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

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

[Gloria Zhao]

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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

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

[Greg Sanders]

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Hello Gloria,

Great work on synthesizing so much feedback into a proposal like this!

Death to carve-out rule.

I'd like to elaborate on some caveats and give a few incomplete thoughts.

There are basically two types of pinning in my estimation today:

1) rule#3 pinning: Make it uneconomical to replace whatever is in mempool
via large in size but low feerate junk that won't get mined anytime soon.
Replacing this with feerate-based policy seems apt, but fraught with DoS
risks.

2) package limit pinning: disallowing transaction propagation by package
limits being hit: size, ancestor count, descendant count. Today it is
mitigated by having all outputs be 1 csv timelocked, and having up to 2
anchor outputs(1 without carve-out rule).

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.

> "Does this fix Rule 3 Pinning?"

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. Due to this pinning attack there aren't many(?) deployed schemes
that use the signature type.

To mitigate this we would likely have to opt into a more complex policy
scheme, committing in the annex to "total mempool package weight", which
would allow mempool package limits to be picked at signing time.

Maybe ANYONECANPAY isn't a very useful paradigm in general, I cannot speak
to that, but it came up in eltoo-related designs using BIP118, which adopts
ACP-like signing behavior. This can be mitigated via straight forward
policy updates as well for BIP118 deployment, but off topic so will leave
it there.

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.

> "Can a V2 transaction replace a V3 transaction and vice versa?"

Circling back to my ACP point, this regime still allows pinning anytime you
are sharing a transaction with someone else where you don't have control
over *all* the inputs. So anytime you are doing a coinjoin-like
transaction, someone else's inputs can be self-double-spent, requiring you
to satisfy rule#3 when replacing theirs, if they're bip125-signaling. If
they're not bip125 signaling, you'll have to somehow detect this and/or
double-spend your input back to yourself.


Finally, a couple suggestions I've already made elsewhere:

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
do think that any L2 uptake of these new rules will take significant
time... maybe we should be a bit more ambitious?

Cheers,
Greg

On Fri, Sep 23, 2022 at 11:27 AM Gloria Zhao via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:

> 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
> bitcoin-dev@lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

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

[Antoine Riard]

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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 <
bitcoin-dev@lists.linuxfoundation.org> 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
> bitcoin-dev@lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

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

[Bastien TEINTURIER]

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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 <
bitcoin-dev@lists.linuxfoundation.org> 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 <
> bitcoin-dev@lists.linuxfoundation.org> 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
>> bitcoin-dev@lists.linuxfoundation.org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>

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

[Greg Sanders]

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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 <
bitcoin-dev@lists.linuxfoundation.org> 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 <
> bitcoin-dev@lists.linuxfoundation.org> 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 <
>> bitcoin-dev@lists.linuxfoundation.org> 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
>>> bitcoin-dev@lists.linuxfoundation.org
>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>
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Re: [bitcoin-dev] New transaction policies (nVersion=3) for contracting protocols

[Gloria Zhao]

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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 <gsanders87@gmail.com> 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 <
> bitcoin-dev@lists.linuxfoundation.org> 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 <
>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>> bitcoin-dev@lists.linuxfoundation.org
>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>
>>> _______________________________________________
>>> bitcoin-dev mailing list
>>> bitcoin-dev@lists.linuxfoundation.org
>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>
>> _______________________________________________
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>>
>

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

[Bastien TEINTURIER]

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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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com> 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 <
>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>
>>>> _______________________________________________
>>>> bitcoin-dev mailing list
>>>> bitcoin-dev@lists.linuxfoundation.org
>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>
>>> _______________________________________________
>>> bitcoin-dev mailing list
>>> bitcoin-dev@lists.linuxfoundation.org
>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>
>>

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

[Greg Sanders]

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> 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 <bastien@acinq.fr> 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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com>
>> 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 <
>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>
>>>>> _______________________________________________
>>>>> bitcoin-dev mailing list
>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>
>>>> _______________________________________________
>>>> bitcoin-dev mailing list
>>>> bitcoin-dev@lists.linuxfoundation.org
>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>
>>>

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

[Ruben Somsen]

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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 <
bitcoin-dev@lists.linuxfoundation.org> 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 <bastien@acinq.fr>
> 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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com>
>>> 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 <
>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>
>>>>>> _______________________________________________
>>>>>> bitcoin-dev mailing list
>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>
>>>>> _______________________________________________
>>>>> bitcoin-dev mailing list
>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>
>>>> _______________________________________________
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Re: [bitcoin-dev] New transaction policies (nVersion=3) for contracting protocols

[Bastien TEINTURIER]

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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 <rsomsen@gmail.com> 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 <
> bitcoin-dev@lists.linuxfoundation.org> 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 <bastien@acinq.fr>
>> 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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com>
>>>> 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 <
>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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
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Re: [bitcoin-dev] New transaction policies (nVersion=3) for contracting protocols

[Greg Sanders]

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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 <bastien@acinq.fr> 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 <rsomsen@gmail.com> 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 <
>> bitcoin-dev@lists.linuxfoundation.org> 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 <bastien@acinq.fr>
>>> 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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com>
>>>>> 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 <
>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>>
>>>>>>>> _______________________________________________
>>>>>>>> bitcoin-dev mailing list
>>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>
>>>>>>> _______________________________________________
>>>>>>> bitcoin-dev mailing list
>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>
>>>>>> _______________________________________________
>>> bitcoin-dev mailing list
>>> bitcoin-dev@lists.linuxfoundation.org
>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>
>>

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

[Ruben Somsen]

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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 <gsanders87@gmail.com> 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 <bastien@acinq.fr> 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 <rsomsen@gmail.com> 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 <
>>> bitcoin-dev@lists.linuxfoundation.org> 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 <bastien@acinq.fr>
>>>> 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 <gloriajzhao@gmail.com> 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 <gsanders87@gmail.com>
>>>>>> 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 <
>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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 <
>>>>>>>>> bitcoin-dev@lists.linuxfoundation.org> 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
>>>>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>>>
>>>>>>>>> _______________________________________________
>>>>>>>>> bitcoin-dev mailing list
>>>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>>
>>>>>>>> _______________________________________________
>>>>>>>> bitcoin-dev mailing list
>>>>>>>> bitcoin-dev@lists.linuxfoundation.org
>>>>>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>>>>>
>>>>>>> _______________________________________________
>>>> bitcoin-dev mailing list
>>>> bitcoin-dev@lists.linuxfoundation.org
>>>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>>>
>>>

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

[Greg Sanders]

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>> "Can a V2 transaction replace a V3 transaction and vice versa?"

> Circling back to my ACP point, this regime still allows pinning anytime
you are sharing a transaction with someone else where you don't have
control over *all* the inputs. So anytime you are doing a coinjoin-like
transaction, someone else's inputs can be self-double-spent, requiring you
to satisfy rule#3 when replacing theirs, if they're bip125-signaling. If
they're not bip125 signaling, you'll have to somehow detect this and/or
double-spend your input back to yourself.

Talking with someone offline I realized we can un-pin coinjoins with V3
which I previously thought untenable. You "just" have to stage all utxos
that are going to be mixed in separately into a timelocked utxo that is
immediately spendable by all joining parties(or the person and the coinjoin
coordinator who is trusted to not pin, they're taking fees usually
anyways). Then once all utxos for a mix are staged, continue the coinjoin
as before with V3. You only need a timelock long enough to stop pinning;
not very long. If you do 2-of-2 with a coordinator, you can start the join
whenever you think you have enough utxos staged. If using coordinator
model, you can then do this in a chained fashion, doing mix after mix, with
only one utxo setup step.

Seems really obvious in retrospect, with the downside of one additional tx
per mixing participant and less composability with other protocols.

Just thought it important to point out in public, in lieu of a "real" fix
like replace by feerate which hasn't been designed yet.

Cheers,
Greg

On Fri, Sep 23, 2022 at 2:48 PM Greg Sanders <gsanders87@gmail.com> wrote:

> Hello Gloria,
>
> Great work on synthesizing so much feedback into a proposal like this!
>
> Death to carve-out rule.
>
> I'd like to elaborate on some caveats and give a few incomplete thoughts.
>
> There are basically two types of pinning in my estimation today:
>
> 1) rule#3 pinning: Make it uneconomical to replace whatever is in mempool
> via large in size but low feerate junk that won't get mined anytime soon.
> Replacing this with feerate-based policy seems apt, but fraught with DoS
> risks.
>
> 2) package limit pinning: disallowing transaction propagation by package
> limits being hit: size, ancestor count, descendant count. Today it is
> mitigated by having all outputs be 1 csv timelocked, and having up to 2
> anchor outputs(1 without carve-out rule).
>
> 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.
>
> > "Does this fix Rule 3 Pinning?"
>
> 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. Due to this pinning attack there aren't many(?) deployed schemes
> that use the signature type.
>
> To mitigate this we would likely have to opt into a more complex policy
> scheme, committing in the annex to "total mempool package weight", which
> would allow mempool package limits to be picked at signing time.
>
> Maybe ANYONECANPAY isn't a very useful paradigm in general, I cannot speak
> to that, but it came up in eltoo-related designs using BIP118, which adopts
> ACP-like signing behavior. This can be mitigated via straight forward
> policy updates as well for BIP118 deployment, but off topic so will leave
> it there.
>
> 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.
>
> > "Can a V2 transaction replace a V3 transaction and vice versa?"
>
> Circling back to my ACP point, this regime still allows pinning anytime
> you are sharing a transaction with someone else where you don't have
> control over *all* the inputs. So anytime you are doing a coinjoin-like
> transaction, someone else's inputs can be self-double-spent, requiring you
> to satisfy rule#3 when replacing theirs, if they're bip125-signaling. If
> they're not bip125 signaling, you'll have to somehow detect this and/or
> double-spend your input back to yourself.
>
>
> Finally, a couple suggestions I've already made elsewhere:
>
> 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 do think that any L2 uptake of these new rules will take
> significant time... maybe we should be a bit more ambitious?
>
> Cheers,
> Greg
>
> On Fri, Sep 23, 2022 at 11:27 AM Gloria Zhao via bitcoin-dev <
> bitcoin-dev@lists.linuxfoundation.org> wrote:
>
>> 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
>> bitcoin-dev@lists.linuxfoundation.org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>
>

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