I come from a more technical background, but I do believe I understand the economic implications of the Bitcoin technology and I do also clearly see the point you are trying to make with your attack.

I do however believe that your attack is not viable in the long run...or rather, it's negligible.

There are, I think, two possible scenarios of how the cartel could withhold the transactions from the rest of the network, and a hybrid approach using both depending on whether the transaction is internal to the cartel network or not.


1) The cartel wallet would only connect to nodes that use the same wallet. The only part of this segregated cartel part of the network that would connect to the complete Bitcoin network would be the mining servers. They would be configured to farm all attractive transactions, while not forwarding any to the rest of the network, effectively keeping the transactions from their cartel nodes for themselves.

I suppose this is a rather unrealistic scenario on the technical front, as only a single ill-behaved node in the cartel section of the network sending transactions to a single member of the non-cartel part of the network would propagate most of the transactions from the cartel network onto the non-cartel network before being mined.

2) I would assume that the scenario you have in mind would involve a custom cartel wallet, that directly sends the transactions to one or several cartel mining servers. At the same time, the cartel mining servers would exchange transactions.