Empty blocks, which are blocks that contain no transactions other than the coinbase transaction which generates the block reward, are drastically increasing on the Ethereum network. Before September 2018, there were practically zero empty blocks on Ethereum, but they are now averaging more than 10% of all blocks. The empty block phenomena has been occurring on the Bitcoin network for years. Empty blocks are likely due to SPV mining in combination with SPY mining.
Mining pools have an incentive to find blocks as fast as possible, since the more blocks they find, the more block rewards they get. One method of accelerating the time it takes to find blocks is SPV mining. Technically, a miner only needs the previous block hash to find the next block, and doesn’t have to download and verify all the transactions in the previous block, which is the standard procedure but takes some extra time.
With SPV mining, a miner finds the next block from the previous block hash and doesn’t include any transactions in the block, since including any transactions in the block without verifying the previous block could lead to a double spend which would cause the block to be rejected by the network.
Over the last three months on the Ethereum network, empty blocks have been 1.6 seconds faster than blocks filled with transactions, 13.2 seconds versus 14.6 seconds block times. This time advantage is critical, since it leads to drastically increased profits for mining pools that participate in SPV mining relative to pools who don’t do SPV mining. Data suggests F2Pool and Etherdig are the two biggest pools producing empty blocks on the Ethereum network.
Additionally, SPY mining can improve the success of SPV mining. It takes some time for a block hash to be broadcast to a network by a mining pool. Often, mining pools will open accounts on all the other mining pools, so if a mining pool finds a block, the pool which is spying will get the block hash faster and then proceed to do SPV mining.
Although there is nothing illegal about SPV or SPY mining, there is definitely controversy since empty blocks reduce the transaction capacity of Ethereum and Bitcoin, which could lead to higher transaction fees and, therefore, could be detrimental to the economy of Bitcoin and Ethereum, at least in the short term.
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