[Bitcoin-development] replace-by-fee v0.10.0rc4

[Peter Todd <pete@petertodd.org>]

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My replace-by-fee patch is now available for the v0.10.0rc4 release:

    https://github.com/petertodd/bitcoin/tree/replace-by-fee-v0.10.0rc4

Along with demo scripts of the functionality:

    https://github.com/petertodd/replace-by-fee-tools

New to this version is a comprehensive set of unittests under
qa/replace-by-fee

Additionally the preferential peering support now preferentially peers
with Bitcoin XT¹ nodes that support Andresen/Harding's double-spend
relaying² patch. While Bitcoin XT nodes don't accept double-spends into
their mempool, they do relay them perfectly well and thus are an asset
to those doing replace-by-fee mining.³

I've had a number of requests from miners for a version of
replace-by-fee against Luke-Jr's Eligius patches⁴; I'll be also
releasing that shortly once this release has undergone some more
testing.


What's replace-by-fee?
----------------------

Currently most Bitcoin nodes accept the first transaction they see
spending an output to the mempool; all later transactions are rejected.
Replace-by-fee changes this behavior to accept the transaction paying
the highest fee, both absolutely, and in terms of fee-per-KB. Replaced
children are also considered - a chain of transactions is only replaced
if the replacement has a higher fee than the sum of all replaced
transactions.

Doing this aligns standard node behavior with miner incentives: earn the
most amount of money per block. It also makes for a more efficient
transaction fee marketplace, as transactions that are "stuck" due to bad
fee estimates can be "unstuck" by double-spending them with higher
paying versions of themselves. With scorched-earth techniques⁵ it gives
a path to making zeroconf transactions economically secure by relying on
economic incentives, rather than "honesty" and alturism, in the same way
Bitcoin mining itself relies on incentives rather than "honesty" and
alturism.

Finally for miners adopting replace-by-fee avoids the development of an
ecosystem that relies heavily on large miners punishing smaller ones for
misbehavior, as seen in Harding's proposal⁶ that miners collectively 51%
attack miners who include doublespends in their blocks - an unavoidable
consequence of imperfect p2p networking in a decentralized system - or
even Hearn's proposal⁷ that a majority of miners be able to vote to
confiscate the earnings of the minority and redistribute them at will.


Installation
------------

Once you've compiled the replace-by-fee-v0.10.0rc4 branch just run your
node normally. With -debug logging enabled, you'll see messages like the
following in your ~/.bitcoin/debug.log indicating your node is replacing
transactions with higher-fee paying double-spends:

    2015-02-12 05:45:20 replacing tx ca07cc2a5eaf55ab13be7ed7d7526cb9d303086f116127608e455122263f93ea with c23973c08d71cdadf3a47bae45566053d364e77d21747ae7a1b66bf1dffe80ea for 0.00798 BTC additional fees, -1033 delta bytes

Additionally you can tell if you are connected to other replace-by-fee
nodes, or Bitcoin XT nodes, by examining the service bits advertised by
your peers:

    $ bitcoin-cli getpeerinfo | grep services | egrep '((0000000000000003)|(0000000004000001))'
            "services" : "0000000000000003",
            "services" : "0000000004000001",
            "services" : "0000000004000001",
            "services" : "0000000000000003",
            "services" : "0000000004000001",
            "services" : "0000000004000001",
            "services" : "0000000000000003",
            "services" : "0000000000000003",

Replace-by-fee nodes advertise service bit 26 from the experimental use
range; Bitcoin XT nodes advertise service bit 1 for their getutxos
support. The code sets aside a certain number of outgoing and incoming
slots just for double-spend relaying nodes, so as long as everything is
working you're node should be connected to like-minded nodes a within 30
minutes or so of starting up.

If you *don't* want to advertise the fact that you are running a
replace-by-fee node, just checkout a slightly earlier commit in git; the
actual mempool changes are separate from the preferential peering
commits. You can then connect directly to a replace-by-fee node using
the -addnode command line flag.

1) https://github.com/bitcoinxt/bitcoinxt
2) https://github.com/bitcoin/bitcoin/pull/3883
3) https://github.com/bitcoin/bitcoin/pull/3883#issuecomment-45543370
4) https://github.com/luke-jr/bitcoin/tree/0.10.x-ljrP
5) http://www.mail-archive.com/bitcoin-development%40lists.sourceforge.net/msg05211.html
6) http://www.mail-archive.com/bitcoin-development@lists.sourceforge.net/msg06970.html
7) http://www.mail-archive.com/bitcoin-development%40lists.sourceforge.net/msg04972.html

-- 
'peter'[:-1]@petertodd.org
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