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Sender: Mike Hearn <mh.in.england@gmail.com>
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From: Mike Hearn <mike@plan99.net>
In-Reply-To: <l7f97u$jdg$1@ger.gmane.org>
Date: Sun, 1 Dec 2013 14:41:52 +0100
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	<l7f97u$jdg$1@ger.gmane.org>
To: Andreas Schildbach <andreas@schildbach.de>
Cc: bitcoin-development@lists.sourceforge.net
Subject: Re: [Bitcoin-development] Floating fees and SPV clients
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> As long as the tx is not confirmed (by a broadcast), apps can offer to
> bump up the fee a little bit.

Unfortunately there are risks to that approach.=20

The most obvious one is that nodes could keep sending reject messages to =
get wallets to attach ridiculously high fees. If half a wallets peers do =
this and the other half don=92t, then effectively the wallet will double =
spend against itself. The bad nodes can keep the fat transaction and =
send it directly to a corrupt miner, no broadcast. If some other miner =
includes the original normal transaction, no problem, just take it out =
of the current block. If the corrupt miner finds the current block, they =
get to claim huge fee premiums.

Quite apart from the problem of malicious nodes/miners, how would you =
represent this in the wallet GUI? Current wallets are designed on the =
assumption that 1 payment =3D=3D 1 transaction =3D=3D 1 paid fee. If a =
single payment could have several different fees, and there=92s no way =
to know which you will actually pay until later, then complexity would =
explode. Even the notion of balance would become even more complicated =
than it already is.

So I really don=92t like the idea of creating different transactions =
depending on error messages from remote nodes. The only time when it =
could make sense is if *all* nodes reject a transaction. Then (assuming =
no MITM) you can assume the first transaction can be thrown away and a =
new attempt made.

But if you think about what the UI flows for that would look like - it=92s=
 just a mess.

There are other risks to fee estimation. Let=92s say wallet authors =
create transactions with exactly the estimated fee needed to get into =
the next block. But due to mempool skew, estimates vary, and so those =
transactions don=92t propagate cleanly everywhere. Now we have two =
problems:

1) Unpredictable failure to enter the mempools can lead to double =
spending and slow confirmations

2) Wallet authors may be tempted to ensure that doesn=92t happen by =
taking the estimate, adding 10% and using that. But then if a bunch of =
popular wallets all do the same thing, the estimation algorithm might =
get confused and decide that as everyone seems to be attaching a fee of =
X+10%, the correct estimate for what fee to attach is X+10%. Then =
wallets would immediate raise their attached fees again and you=92d =
enter into a infinite upward spiral.

The more I think about this, the more complicated it gets.

It=92s tempting to try and just push all the complexity onto the =
merchant side, but one of the best things about Bitcoin is there isn=92t =
any strong notion of =93merchant=94 - that=92s inherent to being peer to =
peer. So just hand-waving and saying sellers will deal with complicated =
fee processes is just a punt.


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