Empty Block Fallacy

There is a theory that the mining of empty blocks is an attack. The theory does not require that the blocks are mined on a weak branch in an attempt to enable double-spending. It also does not specify what person is attacked.

Consider the following:

• Empty block mining is entirely consistent with consensus rules and cannot be reasonably prevented by a new rule.

• The term "attack" implies theft. The Bitcoin whitepaper, for example, uses the term only to describe double-spend attempts.

• A reward consists of fees for transactions and a subsidy for the block. The miner forgoes transaction fees by not including transactions and is not rewarded for them.

• The miner's hash power contributes proportionally to the security of the network. The subsidy is compensation for that security during the inflationary phase. The purpose of inflation is to rationally distribute the coin. The rational distribution is specifically in exchange for hash power, not for transaction inclusion.

For each of these reasons independently the theory is invalid. However it is worth exploring the source of the fallacy. Because of the Zero Sum Property, there may be an assumption that mining an empty block "unfairly" takes away the opportunity for transactions to be confirmed.

A miner commits capital to mining, producing hash power. Setting aside the effects of pooling, the miner is subsidized in proportion to hash power produced. Without this hash power other miners would produce the same average number of blocks at proportionally lower difficulty. In other words, actually attacking owners would be proportionally cheaper. So despite not being rewarded for including transactions, the miner is securing previously-confirmed transactions.

Given that the marginal cost of including transactions is necessarily below average fee levels, the empty block miner is suffering an opportunity cost. This amounts to the miner subsidizing the security of the chain. While this seems economically irrational in the limited context of the coin, it can be rational due to the offsetting opportunity cost for waiting on a new candidate following an announcement. Nevertheless, mining is inherently subject to financial pressures outside of the coin. While a given miner may consider it advantageous to mine empty blocks, it is within every other person's power to do otherwise.

Other miners retain the ability to confirm transactions in proportion to their hash power. If 10% of the hash power mines empty blocks, then confirmations will take 10% longer on average. However if a miner removes his/her 10% of the total hash power, confirmations will also take 10% longer on average, at least until the next difficulty adjustment. Yet removing one's hash power is generally not considered an attack.