Researchers from Florida Atlantic University and the University of Mississippi recently published research showing that blockchains with “full” blocks – especially if there is a transaction queue – appear to have an extra layer of protection against nefarious actors, money launderers and potential fraudsters.
The team’s paper, called “Bitcoin Blocksize, Custodial Security, and Price,” dives deep into the Mount Gox crash and other cases where cryptocurrency has been stolen from crypto exchanges.
The starting point of the research lies in the idea that the perpetrators of illegal activities want to complete the money laundering transactions as quickly as possible.
According to the paper:
“This research is driven by the following intuition: the closer the block size approaches the limit, the more likely it is that the next transaction will be published on a later block and not on the most recent block. When these cybercriminals breach a crypto exchange, or ‘close’ a fraudulently managed exchange, they want to quickly launder the stolen bitcoin.”
The researchers tested their hypothesis using historical Bitcoin blockchain data and a crypto exchange “scam report.” Using a sample period of 2010 through 2021, they created a “completeness” score for blocks that allowed them to evaluate the data.
After creating a benchmark, the team analyzed historical data on two specific measures: how much block fullness has contributed to the price of Bitcoin (BTC) and how much block fullness has acted as a deterrent to bad actors.
Their evaluation, according to the paper, confirmed the team’s hypothesis that “full Bitcoin blocks act as a deterrent to hackers and scammers by signaling congestion.” They also concluded that full blocks “also indicate an increase in network security reflected in the price,” realizing their second hypothesis that block fullness affected the Bitcoin price.
According to the team’s findings, block fullness is said to be 20% lower on the “average day” when a cryptocurrency breach or fraud occurs.