Marathon says its mining pool will stop censoring transactions following bitcoin community outcry

Marathon Digital is reconfiguring its "sanctions-compliant" bitcoin mining pool following a community backlash.

CEO Fred Thiel announced the move in a statement posted on the firm's website on May 31. Marathon's MARA Pool began validating blocks on the Bitcoin network at the beginning of May, using wallet risk-scoring software from DMG that, according to Marathon, filtered out transactions involving wallets that appear on the U.S. Treasury's Office of Foreign Asset Control. 

"Over the coming week, we will be updating all our miners to the full standard Bitcoin Core 0.21.1 node, including support for Taproot. By adopting the full standard Bitcoin core node, we will be validating transactions on the blockchain in the exact same way as all other miners who use the standard node," Thiel said in the firm's video statement.

Over the course of May, MARA Pool minted 226.6 BTC under this system, which many noted resulted in significantly reduced transaction fees going to the miners, as well as blocks that featured far fewer transactions than peers. With the adoption of Bitcoin Core version 0.21.1, the firm is moving away from "OFAC-compliant" mining. A representative for Marathon confirmed to The Block that this would include moving away from its partnership with DMG. 

In an interview with The Block, Thiel said of the controversy over OFAC-compliant mining that:

“There’s a certain amount of Bitcoin politics involved here. On the one hand you have groups in the bitcoin community who are all about maximum decentralization. They are against the whole concept of doing anything that has to do with financial regulatory compliance or government regulation. Then there are the institutional investors who like the fact that people are trying to make the blockchain more compliant because it makes it safer for you to invest.”

Despite Marathon's overhauled approach to mining, Thiel maintained that major institutions will steer clear of a regulation-agnostic bitcoin in an email to The Block: 

"The industry will have to be responsive to regulatory requirements if the financial services industry and investors are going to participate — because they will not if it’s a violation of regulations," said Thiel. "That being said we fully support the bitcoin community and their desire for full transparency decentralization."