as well as the stability of blockchains. Finally, we make our data sets and scripts publicly available.