Researchers from Florida Atlantic University and the University of Mississippi have recently conducted a study on the security benefits of blockchains with “full” blocks. The researchers discovered that when blocks are at full capacity, especially during times of high transaction volumes, they provide an added layer of protection against illicit actors, money laundering, and fraud. The study, titled “Bitcoin Blocksize, Custodial Security, and Price,” delves into the notorious Mt. Gox crash and other instances where cryptocurrencies have been stolen from exchanges.
The researchers based their study on the assumption that criminals involved in illicit activities want to complete their laundering transactions as quickly as possible. They theorized that when the block size is closer to its limit, the probability of the next transaction being published on a subsequent block increases. Therefore, when cybercriminals breach a crypto exchange or close down a fraudulently operated one, they prefer to launder the stolen Bitcoin rapidly.
To test their hypothesis, the researchers utilized historical Bitcoin blockchain data and a report on crypto exchange scams. The sample period for the analysis spanned from 2010 to 2021. They developed a “fullness” score for blocks to evaluate the data more effectively. After establishing a benchmark, the team examined two crucial metrics: the impact of block fullness on the price of Bitcoin and its deterrent effect on malicious actors.
According to the study, the team’s findings confirmed their initial hypothesis. It was observed that full blocks discourage hackers and scammers due to the congestion signal they convey. Furthermore, the researchers concluded that the level of block fullness also influences the price of Bitcoin, indicating a rise in network security. In other words, block fullness has a significant impact on the value of Bitcoin.
The study’s results indicated that block fullness was, on average, 20% lower on days when cryptocurrency breaches or fraud occurred. This suggests that the presence of full blocks serves as an effective deterrent against illegal activities.
These findings have vital implications for the crypto industry, as they highlight the importance of block size and congestion levels in ensuring the security and value of cryptocurrencies. As the block size nears its limit, the network becomes more secure and less susceptible to malicious actors.
Additionally, these findings could guide exchanges and regulatory bodies in implementing stricter security measures. By understanding the relationship between block fullness and network security, exchanges can optimize their block size and transaction processing to enhance security and prevent fraudulent activities.
Further research in this area is needed, but the study lays a solid foundation for future investigations into the relationship between block fullness, security, and the overall stability of cryptocurrencies. As the crypto industry continues to evolve, it is crucial to prioritize research that enhances the security and trustworthiness of digital assets. By uncovering these connections, researchers can assist in developing robust security protocols that protect both individual investors and the industry as a whole.