Hi Greg,

Thank you very much for sharing your proposal!

I think there's one thing about the second part of your proposal that I'm missing. Specifically, assuming the scenario of a v3 transaction with three outputs, A, B, and the ephemeral anchor OP_TRUE. If a child transaction spends A and OP_TRUE, does that effectively mark output B as unspendable once the child gets confirmed? If so, isn't the implication therefore that to safely spend a transaction with an ephemeral anchor, all outputs must be spent? Thanks!

Best,
Arik

On Tue, Oct 18, 2022, at 6:52 AM, Greg Sanders via bitcoin-dev wrote:
> Hello Everyone,
> 
> 
> Following up on the "V3 Transaction" discussion here https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-September/020937.html , I would like to elaborate a bit further on some potential follow-on work that would make pinning severely constrained in many setups].
> 
> 
> V3 transactions may solve bip125 rule#3 and rule#5 pinning attacks under some constraints[0]. This means that when a replacement is to be made and propagated, it costs the expected amount of fees to do so. This is a great start. What's left in this subset of pinning is *package limit* pinning. In other words, a fee-paying transaction cannot enter the mempool due to the existing mempool package it is being added to already being too large in count or vsize.
> 
> 
> Zooming into the V3 simplified scenario for sake of discussion, though this problem exists in general today:
> 
> 
> V3 transactions restrict the package limit of a V3 package to one parent and one child. If the parent transaction includes two outputs which can be immediately spent by separate parties, this allows one party to disallow a spend from the other. In Gloria's proposal for ln-penalty, this is worked around by reducing the number of anchors per commitment transaction to 1, and each version of the commitment transaction has a unique party's key on it. The honest participant can spend their version with their anchor and package RBF the other commitment transaction safely.
> 
> 
> What if there's only one version of the commitment transaction, such as in other protocols like duplex payment channels, eltoo? What about multi party payments?
> 
> 
> In the package RBF proposal, if the parent transaction is identical to an existing transaction in the mempool, the parent will be detected and removed from the package proposal. You are then left with a single V3 child transaction, which is then proposed for entry into the mempool. In the case of another parent output already being spent, this is simply rejected, regardless of feerate of the new child.
> 
> 
> I have two proposed solutions, of which I strongly prefer the latter:
> 
> 
> 1) Expand a carveout for "sibling eviction", where if the new child is paying "enough" to bump spends from the same parent, it knocks its sibling out of the mempool and takes the one child slot. This would solve it, but is a new eviction paradigm that would need to be carefully worked through.
> 
> 
> 2) Ephemeral Anchors (my real policy-only proposal)
> 
> 
> Ephemeral Anchors is a term which means an output is watermarked as an output that MUST be spent in a V3 package. We mark this anchor by being the bare script `OP_TRUE` and of course make these outputs standard to relay and spend with empty witness data.
> 
> 
> Also as a simplifying assumption, we require the parent transaction with such an output to be 0-fee. This makes mempool reasoning simpler in case the child-spend is somehow evicted, guaranteeing the parent will be as well.
> 
> 
> Implications:
> 
> 
> a) If the ephemeral anchor MUST be spent, we can allow *any* value, even dust, even 0, without worrying about bloating the utxo set. We relax this policy for maximum smart contract flexibility and specification simplicity..
> 
> 
> b) Since this anchor MUST be spent, any spending of other outputs in the same parent transaction MUST directly double-spend prior spends of the ephemeral anchor. This causes the 1 block CSV timelock on outputs to be removed in these situations. This greatly magnifies composability of smart contracts, as now we can do things like safely splice directly into new channels, into statechains, your custodial wallet account, your cold wallet, wherever, without requiring other wallets to support arbitrary scripts. Also it hurts that 1 CSV time locked scripts may not be miniscript compatible to begin with...
> 
> 
> c) *Anyone* can bump the transaction, without any transaction key material. This is essentially achieving Jeremy's Transaction Sponsors (https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2020-September/018168.html) proposal without consensus changes. As long as someone gets a fully signed parent, they can execute a bump with minimal wallet tooling. If a transaction author doesn’t want a “sponsor”, do not include the output.
> 
> 
> d) Lightning Carve-out(https://lists.linuxfoundation.org/pipermail/lightning-dev/2019-October/002240.html)  is superseded by this logic, as we are not restricted to two immediately spendable output scenarios. In its place, robust multi-party fee bumping is possible.
> 
> 
> e) This also benefits more traditional wallet scenarios, as change outputs can no longer be pinned, and RBF/CPFP becomes robust. Payees in simple spends cannot pin you. Batched payouts become a lot less painful. This was one of the motivating use cases that created the term “pinning” in the first place(https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2018-February/015717.html), even if LN/L2 discussion has largely overtaken it due to HTLC theft risks.
> 
> 
> Open Question(s):
> 
> 
>  1. If we allow non-zero value in ephemeral outputs, does this open up a MEV we are worried about? Wallets should toss all the value directly to fees, and add their own additional fees on top, otherwise miners have incentive to make the smallest utxo burn transaction to claim those funds. They just confirmed your parent transaction anyways, so do we care?
> 
>  2. SIGHASH_GROUP like constructs would allow uncommitted ephemeral anchors to be added at spend time, depending on spending requirements. SIGHASH_SINGLE already allows this.
> 
> 
> 
> 
> Hopefully this gives people something to consider as we move forward in thinking about mempool design within the constraints we have today.
> 
> 
> 
> Greg
> 
> 
> 0: With V3 transactions where you have "veto power" over all the inputs in that transaction. Therefore something like ANYONECANPAY is still broken. We need a more complex solution, which I’m punting for the sake of progress.
> 
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