Why do some Bitcoin mining pools mine empty blocks?

The blocks in the Bitcoin blockchain have a size limit of 1MB. The difficulty of the proof of work is calibrated so that 1 block can be created every 10 minutes. Miners want to maximize the number of transactions contained in each block because miners can collect transaction fees. Logically, as Bitcoin continues to gain popularity, the average block size gets closer and closer to its limit.

In this environment, it is surprising to see a lot of empty blocks being mined. An empty block is not completely empty, it contains a transaction: the coinbase transaction, which distributes the mining reward to the miner (currently 12.5BTC). It is important to know that mining an empty block is not easier, cheaper or faster than a full block. The proportion of empty blocks in major mining pools also fluctuates greatly. For example, BitFury, BitClub Network and Kano CKPool do not mine empty blocks.

Why are there empty blocks?

When a mining pool receives a new block from an adversary, it needs to perform some actions: download the full block, verify the block transactions, and define the new block. During this time - although it is very short, in order not to waste computing power, they will start mining a new block. It only contains the coinbase transaction, so the previous block will not invalidate them due to duplicate transactions.

The phenomenon of mining without verification (or SPV mining) can be seen on the Kaiko blockchain page. The mining of empty blocks is performed right after the normal blocks are mined, when the memory pool is far from empty.

The number of empty blocks is decreasing

The share of empty blocks has been decreasing over the past few months, although the timing is not identical across all mining pools. The theoretical reason behind this is that improvements in mining software, most notably Bitcoin Core 0.12, have reduced the time between the validation of a block mined by a pool and the mining of a new non-empty block.

These improvements include:

1. Allows pre-calculation of some of the work that miners need to do to verify all transactions in a block, rather than doing it when creating the block.

2. Relay Network configuration improvements: A technical simplification of transactions is prioritized to help miners decide which transactions to include in a block.

3. Bitcoin Core GetBlockTemplate improvement - Individual miners can optimize their mining by requesting the composition of blocks with this improvement.

Is this a bad thing?

The entire point of the Bitcoin network is to process transactions. As such, empty blocks are often criticized as 'bad behavior' because they create very little value for the network, accelerate deflation and steal the fruits of labor from 'honest' miners.

However, this can also be seen as a counterbalance to the centralization tendency of the Bitcoin network: the mining pool that wins a block can immediately start mining the next block, because they already know which transactions are included in the block. Other miners must first download the transactions, and then generate a new block without these transactions. Mining only the block header can be seen as limiting the benefits of centralization.

Technically, this is easy to prevent, for example by including a coinbase hash that links all previous transactions in the block header. The recent decline in the number of empty blocks suggests that this problem can be solved by improving the protocol, as these improvements make empty blocks less attractive. In addition, the gradual reduction of block rewards and the increased reliance on transaction fees may make mining empty blocks less and less profitable.