Bitcoin Miner Transaction Fee Optimization and Network Efficiency

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In the world of Bitcoin, miner behavior plays a crucial role in shaping network performance, transaction throughput, and long-term decentralization. One of the most critical aspects of this behavior is how miners select transactions for inclusion in blocks—specifically, their ability to maximize transaction fee revenue. This analysis dives deep into the efficiency of Bitcoin miners in capturing fees, compares different versions of Bitcoin Core’s block construction logic, benchmarks real-world mining pools, and explores the implications of potential transaction censorship.

Understanding Transaction Selection and Block Construction

Before any computational hashing begins, Bitcoin miners construct candidate blocks from transactions waiting in the memory pool (mempool). Theoretically, miners aim to maximize their revenue by selecting transactions with the highest fees per unit of block weight, subject to the 4MB block weight limit introduced with Segregated Witness (SegWit).

This fee-maximizing strategy is embedded in Bitcoin Core’s built-in getblocktemplate command, which uses an optimized algorithm to assemble the most profitable set of transactions. Most mining operations rely on this logic or similar implementations, making it a reliable benchmark for assessing real-world mining efficiency.

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Methodology: Simulating Candidate Blocks Without Mining

To evaluate miner performance, we leveraged the getblocktemplate RPC command in two versions of Bitcoin Core:

Every 20 seconds over a 15-day period in January 2021, we generated candidate block templates based on our local mempool state and stored the results in a database. This allowed us to simulate what an idealized miner using standard Bitcoin Core logic would include in a block.

Technical Setup

To compare our simulated blocks with actual mined blocks, we matched timestamps within a one-second precision window. Since our templates were generated every 20 seconds, we allowed up to a 20-second backward lookup (average ~10 seconds), giving real miners a slight advantage due to potential new high-fee transactions arriving during that interval.

Core Keywords

Evolution of Fee Capture: 2015 vs. 2020 Bitcoin Core

Our analysis reveals a 40.3% improvement in average transaction fee collection when comparing Bitcoin Core 0.20.0 to version 0.10.3. This significant jump can be attributed to several key developments:

While SegWit itself introduced new transaction formats not supported in older clients, its integration significantly improved overall fee optimization capabilities—even if part of the gain reflects protocol evolution rather than pure algorithmic refinement.

Performance Benchmark: Local Templates vs. Real Miners

Despite the 10-second informational disadvantage, our locally generated candidate blocks using Bitcoin Core 0.20.0 achieved 0.15% higher average fee income than actual mined blocks during the study period:

This small but consistent edge suggests that some real miners may not be fully optimizing their block construction. Factors contributing to this gap include:

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Mining Pool Comparison: Who’s Optimizing Best?

We extended our analysis to compare individual mining pools based on their fee capture performance:

These differences may seem marginal, but over thousands of blocks annually, they translate into meaningful revenue gaps—especially as block subsidy diminishes and fee income becomes the dominant incentive.

The Threat of Transaction Censorship

In October 2020, DMG Blockchain announced plans for a new mining pool that would implement transaction filtering policies. Later, Marathon Patent Group expressed intent to join this initiative. Although no blocks have been mined under this policy as of early 2021, the proposal sparked debate about Bitcoin’s long-term resistance to censorship.

Such policies could manifest as:

This marks a potential ideological shift—from Bitcoin as an uncensorable peer-to-peer cash system to a regulated asset infrastructure catering to institutional investors.

FAQ: Common Questions About Miner Fee Behavior and Censorship

Q: Can miners really censor transactions?
A: Yes—miners control which transactions enter blocks. While economically disincentivized under normal conditions, coordinated pools could exclude specific transactions at a cost.

Q: How does censorship affect Bitcoin’s value proposition?
A: If censorship becomes systemic, it undermines Bitcoin’s core promise of financial sovereignty and trustless exchange—potentially weakening its case as a neutral store of value.

Q: Is higher transaction fee enough to prevent censorship?
A: According to Eric Voskuil’s “Censorship Resistance Property,” yes—fees must exceed the economic benefit of enforcing censorship. However, this makes anti-censorship conditional on market dynamics rather than protocol guarantees.

Q: Why did newer Bitcoin Core versions collect more fees?
A: Improvements in transaction prioritization logic, better handling of CPFP/RBF, and full SegWit support allow newer versions to pack higher-paying transactions more efficiently.

Q: Are empty blocks still a problem?
A: Yes—though less common today, empty blocks suggest suboptimal operation, often caused by stale templates or SPV-style mining practices.

Q: Can users detect miner censorship?
A: Indirectly—by monitoring unconfirmed transaction backlogs, unusual confirmation delays for high-fee transactions, or deviations from expected mempool clearance rates.

Final Thoughts: Is Bitcoin Still Resistant to Censorship?

The proposed censored mining pool acted as a catalyst for this research. While no active censorship has been detected yet, the mere discussion signals a growing tension between regulatory compliance and decentralization ideals.

Historically, Bitcoin’s resilience has relied on economic incentives aligning with protocol rules. As Eric Voskuil notes:

"A nation must spend on taxation at least as much as the fee premium to sustain censorship."

This means that as long as users are willing to pay sufficient fees, honest miners will profit more from including all valid transactions than from complying with arbitrary filters.

However, if anti-censorship depends solely on fee premiums rather than inherent design properties, then Bitcoin’s neutrality becomes fragile—a feature bought daily in the market rather than guaranteed forever by code.

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Ultimately, maintaining Bitcoin’s integrity requires ongoing scrutiny of miner behavior, transparency in pool operations, and continued innovation in fee modeling and block construction techniques. As block space becomes increasingly scarce and valuable, ensuring optimal fee capture isn’t just about profitability—it’s about preserving the network’s foundational principles.