In a recent study by scholars from Florida Atlantic University and the University of Mississippi, compelling evidence has arisen. This evidence suggests that blockchains with “full” blocks, especially when transaction queues are present, provide an added layer of security.
Consequently, this security acts as a deterrent against individuals with illicit intentions, money launderers, and potential fraudsters.
Entitled “Bitcoin Blocksize, Custodial Security, and Price,” the team’s scholarly work delves deep into the infamous Mt. Gox incident and other instances where cryptocurrencies have been pilfered from cryptocurrency exchanges.
This study is based on the idea that those involved in illegal activities want to speed up their money laundering processes.
In the words of the research paper:
in a recent research study conducted by scholars from Florida Atlantic University and the University of Mississippi, compelling evidence has emerged. This evidence suggests that blockchains with “full” blocks, especially when transaction queues are present, provide an added layer of security. Consequently, this security acts as a deterrent against individuals with illicit intentions, money launderers, and potential fraudsters.
Evidence from Bitcoin Blockchain: Blockchain Congestion as a Deterrent to Hackers and its Impact on Price
The researchers tested their hypothesis by analyzing historical Bitcoin blockchain data and a “scam report” from a cryptocurrency exchange. They established a “blockchain congestion” rating for blocks in the timeframe from 2010 to 2021 to assess the data.
Following the establishment of this benchmark, the team scrutinized historical data pertaining to two specific parameters: the extent to which block congestion contributed to Bitcoin’s price fluctuations and how it operated as a deterrent to malevolent entities.
Furthermore, the research paper affirms their hypothesis that “congested Bitcoin blocks deter hackers and scammers by indicating network congestion.” Additionally, their analysis suggests that saturated blocks also indicate heightened network security, which is reflected in the price. This substantiates their secondary hypothesis that block congestion impacts Bitcoin’s price.
According to the team’s discoveries, block congestion registers a 20% decrease on an “average day” coinciding with an occurrence of a cryptocurrency breach or fraud.
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