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From: Antoine Riard <antoine.riard@gmail•com>
To: Bitcoin Development Mailing List <>
Subject: Re: [bitcoindev] Draft BIP for User-Defined Transaction Flags Policy & Strategy
Date: Mon, 15 Apr 2024 19:01:04 -0700 (PDT)	[thread overview]
Message-ID: <> (raw)
In-Reply-To: <>

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Hi John,

Few years ago, while discussing mitigations for mempool pinning at the 
commitment and second-stage transaction-level, we went to consider 
deploying new transaction-relay infrastructure directly connecting 
Lightning nodes and miners mempools over LN gossips [0]. This idea was 
disregarded, as you're introducing miners / Lightning nodes incentives 
misalignment (quid if your LSP who is your channel counterparty drops your 
gossip with a HTLC-preimage transaction within). Additionally, mempool 
partitioning in the miners mempools can be always tried by your 
counterparty with another commitment transaction.

However, one should note that since then privileged transaction-relay API 
for Bitcoin applications with time-sensitive traffic requirements have 
become more frequent with the "so-branded" transaction accelerators, where 
the inclusion of a boosted transaction is only relying on the reputation of 
mining pools. With seeing more private / staged transaction-relay API or 
protocols, there is indeed a concern of loosing the notion of a common 
blockspace market feerate that can be estimated by all full-nodes operators.

On delegating policy-choice to the transaction-issuer themselves, I did 
myself an experiment "transaction-issuer selected policy limits" (e.g 
selecting the max standard tx weight that is accepted for a transaction 
version) [1]. The signaling opt-in mechanism was hacked in the nSequence 
field, which I found a bit gross and they are issues with this approach.

Finally, I would observe that still today's mainstream Internet packets 
(IPv4 - RFC 794) fields have a defined meaning (e.g type of service with 
priorities) even if they're not often respected by ISPs due to local BGP 
routing policy. In practice, I think any user-defined transaction flags 
proposal like that relies on respecting the finality or dynamic transaction 
size limits shall come with a security model relying on miners economic 
incentives to have the flag semantics validated.


Le lundi 15 avril 2024 à 23:00:59 UTC+1, Keagan McClelland a écrit :

> Gaming this out a few iterations, I'm pretty sure a widely deployed DNR 
> policy will result in a proliferation of direct-to-miner transaction 
> submissions and will result in less network-wide visibility of the 
> transaction set that is staged for confirmation. At first it seems 
> reasonable to assume that users can help block the propagation of a 
> hypothetical DNR replacement, but the miners ultimately are unlikely to 
> make this choice in practice. The only argument you can fall back on here 
> is that Miners openly defying user desires will ultimately result in 
> stagnant or negative BTC growth which is bad for their long term, but I 
> think that argument is pretty weak in this context.
> Relying on DNR type behavior in applications will definitely be insecure, 
> but I think fighting to do it anyway has even more distortion effects that 
> we are unlikely to want in the long run.
> Keags
> On Sun, Apr 14, 2024 at 9:16 AM Bitcoin Error Log <bitcoin...@gmail•com> 
> wrote:
>> *Posted here:* 
>> *Full text here:*
>> Title: User-Defined Transaction Flags Policy & Strategy
>> Author: John Carvalho
>> Type: Standards Track
>> Created: Apr 15, 2024
>> Status: Draft 
>> Abstract
>> This BIP introduces a utility-optimized strategy for Bitcoin mempool 
>> policy with new transaction signaling mechanisms, including Do-Not-Replace 
>> (DNR) and Replace-by-Fee (RBF), to enhance control over transaction 
>> handling and improve the network's economic efficiency. 
>> Motivation
>> Enhancing user autonomy and network efficiency through precise, 
>> user-defined transaction signals that integrate seamlessly with Bitcoin's 
>> decentralized nature and existing economic models. 
>> Specification Transaction Signals
>>    - 
>>    Do-Not-Replace (DNR): Ensures transactions are not replaced once 
>>    broadcast. This flag is encoded using a specific bit in the transaction’s 
>>    version field, similar to RBF, but with inverse logic.
>>    - 
>>    Replace-by-Fee (RBF): Allows the sender to signal that the 
>>    transaction may be replaced by another transaction with a higher fee. This 
>>    mechanism is used to increase the likelihood of a transaction being picked 
>>    up by miners in conditions of high network congestion, ensuring timely 
>>    processing. 
>> Encoding
>> The new flag signal, DNR, could be encoded similarly to existing RBF 
>> flags, with complementary mempool handling and conflict-resolution logic 
>> for default local enforcement.
>> Rationale
>> Addresses the need for predictable transaction handling while respecting 
>> the decentralized, incentive-driven nature of network participants.
>> Note: This proposal only discusses subjective, arbitrary mempool policy 
>> and handling. It is assumed that any local policy that enforces preferred 
>> hardware limits is out of scope and remains separately necessary. 
>> Strategic Options for Mempool Evolution
>> There are three strategic options for evolving the Bitcoin mempool 
>> management, where only one should be optimized:
>>    - 
>>    User-defined (The ideal, optimistic option): This approach involves 
>>    creating and default-obeying various transaction flags like RBF and DNR to 
>>    facilitate specific goals of transactors. The primary tradeoff is that 
>>    these flags are suggestions and can be overridden by miners, which means 
>>    they are not enforceable but serve as strong hints to improve transaction 
>>    predictability and network efficiency.
>>    - 
>>    - 
>>    Node-defined (The chaotic, centralizing option): This strategy would 
>>    encourage third-party mempool providers to implement their subjective 
>>    preferences on transaction facilitation. The significant tradeoff here is 
>>    the potential fracturing of the mempool and private, mining-pool-centric 
>>    inclusion requirements, which could lead to increased centralization and 
>>    censorship.
>>    - 
>>    - 
>>    Miner-defined (The rational, pessimistic option): The final strategy 
>>    involves removing all policies and flags, allowing miners to decide based 
>>    on transaction fees or other out-of-band terms. This approach simplifies 
>>    the network at the cost of significantly reducing the utility for users who 
>>    may need special handling for their transactions. 
>> Arguments for User-Definition
>> Option 1 is favored here because it provides a balanced approach that 
>> enhances user experience and network functionality without overly 
>> complicating the Bitcoin protocol or risking centralization. By 
>> standardizing flags that indicate user preferences, we can achieve greater 
>> harmony and utility within the Bitcoin network, supporting diverse user 
>> needs while maintaining decentralization. 
>> More importantly, we may be able to prevent mempool fragmentation and 
>> privatization to miners and pools for direct transaction inclusion by 
>> intentionally supporting flags that better compete and match transaction 
>> use cases within the open mempool network instead of censoring them 
>> arbitrarily.
>> Economic Implications
>> The introduction of these signals could influence transaction fee markets 
>> and network congestion patterns:
>>    - 
>>    DNR potentially improves next-block fee competition and improves 
>>    network throughput by providing clearer signals about transaction 
>>    permanence and relevance.
>>    - 
>>    RBF allows for dynamic fee adjustments that can enhance the certainty 
>>    of transaction confirmations during peak times, benefiting users who need 
>>    timely processing. 
>> Do-Not-Replace (DNR) Use Cases
>> DNR is valuable in scenarios where transaction finality is crucial upon 
>> submission, without the risk of later alterations due to increased fees. 
>> Here are some specific use cases: 
>>    - 
>>    Point-of-Sale Transactions:
>>    - 
>>       Example: Retailers or service providers accepting Bitcoin in a 
>>       face-to-face setting need transactions to be final immediately to prevent 
>>       fraud.
>>       - 
>>       Usage: By using the DNR flag, merchants can ensure that once a 
>>       transaction is broadcast, it cannot be replaced, thereby securing the 
>>       payment process at the point of sale.
>>       - 
>>    Wage Payments:
>>    - 
>>       Example: Employers paying salaries in Bitcoin require certainty 
>>       that the transaction amounts cannot be altered once sent.
>>       - 
>>       Usage: DNR provides employers the confidence to execute payroll 
>>       transactions knowing that the payments cannot be replaced or canceled, 
>>       ensuring employees receive the exact intended amounts.
>>       - 
>>    Automated Payments for Services:
>>    - 
>>       Example: Subscription services where automated payments are 
>>       scheduled and should not be subject to change once initiated.
>>       - 
>>       Usage: DNR can be applied to ensure that automated recurring 
>>       payments are processed without the risk of being replaced, thus simplifying 
>>       financial planning and contract enforcement. 
>> Replace-by-Fee (RBF) Use Cases
>> RBF is essential for transactions where timing and confirmation speed are 
>> more critical than the immediacy of finality. Here are applicable scenarios:
>>    - 
>>    High-Frequency Trading:
>>    - 
>>       Example: Traders on cryptocurrency exchanges who need to rapidly 
>>       adjust their positions based on market conditions.
>>       - 
>>       Usage: RBF allows traders to increase the fee on a transaction if 
>>       it's not getting confirmed quickly enough, enabling them to ensure timely 
>>       executions in response to market movements.
>>       - 
>>    Emergency Service Payments:
>>    - 
>>       Example: Payments for time-sensitive services, such as premium 
>>       fast delivery or emergency technical services.
>>       - 
>>       Usage: When quick service delivery is critical, RBF enables the 
>>       sender to increase the transaction fee to speed up the confirmation 
>>       process, ensuring that the transaction is prioritized by miners.
>>       - 
>>    Bidding in Auctions:
>>    - 
>>       Example: Participants in online auctions who need to ensure their 
>>       payments go through before the auction closes.
>>       - 
>>       Usage: Auction participants can use RBF to adjust their 
>>       transaction fees to outpace other transactions in times of network 
>>       congestion, securing their winning bids.
>>       - 
>>    Dynamic Fee Management for Wallets:
>>    - 
>>       Example: Users sending non-urgent transactions who want to 
>>       minimize fees but are willing to increase them if network conditions change.
>>       - 
>>       Usage: RBF provides flexibility, allowing users to start with a 
>>       lower fee and only increase it if the transaction confirmation is delayed, 
>>       optimizing their transaction fee expenditures. 
>> Adoption and Transition Strategy & Requirements
>> It is implicit, until now, that within this strategy is a requirement for 
>> Core and other implementations to abandon strategies within Option 2, by 
>> specifically removing and rejecting policy tools like mempoolfullrbf, or 
>> other attempts to overrule, filter, or otherwise filter and hamper the 
>> propagation of valid, non-destructive transactions.
>> This proposal is presented to the community for feedback, focusing on 
>> gathering input from wallet developers, miners, and node operators to 
>> ensure broad support and understanding of the benefits and implications of 
>> these new transaction signals.
>> -- 
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      reply	other threads:[~2024-04-16 13:16 UTC|newest]

Thread overview: 5+ messages / expand[flat|nested]  mbox.gz  Atom feed  top
2024-04-14 15:09 Bitcoin Error Log
2024-04-14 15:51 ` Peter Todd
2024-04-14 20:12 ` Isaac Eiter
2024-04-15 18:58 ` Keagan McClelland
2024-04-16  2:01   ` Antoine Riard [this message]

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