From: Isaac Eiter <eiter.isaac@gmail.com>
To: Bitcoin Error Log <bitcoinerrorlog@gmail.com>
Cc: Bitcoin Development Mailing List <bitcoindev@googlegroups.com>
Subject: Re: [bitcoindev] Draft BIP for User-Defined Transaction Flags Policy & Strategy
Date: Sun, 14 Apr 2024 15:12:13 -0500 [thread overview]
Message-ID: <CAEQht-vBi65qfj1gNp7m1vBk+9C_2WDwSurni=FTmxdAT_Cbgw@mail.gmail.com> (raw)
In-Reply-To: <cc812488-9da0-4595-be3b-bcfd7ab41106n@googlegroups.com>
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"Example: Retailers or service providers accepting Bitcoin in a
face-to-face setting need transactions to be final immediately to prevent
fraud." - Transactions can't be final until included in a block. Pretending
that adding a flag to the transaction makes it "final" is going to give a
false sense of security for those accepting 0-conf transactions. On-chain
point-of-sale payments will never be economically feasible in a bitcoinized
world. And if the point-of-sale payment is large enough to justify using
on-chain, then it's also worth waiting to see it in a block.
"Automated payments for services" - If you are using recurring payments,
time isn't of the essence. The guarantee of a "DNR" is pointless, there's
no reason to rely on a transaction flag instead of waiting for confirmation
via presence in a block.
"DNR potentially improves next block fee competition" - I'm not sure this
solves a real problem.
On Sun, Apr 14, 2024 at 10:16 AM Bitcoin Error Log <
bitcoinerrorlog@gmail.com> wrote:
> *Posted here:*
> https://github.com/BitcoinAndLightningLayerSpecs/balls/blob/main/balls-00138.md
>
> *Full text here:*
>
> BIP: XXXX
> 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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next prev parent reply other threads:[~2024-04-15 18:01 UTC|newest]
Thread overview: 5+ messages / expand[flat|nested] mbox.gz Atom feed top
2024-04-14 15:09 [bitcoindev] Draft BIP for User-Defined Transaction Flags Policy & Strategy Bitcoin Error Log
2024-04-14 15:51 ` Peter Todd
2024-04-14 20:12 ` Isaac Eiter [this message]
2024-04-15 18:58 ` Keagan McClelland
2024-04-16 2:01 ` Antoine Riard
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