Bitcoin is designed to go through four phases of war against the State: 1. Non-threat honeymoon period 2. Outlaw/criminalization period 3. Hash war 4. Surrender What you are describing here is the initial phase of the Outlaw period.

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That's the hash war phase. It comes when the outlaw period fails. The States mines empty blocks, and the market fights back by increases fees to motivate more hashpower to come online and overpower the censor. It's a little more nuanced than that, but that's the general idea.