Subject: Re: [bitcoin-dev] New transaction policies (nVersion=3) for contracting protocols

From: Ruben Somsen <[email-masked]>
Date: Sat, 1 Oct 2022 11:59:55 +0200

Hi Bastien,

>Greg already has a draft design that addresses your concerns

Thanks, that is very nice. In that case I currently have no outstanding
objections.

>I'm curious why you would need more than one such output

My reasoning was actually to allow only one OP_TRUE output per transaction,
so I think we agree. Apologies if that wasn't clear.

To summarize:

1. OP_TRUE output must be spent
2. Only one child allowed per transaction

This ensures there is no scenario where a child is propagated that does not
spend the OP_TRUE output.

Cheers,
Ruben

On Fri, Sep 30, 2022 at 2:17 PM Greg Sanders <[email-masked]> wrote:

> It's likely better if the ephemeral output can be any value, including
> dust. This lets contract designers put "trimmed output" value indirectly
> towards CPFP fees without making the parent tx have fees itself.
>
> On Fri, Sep 30, 2022, 8:08 AM Bastien TEINTURIER <[email-masked]> wrote:
>
>> Hey Ruben,
>>
>> I discussed this further over IRC, and I now agree that this particular
>> change would be very desirable and can likely fit in the initial release
>> (even though I'm not the one writing that code, but I'd be happy to
>> review it and test it).
>>
>> Greg already has a draft design that addresses your concerns: if there is
>> an "ephemeral output" (0-value, OP_TRUE) in an unconfirmed v3 transaction,
>> it MUST be spent by any child v3 transaction. This way, you ensure that
>> any child transaction spending the unconfirmed parent spends the ephemeral
>> output(s). @Greg, correct me if I misunderstood something here. Note that
>> we will need to precisely define the criteria for those "ephemeral
>> outputs"
>> (it can probably simply be "outputs that are 0 sats").
>>
>> Coupled with transactions that pay no fees (and thus require a child to
>> CPFP in order to be included in a block), this ensures those outputs can
>> never leak into the utxo set. How does that sound?
>>
>> I'm curious why you would need more than one such output, can you detail?
>> I believe we only ever need one, spendable by anyone.
>>
>> Cheers,
>> Bastien
>>
>> Le ven. 30 sept. 2022 à 02:14, Ruben Somsen <[email-masked]> a écrit :
>>
>>> Hi Bastien,
>>>
>>> >The other change mentioned (making OP_TRUE standard and allowing outputs
>>> that are below dust) can be added later, as those won't be standard until
>>> we start allowing them, so there shouldn't be any backwards-compatibility
>>> issue with postponing this change. But maybe it's still worth having from
>>> the get-go, even though it may take a bit more time? Again, I'm curious
>>> to
>>> have other people's opinion here
>>>
>>> I'm sensitive to not wanting to overload the current discussion but this
>>> also interests me, provided it can be done in a way that is acceptable
>>> (i.e. minimizing the potential UTXO set impact). It would solve a big cost
>>> issue in my spacechains design if transactions could be 0 fees and have a 0
>>> sat output that could be used in order to pay all the fees with CPFP.
>>>
>>> My current view is that a tx containing a single 0 sat OP_TRUE output
>>> should only get relayed if it is a package where the OP_TRUE output is
>>> currently being spent in a way that increases the overall fee rate. But
>>> even then, one theoretical edge case remains:
>>> - Another CPFP tx can feebump the package on a different (non-OP_TRUE)
>>> output with an even higher fee rate
>>> - Subsequently, the tx that is spending the OP_TRUE might fall out of
>>> the mempool if the mempool fee rate rises
>>> - This could cause the 0 sat output to enter the UTXO set (specifically,
>>> rational miners wouldn't refuse to mine such a tx)
>>>
>>> It doesn't seem like this would happen much in practice (nor is there an
>>> incentive to do it on purpose), but the chance isn't 0.
>>>
>>> Cheers,
>>> Ruben
>>>
>>>
>>>
>>> On Thu, Sep 29, 2022 at 4:50 PM Greg Sanders via bitcoin-dev <
>>> [email-masked]> wrote:
>>>
>>>> > Right, good catch, this does require new logic to handle this case.
>>>> As Gloria points out, this should be doable, and is definitely worth
>>>> adding (those CSV 1 on every other output are really hacky, glad to
>>>> find a way to get rid of them).
>>>>
>>>> For the record, it turns out ephemeral anchors + v3 solves this
>>>> already, as the anchor must be spent, and the parent tx may only have one
>>>> child. Somehow I missed this implication for a few months. It's great news
>>>> if we can directly source fees from any output claimable, including HTLCs!
>>>>
>>>> On Thu, Sep 29, 2022 at 5:15 AM Bastien TEINTURIER <[email-masked]>
>>>> wrote:
>>>>
>>>>> Hi Gloria, Greg,
>>>>>
>>>>> > I interpret most of the discussion around limitations as ideas for
>>>>> > future improvements rather than criticisms of the proposal
>>>>>
>>>>> As far as I'm concerned, definitely!
>>>>>
>>>>> My current understanding is that the main change/improvement that would
>>>>> make sense here is restricting the whole v3 package's size (instead of
>>>>> just the child) via committing to a specific value in the taproot annex
>>>>> (also note that it's probably not just the v3 package's size, it should
>>>>> be the whole unconfirmed package including potential v2 unconfirmed
>>>>> ancestors).
>>>>>
>>>>> While I think this would be very valuable and would like to see this
>>>>> happen, I believe that can be done in a second, separate step since
>>>>> this
>>>>> would make relay policy stricter (some v3 transactions that previously
>>>>> propagated wouldn't propagate under this new rule). As long as you are
>>>>> able to find a path to miners through upgraded peers that use this
>>>>> annex
>>>>> approach, you should be able to resolve ACP pinning issues?
>>>>>
>>>>> I'm curious to know how other people feel about that: is it ok to do
>>>>> later or should we try to implement this for the first release of v3
>>>>> transactions?
>>>>>
>>>>> The other change mentioned (making OP_TRUE standard and allowing
>>>>> outputs
>>>>> that are below dust) can be added later, as those won't be standard
>>>>> until
>>>>> we start allowing them, so there shouldn't be any
>>>>> backwards-compatibility
>>>>> issue with postponing this change. But maybe it's still worth having
>>>>> from
>>>>> the get-go, even though it may take a bit more time? Again, I'm
>>>>> curious to
>>>>> have other people's opinion here, I'd be happy to get all of those
>>>>> directly
>>>>> in the first release of v3 transactions, but I don't know how much
>>>>> implementation will have to go into that.
>>>>>
>>>>> > For clarification, package RBF is ParentTx*s*(plural), and
>>>>> ChildTx(singular),
>>>>> > so it might be a bit more complicated than we're thinking
>>>>>
>>>>> Right, good catch, this does require new logic to handle this case.
>>>>> As Gloria points out, this should be doable, and is definitely worth
>>>>> adding (those CSV 1 on every other output are really hacky, glad to
>>>>> find a way to get rid of them).
>>>>>
>>>>> Thanks,
>>>>> Bastien
>>>>>
>>>>> Le lun. 26 sept. 2022 à 18:48, Gloria Zhao <[email-masked]> a
>>>>> écrit :
>>>>>
>>>>>> Hi Greg, Antoine, Bastien,
>>>>>>
>>>>>> Thanks very much for the feedback! I interpret most of the discussion
>>>>>> around limitations as ideas for future improvements rather than criticisms
>>>>>> of the proposal (please correct me if I'm wrong). I'll try to respond to as
>>>>>> much as possible.
>>>>>>
>>>>>> Also I realize that I didn't contextualize this proposal clearly
>>>>>> enough; it is very tailored for LN Penalty and definitely doesn't close all
>>>>>> pinning attacks possible (sorry for confusing anyone). I also agree that
>>>>>> some bits can be a little ugly or tack-on; I would definitely prefer a
>>>>>> comprehensive RBF revamp to fix all our problems and enable other
>>>>>> fee-bumping strategies such as
>>>>>> sign-ANYONECANPAY-then-bring-your-own-fees-by-adding-inputs-at-broadcast. I
>>>>>> was hoping to get some ideas with the "RBF Improvements" post in January,
>>>>>> but it doesn't seem like we're much closer to a workable proposal. I think
>>>>>> this is a minimally-invasive step that works for Lightning today, a small
>>>>>> fix similar to CPFP carve out.
>>>>>>
>>>>>> > As you likely know from previous discussions the biggest scenario
>>>>>> this does not fix in my estimation is ANYONECANPAY situations. If the
>>>>>> parent transaction can be "inflated" by tacking on additional inputs, this
>>>>>> means the total weight of the parent tx lowers the effective feerate of the
>>>>>> package.
>>>>>>
>>>>>> (For more context to other readers I wrote an explanation for this in
>>>>>> "SIGHASH_ANYONECANPAY Pinning" section of RBF ML post).  Yes, this
>>>>>> unfortunately doesn't fix any of the existing pinning attacks for single
>>>>>> transaction RBF but also doesn't make them worse. This boils down to adding
>>>>>> an incentive compatibility rule that ensures you can't replace a
>>>>>> transaction with something that will confirm slower. Package RBF has an
>>>>>> ancestor feerate-based rule for this (note it is quite conservative and not
>>>>>> perfect).
>>>>>>
>>>>>> So in the scenario above with the "inflated" parent that was signed
>>>>>> ACP, the replacement would be rejected because the package ancestor feerate
>>>>>> is lower than the feerate of what is being replaced. But it is imperfect
>>>>>> (explained below) and thus I wouldn't recommend it for single transaction
>>>>>> replacement. So that attack still exists for single transactions, yes.
>>>>>>
>>>>>> The strategy of using ACP to bring-your-own-fees has its own
>>>>>> challenges but hopefully has no current use cases as you say. AFAIK LN
>>>>>> Penalty is not affected by this since it doesn't use ACP, though obviously
>>>>>> I agree we should fix it for the future.
>>>>>>
>>>>>> So when I said "this is intended for fee-bumping presigned txns in
>>>>>> contracting protocols," I should have said "this is intended for
>>>>>> fee-bumping presigned txns specifically using CPFP and anchor outputs."
>>>>>> Apologies for forgetting to contextualize, I've been sitting on this for
>>>>>> too long.
>>>>>>
>>>>>> > The other scenario it doesn't really fix is where
>>>>>> HTLC/commitment-like transactions are being resolved in a batch, but due to
>>>>>> relative time constraints, you may want to accelerate some and not others.
>>>>>> Now you must pay higher rates to replace all of the transaction bumps. This
>>>>>> is a "self-pin" and "get good at utxos noob" type problem, but it's
>>>>>> something that axing rule#3 in favor of a Replace-by-ancestor-feerate
>>>>>> system would get us.
>>>>>>
>>>>>> I understand you to mean "if you don't have enough UTXOs and you're
>>>>>> forced to batch-bump, you over-pay because you need to bring them all to
>>>>>> the highest target feerate." Isn't this kind of separate, wallet-related
>>>>>> problem? Contracting or not, surely every wallet needs to have enough UTXOs
>>>>>> to not batch transactions that shouldn't be batched... I don't see how a
>>>>>> replace-by-ancestor-feerate policy would make any difference for this?
>>>>>>
>>>>>> Also in general I'd like to reiterate that ancestor feerate is not a
>>>>>> panacea to all our RBF incentive compatibility concerns. Like individual
>>>>>> feerate, unless we run the mining algorithm, it cannot tell us exactly how
>>>>>> quickly this transaction would be mined.
>>>>>>
>>>>>> We're estimating the incentive compatibility of the original
>>>>>> transaction(s) and replacement transaction(s), with the goal of not letting
>>>>>> a transaction replace something that would have been more incentive
>>>>>> compatible to mine. As such, we don't want to overestimate how good the
>>>>>> replacement is, and we don't want to underestimate how good the original
>>>>>> transactions are. This rule "The minimum between package feerate and
>>>>>> ancestor feerate of the child is not lower than the individual feerates of
>>>>>> all directly conflicting transactions and the ancestor feerates of all
>>>>>> original transactions" is a conservative estimate.
>>>>>>
>>>>>> > Would kind of be nice if package RBF would detect a "sibling output
>>>>>> spend" conflict, and knock it out of the mempool via the other replacement
>>>>>> rules? Getting rid of the requirement to 1 block csv lock every output
>>>>>> would be quite nice from a smart contracting composability point of view.
>>>>>>
>>>>>> Interesting, so when a transaction hits a mempool tx's descendant
>>>>>> limit, we consider evicting one of its descendants in favor of this
>>>>>> transaction, based on the RBF rules.
>>>>>> Cool idea! After chewing on this for a bit, I think this *also* just
>>>>>> boils down to the fact that RBF should require replacements to be better
>>>>>> mining candidates. As in, if we added this policy and it can make us evict
>>>>>> the sibling and accept a transaction with a bunch of low-feerate ancestor
>>>>>> junk, it would be a new pinning vector.
>>>>>>
>>>>>> > If you're a miner and you receive a non-V3, second descendant of an
>>>>>> unconfirmed V3 transaction, if the offered fee is in the top mempool
>>>>>> backlog, I think you would have an interest to accept such a transaction.
>>>>>>
>>>>>> > So I'm not sure if those two rules are compatible with miners
>>>>>> incentives...
>>>>>>
>>>>>> The same argument can be made for the 26th descendant of a mempool
>>>>>> transaction; it's also not entirely incentive-compatible to reject it, but
>>>>>> that is not the *only* design goal in mempool policy. Of course, the
>>>>>> difference here is that the 25-descendant limit rule is a sensible DoS
>>>>>> protection, while this 1-descendant limit rule is more of a "help the
>>>>>> Bitcoin ecosystem" policy, just like CPFP carve-out, dust limit, etc. I can
>>>>>> of course understand why not everyone would be in favor of this, but I do
>>>>>> think it's worth it.
>>>>>>
>>>>>> > > 4. A V3 transaction that has an unconfirmed V3 ancestor cannot be
>>>>>>
>>>>>> > >    larger than 1000 virtual bytes.
>>>>>>
>>>>>> > If I understand correctly the 1000 vb upper bound rational, it
>>>>>> would be to constraint the pinning counterparty to attach a high fee to a
>>>>>> child due to the limited size, if they would like this transaction to be
>>>>>> stuck in the network mempools. By doing so  this child has high odds to
>>>>>> confirm.
>>>>>>
>>>>>> Yeah exactly, the "Rule 3 pin" is done by adding a child that's
>>>>>> high-fee (so you have to pay that much to evict it). Because they *don't*
>>>>>> want this tx to confirm, normally, this child would be really large. If
>>>>>> they only have 1000vB for the child, they can't increase the replacement
>>>>>> cost without also fee-bumping the transaction to make it confirm faster.
>>>>>>
>>>>>> > As of today, I think yes you can already fingerprint LN
>>>>>> transactions on the  spec-defined amount value of the anchor outputs, 330
>>>>>> sats. There is always one of them on post-anchor commitment transactions.
>>>>>> And sadly I would say we'll always have tricky fingerprints leaking from
>>>>>> unilateral LN closures such as HTLC/PTLC timelocks...
>>>>>>
>>>>>> > I agree with you, this isn't worse than today, unilateral closes
>>>>>> will
>>>>>> probably always be identifiable on-chain.
>>>>>>
>>>>>> Great to hear that there is no privacy worsening!
>>>>>>
>>>>>> Best,
>>>>>> Gloria
>>>>>>
>>>>>> On Mon, Sep 26, 2022 at 5:02 PM Greg Sanders <[email-masked]>
>>>>>> wrote:
>>>>>>
>>>>>>> Bastien,
>>>>>>>
>>>>>>> > This may be already covered by the current package RBF logic, in
>>>>>>> that
>>>>>>> scenario we are simply replacing [ParentTx, ChildTx1] with
>>>>>>> [ParentTx, ChildTx2] that pays more fees, right?
>>>>>>>
>>>>>>> For clarification, package RBF is ParentTx*s*(plural), and
>>>>>>> ChildTx(singular), so it might be a bit more complicated than we're
>>>>>>> thinking, and currently the V3 proposal would first de-duplicate the
>>>>>>> ParentTx based on what is in the mempool, then look at the "rest" of the
>>>>>>> transactions as a package, then individually. Not the same, not sure how
>>>>>>> different. I'll defer to experts.
>>>>>>>
>>>>>>> Best,
>>>>>>> Greg
>>>>>>>
>>>>>>> On Mon, Sep 26, 2022 at 11:48 AM Bastien TEINTURIER via bitcoin-dev <
>>>>>>> [email-masked]> wrote:
>>>>>>>
>>>>>>>> Thanks Gloria for this great post.
>>>>>>>>
>>>>>>>> This is very valuable work for L2 contracts, and will greatly
>>>>>>>> improve
>>>>>>>> their security model.
>>>>>>>>
>>>>>>>> > "Only 1 anchor output? What if I need to bump counterparty's
>>>>>>>> commitment tx in mempool?"
>>>>>>>> > You won't need to fee-bump a counterparty's commitment tx using
>>>>>>>> CPFP.
>>>>>>>> > You would just package RBF it by attaching a high-feerate child to
>>>>>>>> > your commitment tx.
>>>>>>>>
>>>>>>>> Note that we can also very easily make that single anchor spendable
>>>>>>>> by
>>>>>>>> both participants (or even anyone), so if you see your
>>>>>>>> counterparty's
>>>>>>>> commitment in your mempool, you can bump it without publishing your
>>>>>>>> own commitment, which is quite desirable (your own commitment tx has
>>>>>>>> CSV delays on your outputs, whereas your counterparty's commitment
>>>>>>>> tx
>>>>>>>> doesn't).
>>>>>>>>
>>>>>>>> > "Is this a privacy issue, i.e. doesn't it allow fingerprinting LN
>>>>>>>> transactions based on nVersion?"
>>>>>>>>
>>>>>>>> I agree with you, this isn't worse than today, unilateral closes
>>>>>>>> will
>>>>>>>> probably always be identifiable on-chain.
>>>>>>>>
>>>>>>>> > Would kind of be nice if package RBF would detect a "sibling
>>>>>>>> output spend"
>>>>>>>> > conflict, and knock it out of the mempool via the other
>>>>>>>> replacement rules?
>>>>>>>> > Getting rid of the requirement to 1 block csv lock every output
>>>>>>>> would be
>>>>>>>> > quite nice from a smart contracting composability point of view.
>>>>>>>>
>>>>>>>> +1, that would be very neat!
>>>>>>>>
>>>>>>>> This may be already covered by the current package RBF logic, in
>>>>>>>> that
>>>>>>>> scenario we are simply replacing [ParentTx, ChildTx1] with
>>>>>>>> [ParentTx, ChildTx2] that pays more fees, right?
>>>>>>>>
>>>>>>>> > 1) I do think that we should seriously consider allowing OP_TRUE
>>>>>>>> to become
>>>>>>>> > a standard script type as part of this policy update. If pinning
>>>>>>>> is solved,
>>>>>>>> > then there's no reason to require all those extra bytes for
>>>>>>>> "binding" an
>>>>>>>> > anchor to a specific wallet/user. We can save quite a few bytes
>>>>>>>> by having
>>>>>>>> > the input be empty of witness data.
>>>>>>>> > 2) If we allow for a single dust-value(0 on up) output which is
>>>>>>>> immediately
>>>>>>>> > spent by the package, anchors become even easier to to design. No
>>>>>>>> value has
>>>>>>>> > to be "sapped" from contract participants to make an anchor
>>>>>>>> output. There's
>>>>>>>> > more complications for this, such as making sure the parent
>>>>>>>> transaction is
>>>>>>>> > dropped if the child spend is dropped, but maybe it's worth the
>>>>>>>> squeeze.
>>>>>>>>
>>>>>>>> I also think both of these could be quite useful. This would
>>>>>>>> probably always
>>>>>>>> be used in combination with a parent transaction that pays 0 fees,
>>>>>>>> so the
>>>>>>>> 0-value output would always be spent in the same block.
>>>>>>>>
>>>>>>>> But this means we could end up with 0-value outputs in the utxo
>>>>>>>> set, if for
>>>>>>>> some reason the parent tx is CPFP-ed via another output than the
>>>>>>>> 0-value one,
>>>>>>>> which would be a utxo set bloat issue. But I'd argue that we're
>>>>>>>> probably
>>>>>>>> already creating utxo set bloat with the 330 sat anchor outputs
>>>>>>>> (especially
>>>>>>>> since we use two of them, but only one is usually spent), so it
>>>>>>>> would
>>>>>>>> probably be *better* than what we're doing today.
>>>>>>>>
>>>>>>>> Thanks,
>>>>>>>> Bastien
>>>>>>>>
>>>>>>>> Le lun. 26 sept. 2022 à 03:22, Antoine Riard via bitcoin-dev <
>>>>>>>> [email-masked]> a écrit :
>>>>>>>>
>>>>>>>>> Hi Gloria,
>>>>>>>>>
>>>>>>>>> Thanks for the progress on package RBF, few early questions.
>>>>>>>>>
>>>>>>>>> > 2. Any descendant of an unconfirmed V3 transaction must also be
>>>>>>>>> V3.
>>>>>>>>>
>>>>>>>>> > 3. An unconfirmed V3 transaction cannot have more than 1
>>>>>>>>> descendant.
>>>>>>>>>
>>>>>>>>> If you're a miner and you receive a non-V3, second descendant of
>>>>>>>>> an unconfirmed V3 transaction, if the offered fee is in the top mempool
>>>>>>>>> backlog, I think you would have an interest to accept such a transaction.
>>>>>>>>>
>>>>>>>>> So I'm not sure if those two rules are compatible with miners
>>>>>>>>> incentives...
>>>>>>>>>
>>>>>>>>> > 4. A V3 transaction that has an unconfirmed V3 ancestor cannot be
>>>>>>>>> >    larger than 1000 virtual bytes.
>>>>>>>>>
>>>>>>>>> If I understand correctly the 1000 vb upper bound rational, it
>>>>>>>>> would be to constraint the pinning counterparty to attach a high fee to a
>>>>>>>>> child due to the limited size, if they would like this transaction to be
>>>>>>>>> stuck in the network mempools. By doing so  this child has high odds to
>>>>>>>>> confirm.
>>>>>>>>>
>>>>>>>>> I still wonder if this compatible with miner incentives in period
>>>>>>>>> of empty mempools, in the sense that if you've already a V3 transaction of
>>>>>>>>> size 100Kvb offering 2 sat/vb, it's more interesting than a V3 replacement
>>>>>>>>> candidate of size 1000 vb offering 10 sat/vb. It could be argued the former
>>>>>>>>> should be conserved.
>>>>>>>>>
>>>>>>>>> (That said, the hard thing with any replacement strategy we might
>>>>>>>>> evict a parent transaction *now* to which is attached a high-feerate child
>>>>>>>>> *latter* making for a utxo considered the best ancestor set. Maybe in the
>>>>>>>>> long-term miners should keep every transaction ever accepted...)
>>>>>>>>>
>>>>>>>>> > (Lower bound) the smaller this limit, the fewer UTXOs a child
>>>>>>>>> may use
>>>>>>>>> > to fund this fee-bump. For example, only allowing the V3 child
>>>>>>>>> to have
>>>>>>>>> > 2 inputs would require L2 protocols to manage a wallet with
>>>>>>>>> high-value
>>>>>>>>> > UTXOs and make batched fee-bumping impossible. However, as the
>>>>>>>>> > fee-bumping child only needs to fund fees (as opposed to
>>>>>>>>> payments),
>>>>>>>>> > just a few UTXOs should suffice.
>>>>>>>>>
>>>>>>>>> Reminder for L2 devs, batched fee-bumping of time-sensitive
>>>>>>>>> confirmations of commitment transactions is unsafe, as the counterparty
>>>>>>>>> could enter in a "cat-and-mouse" game to replace one of the batch element
>>>>>>>>> at each block to delay confirmation of the remaining elements in the batch,
>>>>>>>>> I think.
>>>>>>>>>
>>>>>>>>> On the other hand, I wonder if we wouldn't want a higher bound. LN
>>>>>>>>> wallets are likely to have one big UTXO in their fee-bumping reserve pool,
>>>>>>>>> as the cost of acquiring UTXO is non-null and in the optimistic case, you
>>>>>>>>> don't need to do unilateral closure. Let's say you close dozens of channels
>>>>>>>>> at the same time, a UTXO pool management strategy might be to fan-out the
>>>>>>>>> first spends UTXOs in N fan-out outputs ready to feed the remaining
>>>>>>>>> in-flight channels.
>>>>>>>>>
>>>>>>>>> > 1. The rule around unconfirmed inputs was
>>>>>>>>> > originally "A package may include new unconfirmed inputs, but the
>>>>>>>>> > ancestor feerate of the child must be at least as high as the
>>>>>>>>> ancestor
>>>>>>>>> > feerates of every transaction being replaced."
>>>>>>>>>
>>>>>>>>> Note, I think we would like this new RBF rule to also apply to
>>>>>>>>> single transaction package, e.g second-stage HTLC transactions, where a
>>>>>>>>> counterparty pins a HTLC-preimage by abusing rule 3. In that case, the
>>>>>>>>> honest LN node should be able to broadcast a "at least as high ancestor
>>>>>>>>> feerate" HTLC-timeout transaction. With `option_anchor_outputs" there is no
>>>>>>>>> unconfirmed ancestor to replace, as the commitment transaction, whatever
>>>>>>>>> the party it is originating from, should already be confirmed.
>>>>>>>>>
>>>>>>>>> > "Is this a privacy issue, i.e. doesn't it allow fingerprinting LN
>>>>>>>>> transactions based on nVersion?"
>>>>>>>>>
>>>>>>>>> As of today, I think yes you can already fingerprint LN
>>>>>>>>> transactions on the  spec-defined amount value of the anchor outputs, 330
>>>>>>>>> sats. There is always one of them on post-anchor commitment transactions.
>>>>>>>>> And sadly I would say we'll always have tricky fingerprints leaking from
>>>>>>>>> unilateral LN closures such as HTLC/PTLC timelocks...
>>>>>>>>>
>>>>>>>>> > "Can a V2 transaction replace a V3 transaction and vice versa?"
>>>>>>>>>
>>>>>>>>> IIUC, a V3 package could replace a V2 package, with the benefit of
>>>>>>>>> the new package RBF rules applied. I think this would be a significant
>>>>>>>>> advantage for LN, as for the current ~85k of opened channels, the old V2
>>>>>>>>> states shouldn't be pinning vectors. Currently, commitment transactions
>>>>>>>>> signal replaceability.
>>>>>>>>>
>>>>>>>>> Le ven. 23 sept. 2022 à 11:26, Gloria Zhao via bitcoin-dev <
>>>>>>>>> [email-masked]> a écrit :
>>>>>>>>>
>>>>>>>>>> Hi everyone,
>>>>>>>>>>
>>>>>>>>>> I'm writing to propose a very simple set of mempool/transaction
>>>>>>>>>> relay
>>>>>>>>>> policies intended to aid L2/contract protocols. I realized that
>>>>>>>>>> the previously proposed Package Mempool Accept package RBF [1]
>>>>>>>>>> had a few remaining problems after digging into the RBF logic
>>>>>>>>>> more [2].
>>>>>>>>>> This additional set of policies solves them without requiring a
>>>>>>>>>> huge RBF overhaul.
>>>>>>>>>>
>>>>>>>>>> I've written an implementation (and docs) for Bitcoin Core:
>>>>>>>>>> https://github.com/bitcoin/bitcoin/pull/25038
>>>>>>>>>>
>>>>>>>>>> (You may notice that this proposal incorporates feedback on the
>>>>>>>>>> PR - thanks Suhas Daftuar, Gregory Sanders, Bastien Teinturier, Anthony
>>>>>>>>>> Towns, and others.)
>>>>>>>>>>
>>>>>>>>>> If you are interested in using package RBF/relay to bump presigned
>>>>>>>>>> transactions, I think you may be interested in reviewing this
>>>>>>>>>> proposal.
>>>>>>>>>> This should solve Rule 3 pinning and perhaps allow us
>>>>>>>>>> to get rid of CPFP carve-out (yay!). I'm keen to hear if people
>>>>>>>>>> find
>>>>>>>>>> the 1-anchor-output, 1000vB child limit too restrictive. Also, if
>>>>>>>>>> you find a
>>>>>>>>>> pinning attack or something that makes it unusable for you, I
>>>>>>>>>> would
>>>>>>>>>> really really like to know.
>>>>>>>>>>
>>>>>>>>>> Note that transactions with nVersion=3 ("V3 transactions") are
>>>>>>>>>> currently non-standard in Bitcoin Core. That means **anything
>>>>>>>>>> that was
>>>>>>>>>> standard before this policy change would still be standard
>>>>>>>>>> afterwards.** If you don't want your transactions to be subject to
>>>>>>>>>> these rules, just continue whatever you're doing and don't use
>>>>>>>>>> nVersion=3. AFAICT this shouldn't break anything, but let me know
>>>>>>>>>> if
>>>>>>>>>> this would be disruptive for you?
>>>>>>>>>>
>>>>>>>>>> **New Policies:**
>>>>>>>>>>
>>>>>>>>>> This includes:
>>>>>>>>>> - a set of additional policy rules applying to V3 transactions
>>>>>>>>>> - modifications to package RBF rules
>>>>>>>>>>
>>>>>>>>>> **V3 transactions:**
>>>>>>>>>>
>>>>>>>>>> Existing standardness rules apply to V3 (e.g. min/max tx weight,
>>>>>>>>>> standard output types, cleanstack, etc.). The following additional
>>>>>>>>>> rules apply to V3:
>>>>>>>>>>
>>>>>>>>>> 1. A V3 transaction can be replaced, even if it does not signal
>>>>>>>>>> BIP125
>>>>>>>>>>    replaceability. (It must also meet the other RBF rules around
>>>>>>>>>> fees,
>>>>>>>>>> etc. for replacement to happen).
>>>>>>>>>>
>>>>>>>>>> 2. Any descendant of an unconfirmed V3 transaction must also be
>>>>>>>>>> V3.
>>>>>>>>>>
>>>>>>>>>> *Rationale*: Combined with Rule 1, this gives us the property of
>>>>>>>>>> "inherited" replaceability signaling when descendants of
>>>>>>>>>> unconfirmed
>>>>>>>>>> transactions are created. Additionally, checking whether a
>>>>>>>>>> transaction
>>>>>>>>>> signals replaceability this way does not require mempool
>>>>>>>>>> traversal,
>>>>>>>>>> and does not change based on what transactions are mined. It also
>>>>>>>>>> makes subsequent rules about descendant limits much easier to
>>>>>>>>>> check.
>>>>>>>>>>
>>>>>>>>>> *Note*: The descendant of a *confirmed* V3 transaction does not
>>>>>>>>>> need to be V3.
>>>>>>>>>>
>>>>>>>>>> 3. An unconfirmed V3 transaction cannot have more than 1
>>>>>>>>>> descendant.
>>>>>>>>>>
>>>>>>>>>> *Rationale*: (Upper bound) the larger the descendant limit, the
>>>>>>>>>> more
>>>>>>>>>> transactions may need to be replaced. This is a problematic
>>>>>>>>>> pinning
>>>>>>>>>> attack, i.e., a malicious counterparty prevents the transaction
>>>>>>>>>> from
>>>>>>>>>> being replaced by adding many descendant transactions that aren't
>>>>>>>>>> fee-bumping.
>>>>>>>>>>
>>>>>>>>>> (Lower bound) at least 1 descendant is required to allow CPFP of
>>>>>>>>>> the
>>>>>>>>>> presigned transaction. The contract protocol can create presigned
>>>>>>>>>> transactions paying 0 fees and 1 output for attaching a CPFP at
>>>>>>>>>> broadcast time ("anchor output"). Without package RBF, multiple
>>>>>>>>>> anchor
>>>>>>>>>> outputs would be required to allow each counterparty to fee-bump
>>>>>>>>>> any
>>>>>>>>>> presigned transaction. With package RBF, since the presigned
>>>>>>>>>> transactions can replace each other, 1 anchor output is
>>>>>>>>>> sufficient.
>>>>>>>>>>
>>>>>>>>>> 4. A V3 transaction that has an unconfirmed V3 ancestor cannot be
>>>>>>>>>>    larger than 1000 virtual bytes.
>>>>>>>>>>
>>>>>>>>>> *Rationale*: (Upper bound) the larger the descendant size limit,
>>>>>>>>>> the
>>>>>>>>>> more vbytes may need to be replaced. With default limits, if the
>>>>>>>>>> child
>>>>>>>>>> is e.g. 100,000vB, that might be an additional 100,000sats (at
>>>>>>>>>> 1sat/vbyte) or more, depending on the feerate.
>>>>>>>>>>
>>>>>>>>>> (Lower bound) the smaller this limit, the fewer UTXOs a child may
>>>>>>>>>> use
>>>>>>>>>> to fund this fee-bump. For example, only allowing the V3 child to
>>>>>>>>>> have
>>>>>>>>>> 2 inputs would require L2 protocols to manage a wallet with
>>>>>>>>>> high-value
>>>>>>>>>> UTXOs and make batched fee-bumping impossible. However, as the
>>>>>>>>>> fee-bumping child only needs to fund fees (as opposed to
>>>>>>>>>> payments),
>>>>>>>>>> just a few UTXOs should suffice.
>>>>>>>>>>
>>>>>>>>>> With a limit of 1000 virtual bytes, depending on the output
>>>>>>>>>> types, the
>>>>>>>>>> child can have 6-15 UTXOs, which should be enough to fund a
>>>>>>>>>> fee-bump
>>>>>>>>>> without requiring a carefully-managed UTXO pool. With 1000 virtual
>>>>>>>>>> bytes as the descendant limit, the cost to replace a V3
>>>>>>>>>> transaction
>>>>>>>>>> has much lower variance.
>>>>>>>>>>
>>>>>>>>>> *Rationale*: This makes the rule very easily "tacked on" to
>>>>>>>>>> existing
>>>>>>>>>> logic for policy and wallets. A transaction may be up to 100KvB
>>>>>>>>>> on its
>>>>>>>>>> own (`MAX_STANDARD_TX_WEIGHT`) and 101KvB with descendants
>>>>>>>>>> (`DEFAULT_DESCENDANT_SIZE_LIMIT_KVB`). If an existing V3
>>>>>>>>>> transaction
>>>>>>>>>> in the mempool is 100KvB, its descendant can only be 1000vB, even
>>>>>>>>>> if
>>>>>>>>>> the policy is 10KvB.
>>>>>>>>>>
>>>>>>>>>> **Package RBF modifications:**
>>>>>>>>>>
>>>>>>>>>> 1. The rule around unconfirmed inputs was
>>>>>>>>>> originally "A package may include new unconfirmed inputs, but the
>>>>>>>>>> ancestor feerate of the child must be at least as high as the
>>>>>>>>>> ancestor
>>>>>>>>>> feerates of every transaction being replaced."
>>>>>>>>>>
>>>>>>>>>> The package may still include new unconfirmed inputs. However,
>>>>>>>>>> the new rule is modified to be "The minimum between package
>>>>>>>>>> feerate
>>>>>>>>>> and ancestor feerate of the child is not lower than the individual
>>>>>>>>>> feerates of all directly conflicting transactions and the ancestor
>>>>>>>>>> feerates of all original transactions."
>>>>>>>>>>
>>>>>>>>>> *Rationale*: We are attempting to ensure that the replacement
>>>>>>>>>> transactions are not less incentive-compatible to mine. However, a
>>>>>>>>>> package/transaction's ancestor feerate is not perfectly
>>>>>>>>>> representative
>>>>>>>>>> of its incentive compatibility; it may overestimate (some subset
>>>>>>>>>> of
>>>>>>>>>> the ancestors could be included by itself if it has other
>>>>>>>>>> high-feerate
>>>>>>>>>> descendants or are themselves higher feerate than this
>>>>>>>>>> package/transaction). Instead, we use the minimum between the
>>>>>>>>>> package
>>>>>>>>>> feerate and ancestor feerate of the child as a more conservative
>>>>>>>>>> value
>>>>>>>>>> than what was proposed originally.
>>>>>>>>>>
>>>>>>>>>> 2. A new rule is added, requiring that all package transactions
>>>>>>>>>> with
>>>>>>>>>> mempool conflicts to be V3. This also means the "sponsoring"
>>>>>>>>>> child transaction must be V3.
>>>>>>>>>>
>>>>>>>>>> *Note*: Combined with the V3 rules, this means the package must be
>>>>>>>>>> a child-with-parents package. Since package validation is only
>>>>>>>>>> attempted if the transactions do not pay sufficient fees to be
>>>>>>>>>> accepted on their own, this effectively means that only V3
>>>>>>>>>> transactions can pay to replace their ancestors' conflicts, and
>>>>>>>>>> only
>>>>>>>>>> V3 transactions' replacements may be paid for by a descendant.
>>>>>>>>>>
>>>>>>>>>> *Rationale*: The fee-related rules are economically rational for
>>>>>>>>>> ancestor packages, but not necessarily other types of packages.
>>>>>>>>>> A child-with-parents package is a type of ancestor package. It
>>>>>>>>>> may be fine to allow any ancestor package, but it's more difficult
>>>>>>>>>> to account for all of the possibilities. For example, it gets much
>>>>>>>>>> harder to see that we're applying the descendant limits correctly
>>>>>>>>>> if
>>>>>>>>>> the package has a gnarly, many-generation, non-tree shape. I'm
>>>>>>>>>> also
>>>>>>>>>> not sure if this policy is 100% incentive-compatible if the
>>>>>>>>>> sponsor
>>>>>>>>>> is not a direct descendant of the sponsee.
>>>>>>>>>>
>>>>>>>>>> Please see doc/policy/version3_transactions.md and
>>>>>>>>>> doc/policy/packages.md in the PR for the full set of rules.
>>>>>>>>>>
>>>>>>>>>> **Intended usage for LN:**
>>>>>>>>>>
>>>>>>>>>> Commitment transactions should be V3 and have 1 anchor output.
>>>>>>>>>> They
>>>>>>>>>> can be signed with 0 fees (or 1sat/vbyte) once package relay is
>>>>>>>>>> deployed
>>>>>>>>>> on a significant portion of the network. If the commitment tx must
>>>>>>>>>> be broadcast, determine the desired feerate at broadcast time and
>>>>>>>>>> spend the anchor output in a high feerate transaction. I'm going
>>>>>>>>>> to
>>>>>>>>>> call the broadcasted commitment tx "the parent" and the attached
>>>>>>>>>> fee-bumping tx "the child."
>>>>>>>>>>
>>>>>>>>>> - This child must be V3.
>>>>>>>>>> - This child must be at most 1000vB. Note this restricts the
>>>>>>>>>>   number of inputs you can use to fund the fee bump. Depending
>>>>>>>>>> on the output types, this is around 6-15.
>>>>>>>>>> - One child may fund fees for multiple commitment tx ("batched
>>>>>>>>>>   fee-bumping").
>>>>>>>>>> - To do a second fee-bump to add more fees, replace the
>>>>>>>>>>   *child* with a higher-feerate tx. Do not try to attach a
>>>>>>>>>> grandchild.
>>>>>>>>>>
>>>>>>>>>> Otherwise, never try to spend from an unconfirmed V3 transaction.
>>>>>>>>>> The
>>>>>>>>>> descendant limits for V3 transactions are very restrictive.
>>>>>>>>>>
>>>>>>>>>> **Expected Questions:**
>>>>>>>>>>
>>>>>>>>>> "Does this fix Rule 3 Pinning?"
>>>>>>>>>> Yes. The V3 descendant limit restricts both you and your
>>>>>>>>>> counterparty.
>>>>>>>>>> Assuming nodes adopted this policy, you may reasonably assume
>>>>>>>>>> that you
>>>>>>>>>> only need to replace the commitment transaction + up to 1000vB.
>>>>>>>>>>
>>>>>>>>>> "Only 1 anchor output? What if I need to bump counterparty's
>>>>>>>>>> commitment tx in mempool?"
>>>>>>>>>> You won't need to fee-bump a counterparty's commitment tx using
>>>>>>>>>> CPFP.
>>>>>>>>>> You would just package RBF it by attaching a high-feerate child to
>>>>>>>>>> your commitment tx.
>>>>>>>>>>
>>>>>>>>>> "Is this a privacy issue, i.e. doesn't it allow fingerprinting LN
>>>>>>>>>> transactions based on nVersion?"
>>>>>>>>>> Indeed it may be unrealistic to assume V3 transactions will be in
>>>>>>>>>> widespread use outside of L2. IIUC, unilateral closes are already
>>>>>>>>>> obvious LN transactions because of the HTLC inputs. For e.g.
>>>>>>>>>> cooperative closes and opens, I think it makes sense to continue
>>>>>>>>>> using
>>>>>>>>>> V2. So, unless I'm missing something, this shouldn't make it
>>>>>>>>>> worse.
>>>>>>>>>>
>>>>>>>>>> "So a V3 transaction that doesn't signal BIP125 replaceability is
>>>>>>>>>> replaceable? Is that a backward compatibility issue?"
>>>>>>>>>> Yes it's replaceable. It's not an issue AFAICT because,
>>>>>>>>>> under previous policy, the V3 transaction wouldn't have been
>>>>>>>>>> in the mempool in the first place.
>>>>>>>>>>
>>>>>>>>>> "Can a V2 transaction replace a V3 transaction and vice versa?"
>>>>>>>>>> Yes, otherwise someone can use V3 transactions to censor V2
>>>>>>>>>> transactions spending shared inputs. Note if the
>>>>>>>>>> original V3 transaction has an unconfirmed V3 parent, this would
>>>>>>>>>> violate the "inherited V3" rule and would be rejected.
>>>>>>>>>>
>>>>>>>>>> Thanks for reading! Feedback and review would be much appreciated.
>>>>>>>>>>
>>>>>>>>>> [1]:
>>>>>>>>>> https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2021-September/019464.html
>>>>>>>>>> [2]:
>>>>>>>>>> https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-January/019817.html
>>>>>>>>>>
>>>>>>>>>> Best,
>>>>>>>>>> Gloria
>>>>>>>>>> _______________________________________________
>>>>>>>>>> bitcoin-dev mailing list
>>>>>>>>>> [email-masked]
>>>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>>>
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