Researchers from Florida Atlantic University and the University of Mississippi recently conducted a study that suggests blockchains with “full” blocks and transaction queues provide an extra layer of protection against nefarious actors, money launderers, and potential fraudsters. Their findings are outlined in a research paper titled “Bitcoin Blocksize, Custodial Security, and Price,” which examines the Mt. Gox crash and other incidents involving the theft of cryptocurrency from crypto exchanges.
The premise of the study is based on the idea that those involved in illicit activities prefer to complete their money laundering transactions as quickly as possible. The researchers state:
“This investigation is driven by the following intuition: the closer the blocksize is to the limit, the more likely the next transaction will be published on a later block and not the most current one. When these cybercriminals breach a crypto exchange, or ‘close’ a fraudulently operated one, they want to launder the stolen bitcoin quickly.”
To test their hypothesis, the researchers analyzed historical Bitcoin blockchain data and a crypto exchange “scam report.” They created a score for block fullness based on data from 2010 to 2021. The team then evaluated how block fullness contributed to the price of Bitcoin (BTC) and acted as a deterrent for bad actors.
According to the paper, the team’s evaluation confirmed their hypothesis that “full Bitcoin blocks act as a deterrent to hackers and scammers because they signal congestion.” They also concluded that full blocks “also signal a rise in network security that is captured in price,” proving their second hypothesis that block fullness affects Bitcoin price.
The researchers found that block fullness is approximately 20% lower on the average day when a cryptocurrency breach or fraud occurs.
Key Points:
– Researchers suggest that blockchains with “full” blocks and transaction queues deter nefarious actors, money launderers, and fraudsters.
– The study examines the Mt. Gox crash and other incidents of cryptocurrency theft.
– The hypothesis is based on the idea that illicit actors want to launder stolen bitcoin quickly.
– The researchers analyzed historical Bitcoin blockchain data and a crypto exchange “scam report.”
– Block fullness acts as a deterrent to hackers and scammers by signaling congestion and network security.
– Block fullness affects the price of Bitcoin.
