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From: Gloria Zhao <gloriajzhao@gmail.com>
Date: Mon, 26 Sep 2022 17:47:49 +0100
Message-ID: <CAFXO6=JGBPVpxTJnSMWCCZVPHZW_RyWQ2Cv18Ao_F=uQx3LVkg@mail.gmail.com>
To: Greg Sanders <gsanders87@gmail.com>
Content-Type: multipart/alternative; boundary="0000000000006503c005e9974ad1"
Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>
Subject: Re: [bitcoin-dev] New transaction policies (nVersion=3) for
 contracting protocols
Precedence: list

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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 commitmen=
t
>> 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 valu=
e
>> has
>> > to be "sapped" from contract participants to make an anchor output.
>> There's
>> > more complications for this, such as making sure the parent transactio=
n
>> is
>> > dropped if the child spend is dropped, but maybe it's worth the squeez=
e.
>>
>> 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 th=
e
>> 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 =C3=A0 03:22, Antoine Riard via bitcoin-dev <
>> bitcoin-dev@lists.linuxfoundation.org> a =C3=A9crit :
>>
>>> 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 transactio=
n.
>>>
>>> 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 replacem=
ent
>>> candidate of size 1000 vb offering 10 sat/vb. It could be argued the fo=
rmer
>>> 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 t=
he
>>> 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 hav=
e
>>> > 2 inputs would require L2 protocols to manage a wallet with high-valu=
e
>>> > 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 eleme=
nt
>>> at each block to delay confirmation of the remaining elements in the ba=
tch,
>>> 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 po=
ol,
>>> as the cost of acquiring UTXO is non-null and in the optimistic case, y=
ou
>>> don't need to do unilateral closure. Let's say you close dozens of chan=
nels
>>> at the same time, a UTXO pool management strategy might be to fan-out t=
he
>>> 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 ancesto=
r
>>> > 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 i=
s no
>>> unconfirmed ancestor to replace, as the commitment transaction, whateve=
r
>>> 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 i=
s
>>> 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 V=
2
>>> states shouldn't be pinning vectors. Currently, commitment transactions
>>> signal replaceability.
>>>
>>> Le ven. 23 sept. 2022 =C3=A0 11:26, Gloria Zhao via bitcoin-dev <
>>> bitcoin-dev@lists.linuxfoundation.org> a =C3=A9crit :
>>>
>>>> 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 Tow=
ns,
>>>> 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=3D3 ("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=3D3. 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 t=
o
>>>> 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 deploy=
ed
>>>> 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 commitmen=
t
>>>> 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/0=
19817.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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>> bitcoin-dev@lists.linuxfoundation.org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>
>

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<div dir=3D"ltr">Hi Greg, Antoine, Bastien, =C2=A0<br>=C2=A0 <br>Thanks ver=
y much for the feedback! I interpret most of the discussion around limitati=
ons as ideas for future improvements rather than criticisms of the proposal=
 (please correct me if I&#39;m wrong). I&#39;ll try to respond to as much a=
s possible.<br><br>Also I realize that I didn&#39;t contextualize this prop=
osal clearly enough; it is very tailored for LN Penalty and definitely does=
n&#39;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 definite=
ly prefer a comprehensive RBF revamp to fix all our problems and enable oth=
er fee-bumping strategies such as sign-ANYONECANPAY-then-bring-your-own-fee=
s-by-adding-inputs-at-broadcast. I was hoping to get some ideas with the &q=
uot;RBF Improvements&quot; post in January, but it doesn&#39;t seem like we=
&#39;re much closer to a workable proposal. I think this is a minimally-inv=
asive step that works for Lightning today, a small fix similar to CPFP carv=
e out.<br><br>&gt; 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 &quot;inflated&quot; by tacking on additiona=
l inputs, this means the total weight of the parent tx lowers the effective=
 feerate of the package. =C2=A0<br>=C2=A0 <br>(For more context to other re=
aders I wrote an explanation for this in &quot;SIGHASH_ANYONECANPAY Pinning=
&quot; section of RBF ML post).=C2=A0 Yes, this unfortunately doesn&#39;t f=
ix any of the existing pinning attacks for single transaction RBF but also =
doesn&#39;t make them worse. This boils down to adding an incentive compati=
bility rule that ensures you can&#39;t replace a transaction with something=
 that will confirm slower. Package RBF has an ancestor feerate-based rule f=
or this (note it is quite conservative and not perfect).<br><br>So in the s=
cenario above with the &quot;inflated&quot; parent that was signed ACP, the=
 replacement would be rejected because the package ancestor feerate is lowe=
r than the feerate of what is being replaced. But it is imperfect (explaine=
d below) and thus I wouldn&#39;t recommend it for single transaction replac=
ement. So that attack still exists for single transactions, yes. =C2=A0<br>=
<br>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&#39;t use ACP, though obviously I agree we=
 should fix it for the future.<br><br>So when I said &quot;this is intended=
 for fee-bumping presigned txns in contracting protocols,&quot; I should ha=
ve said &quot;this is intended for fee-bumping presigned txns specifically =
using CPFP and anchor outputs.&quot; Apologies for forgetting to contextual=
ize, I&#39;ve been sitting on this for too long.<br>=C2=A0 <br>&gt; The oth=
er scenario it doesn&#39;t really fix is where HTLC/commitment-like transac=
tions 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 rat=
es to replace all of the transaction bumps. This is a &quot;self-pin&quot; =
and &quot;get good at utxos noob&quot; type problem, but it&#39;s something=
 that axing rule#3 in favor of a Replace-by-ancestor-feerate system would g=
et us. =C2=A0<br>=C2=A0 <br>I understand you to mean &quot;if you don&#39;t=
 have enough UTXOs and you&#39;re forced to batch-bump, you over-pay becaus=
e you need to bring them all to the highest target feerate.&quot; Isn&#39;t=
 this kind of separate, wallet-related problem? Contracting or not, surely =
every wallet needs to have enough UTXOs to not batch transactions that shou=
ldn&#39;t be batched... I don&#39;t see how a replace-by-ancestor-feerate p=
olicy would make any difference for this?<br><br>Also in general I&#39;d li=
ke to reiterate that ancestor feerate is not a panacea to all our RBF incen=
tive compatibility concerns. Like individual feerate, unless we run the min=
ing algorithm, it cannot tell us exactly how quickly this transaction would=
 be mined.<br><br>We&#39;re estimating the incentive compatibility of the o=
riginal transaction(s) and replacement transaction(s), with the goal of not=
 letting a transaction replace something that would have been more incentiv=
e compatible to mine. As such, we don&#39;t want to overestimate how good t=
he replacement is, and we don&#39;t want to underestimate how good the orig=
inal transactions are. This rule &quot;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&quot; is a conservative estimate.<br><br>&gt; Would k=
ind of be nice if package RBF would detect a &quot;sibling output spend&quo=
t; conflict, and knock it out of the mempool via the other replacement rule=
s? Getting rid of the requirement to 1 block csv lock every output would be=
 quite nice from a smart contracting composability point of view.<br><br>In=
teresting, so when a transaction hits a mempool tx&#39;s descendant limit, =
we consider evicting one of its descendants in favor of this transaction, b=
ased on the RBF rules.<br>Cool idea! After chewing on this for a bit, I thi=
nk this *also* just boils down to the fact that RBF should require replacem=
ents 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. <br>=C2=A0 <br>&gt=
; If you&#39;re a miner and you receive a non-V3, second descendant of an u=
nconfirmed V3 transaction, if the offered fee is in the top mempool backlog=
, I think you would have an interest to accept such a transaction. =C2=A0 =
=C2=A0 =C2=A0<br>&gt; So I&#39;m not sure if those two rules are compatible=
 with miners incentives... =C2=A0<br>=C2=A0 <br>The same argument can be ma=
de for the 26th descendant of a mempool transaction; it&#39;s also not enti=
rely incentive-compatible to reject it, but that is not the *only* design g=
oal in mempool policy. Of course, the difference here is that the 25-descen=
dant limit rule is a sensible DoS protection, while this 1-descendant limit=
 rule is more of a &quot;help the Bitcoin ecosystem&quot; policy, just like=
 CPFP carve-out, dust limit, etc. I can of course understand why not everyo=
ne would be in favor of this, but I do think it&#39;s worth it.<br>=C2=A0 <=
br>&gt; &gt; 4. A V3 transaction that has an unconfirmed V3 ancestor cannot=
 be =C2=A0 =C2=A0<br>&gt; &gt; =C2=A0 =C2=A0larger than 1000 virtual bytes.=
 =C2=A0 =C2=A0<br>=C2=A0 =C2=A0<br>&gt; 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 lik=
e this transaction to be stuck in the network mempools. By doing so=C2=A0 t=
his child has high odds to confirm. =C2=A0<br>=C2=A0 <br><div>Yeah exactly,=
 the &quot;Rule 3 pin&quot; is done by adding a child that&#39;s high-fee (=
so you have to pay that much to evict it). Because they *don&#39;t* want th=
is tx to confirm, normally, this child would be really large. If they only =
have 1000vB for the child, they can&#39;t increase the replacement cost wit=
hout also fee-bumping the transaction to make it confirm faster.=C2=A0 </di=
v><br>&gt; As of today, I think yes you can already fingerprint LN transact=
ions on the=C2=A0 spec-defined amount value of the anchor outputs, 330 sats=
. There is always one of them on post-anchor commitment transactions. And s=
adly I would say we&#39;ll always have tricky fingerprints leaking from uni=
lateral LN closures such as HTLC/PTLC timelocks... =C2=A0<br><div><br></div=
><div>&gt; I agree with you, this isn&#39;t worse than today, unilateral cl=
oses will</div><div>probably always be identifiable on-chain.</div><br>Grea=
t to hear that there is no privacy worsening!<br><br>Best, =C2=A0<br>Gloria=
<br></div><br><div class=3D"gmail_quote"><div dir=3D"ltr" class=3D"gmail_at=
tr">On Mon, Sep 26, 2022 at 5:02 PM Greg Sanders &lt;<a href=3D"mailto:gsan=
ders87@gmail.com">gsanders87@gmail.com</a>&gt; wrote:<br></div><blockquote =
class=3D"gmail_quote" style=3D"margin:0px 0px 0px 0.8ex;border-left:1px sol=
id rgb(204,204,204);padding-left:1ex"><div dir=3D"ltr">Bastien,<div><br></d=
iv><div>&gt; This may be already covered by the current package RBF logic, =
in that</div>scenario we are simply replacing [ParentTx, ChildTx1] with<br>=
[ParentTx, ChildTx2] that pays more fees, right?<div><br></div><div>For cla=
rification, package RBF is ParentTx*s*(plural), and ChildTx(singular), so i=
t might be a bit more complicated than we&#39;re thinking, and currently th=
e V3 proposal would first de-duplicate=C2=A0the ParentTx based on what is i=
n the mempool, then look at the &quot;rest&quot; of the transactions as a p=
ackage, then individually. Not the same, not sure how different. I&#39;ll d=
efer to experts.</div><div><br></div><div>Best,</div><div>Greg</div></div><=
br><div class=3D"gmail_quote"><div dir=3D"ltr" class=3D"gmail_attr">On Mon,=
 Sep 26, 2022 at 11:48 AM Bastien TEINTURIER via bitcoin-dev &lt;<a href=3D=
"mailto:bitcoin-dev@lists.linuxfoundation.org" target=3D"_blank">bitcoin-de=
v@lists.linuxfoundation.org</a>&gt; wrote:<br></div><blockquote class=3D"gm=
ail_quote" style=3D"margin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,=
204,204);padding-left:1ex"><div dir=3D"ltr">Thanks Gloria for this great po=
st.<br><br>This is very valuable work for L2 contracts, and will greatly im=
prove<br>their security model.<br><br>&gt; &quot;Only 1 anchor output? What=
 if I need to bump counterparty&#39;s commitment tx in mempool?&quot;<br>&g=
t; You won&#39;t need to fee-bump a counterparty&#39;s commitment tx using =
CPFP.<br>&gt; You would just package RBF it by attaching a high-feerate chi=
ld to<br>&gt; your commitment tx.<br><br>Note that we can also very easily =
make that single anchor spendable by<br>both participants (or even anyone),=
 so if you see your counterparty&#39;s<br>commitment in your mempool, you c=
an bump it without publishing your<br>own commitment, which is quite desira=
ble (your own commitment tx has<br>CSV delays on your outputs, whereas your=
 counterparty&#39;s commitment tx<br>doesn&#39;t).<br><br>&gt; &quot;Is thi=
s a privacy issue, i.e. doesn&#39;t it allow fingerprinting LN<br>transacti=
ons based on nVersion?&quot;<br><br>I agree with you, this isn&#39;t worse =
than today, unilateral closes will<br>probably always be identifiable on-ch=
ain.<br><br>&gt; Would kind of be nice if package RBF would detect a &quot;=
sibling output spend&quot;<br>&gt; conflict, and knock it out of the mempoo=
l via the other replacement rules?<br>&gt; Getting rid of the requirement t=
o 1 block csv lock every output would be<br>&gt; quite nice from a smart co=
ntracting composability point of view.<br><br>+1, that would be very neat!<=
br><br>This may be already covered by the current package RBF logic, in tha=
t<br>scenario we are simply replacing [ParentTx, ChildTx1] with<br>[ParentT=
x, ChildTx2] that pays more fees, right?<br><br>&gt; 1) I do think that we =
should seriously consider allowing OP_TRUE to become<br>&gt; a standard scr=
ipt type as part of this policy update. If pinning is solved,<br>&gt; then =
there&#39;s no reason to require all those extra bytes for &quot;binding&qu=
ot; an<br>&gt; anchor to a specific wallet/user. We can save quite a few by=
tes by having<br>&gt; the input be empty of witness data.<br>&gt; 2) If we =
allow for a single dust-value(0 on up) output which is immediately<br>&gt; =
spent by the package, anchors become even easier to to design. No value has=
<br>&gt; to be &quot;sapped&quot; from contract participants to make an anc=
hor output. There&#39;s<br>&gt; more complications for this, such as making=
 sure the parent transaction is<br>&gt; dropped if the child spend is dropp=
ed, but maybe it&#39;s worth the squeeze.<br><br>I also think both of these=
 could be quite useful. This would probably always<br>be used in combinatio=
n with a parent transaction that pays 0 fees, so the<br>0-value output woul=
d always be spent in the same block.<br><br>But this means we could end up =
with 0-value outputs in the utxo set, if for<br>some reason the parent tx i=
s CPFP-ed via another output than the 0-value one,<br>which would be a utxo=
 set bloat issue. But I&#39;d argue that we&#39;re probably<br>already crea=
ting utxo set bloat with the 330 sat anchor outputs (especially<br>since we=
 use two of them, but only one is usually spent), so it would<br>probably b=
e *better* than what we&#39;re doing today.<br><br>Thanks,<br>Bastien</div>=
<br><div class=3D"gmail_quote"><div dir=3D"ltr" class=3D"gmail_attr">Le=C2=
=A0lun. 26 sept. 2022 =C3=A0=C2=A003:22, Antoine Riard via bitcoin-dev &lt;=
<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org" target=3D"_blank">=
bitcoin-dev@lists.linuxfoundation.org</a>&gt; a =C3=A9crit=C2=A0:<br></div>=
<blockquote class=3D"gmail_quote" style=3D"margin:0px 0px 0px 0.8ex;border-=
left:1px solid rgb(204,204,204);padding-left:1ex"><div dir=3D"ltr">Hi Glori=
a,<br><br>Thanks for the progress on package RBF, few early questions.<br><=
br>&gt; 2. Any descendant of an unconfirmed V3 transaction must also be V3.=
<br><br>&gt; 3. An unconfirmed V3 transaction cannot have more than 1 desce=
ndant.<br><br>If you&#39;re a miner and you receive a non-V3, second descen=
dant of an unconfirmed V3 transaction, if the offered fee is in the top mem=
pool backlog, I think you would have an interest to accept such a transacti=
on.<br><br>So I&#39;m not sure if those two rules are compatible with miner=
s incentives...<br><br>&gt; 4. A V3 transaction that has an unconfirmed V3 =
ancestor cannot be<br>&gt; =C2=A0 =C2=A0larger than 1000 virtual bytes.<br>=
<br>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 th=
e network mempools. By doing so=C2=A0 this child has high odds to confirm.<=
br><br>I still wonder if this compatible with miner incentives in period of=
 empty mempools, in the sense that if you&#39;ve already a V3 transaction o=
f size 100Kvb offering 2 sat/vb, it&#39;s more interesting than a V3 replac=
ement candidate of size 1000 vb offering 10 sat/vb. It could be argued the =
former should be conserved.<br><br>(That said, the hard thing with any repl=
acement strategy we might evict a parent transaction *now* to which is atta=
ched a high-feerate child *latter* making for a utxo considered the best an=
cestor set. Maybe in the long-term miners should keep every transaction eve=
r accepted...)<br><br>&gt; (Lower bound) the smaller this limit, the fewer =
UTXOs a child may use<br>&gt; to fund this fee-bump. For example, only allo=
wing the V3 child to have<br>&gt; 2 inputs would require L2 protocols to ma=
nage a wallet with high-value<br>&gt; UTXOs and make batched fee-bumping im=
possible. However, as the<br>&gt; fee-bumping child only needs to fund fees=
 (as opposed to payments),<br>&gt; just a few UTXOs should suffice.<br><br>=
Reminder for L2 devs, batched fee-bumping of time-sensitive confirmations o=
f commitment transactions is unsafe, as the counterparty could enter in a &=
quot;cat-and-mouse&quot; game to replace one of the batch element at each b=
lock to delay confirmation of the remaining elements in the batch, I think.=
<br><br>On the other hand, I wonder if we wouldn&#39;t want a higher bound.=
 LN wallets are likely to have one big UTXO in their fee-bumping reserve po=
ol, as the cost of acquiring UTXO is non-null and in the optimistic case, y=
ou don&#39;t need to do unilateral closure. Let&#39;s say you close dozens =
of channels at the same time, a UTXO pool management strategy might be to f=
an-out the first spends UTXOs in N fan-out outputs ready to feed the remain=
ing in-flight channels.<br><br>&gt; 1. The rule around unconfirmed inputs w=
as<br>&gt; originally &quot;A package may include new unconfirmed inputs, b=
ut the<br>&gt; ancestor feerate of the child must be at least as high as th=
e ancestor<br>&gt; feerates of every transaction being replaced.&quot;<br><=
br>Note, I think we would like this new RBF rule to also apply to single tr=
ansaction 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 s=
hould be able to broadcast a &quot;at least as high ancestor feerate&quot; =
HTLC-timeout transaction. With `option_anchor_outputs&quot; there is no unc=
onfirmed ancestor to replace, as the commitment transaction, whatever the p=
arty it is originating from, should already be confirmed.<br><br>&gt; &quot=
;Is this a privacy issue, i.e. doesn&#39;t it allow fingerprinting LN<br>tr=
ansactions based on nVersion?&quot;<br><br>As of today, I think yes you can=
 already fingerprint LN transactions on the=C2=A0 spec-defined amount value=
 of the anchor outputs, 330 sats. There is always one of them on post-ancho=
r commitment transactions. And sadly I would say we&#39;ll always have tric=
ky fingerprints leaking from unilateral LN closures such as HTLC/PTLC timel=
ocks...<br><br>&gt; &quot;Can a V2 transaction replace a V3 transaction and=
 vice versa?&quot;<br><br>IIUC, a V3 package could replace a V2 package, wi=
th 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&#39;t be pinning vectors. Currently, commitment =
transactions signal replaceability.<br></div><br><div class=3D"gmail_quote"=
><div dir=3D"ltr" class=3D"gmail_attr">Le=C2=A0ven. 23 sept. 2022 =C3=A0=C2=
=A011:26, Gloria Zhao via bitcoin-dev &lt;<a href=3D"mailto:bitcoin-dev@lis=
ts.linuxfoundation.org" target=3D"_blank">bitcoin-dev@lists.linuxfoundation=
.org</a>&gt; a =C3=A9crit=C2=A0:<br></div><blockquote class=3D"gmail_quote"=
 style=3D"margin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,204,204);p=
adding-left:1ex"><div dir=3D"ltr">Hi everyone,<br><br>I&#39;m writing to pr=
opose a very simple set of mempool/transaction relay<br>policies intended t=
o aid L2/contract protocols. I realized that<br>the previously proposed Pac=
kage Mempool Accept package RBF [1]<br><div>had a few remaining problems af=
ter digging into the RBF logic more [2].</div><div>This additional set of p=
olicies solves them without requiring a huge RBF overhaul.<br></div><br>I&#=
39;ve written an implementation (and docs) for Bitcoin Core:<br><a href=3D"=
https://github.com/bitcoin/bitcoin/pull/25038" target=3D"_blank">https://gi=
thub.com/bitcoin/bitcoin/pull/25038</a><br><br>(You may notice that this pr=
oposal incorporates feedback on the PR - thanks Suhas Daftuar, Gregory Sand=
ers, Bastien Teinturier, Anthony Towns, and others.)<br><br>If you are inte=
rested in using package RBF/relay to bump presigned<br>transactions, I thin=
k you may be interested in reviewing this proposal.<br>This should solve Ru=
le 3 pinning and perhaps allow us<br>to get rid of CPFP carve-out (yay!). I=
&#39;m keen to hear if people find<br>the 1-anchor-output, 1000vB child lim=
it too restrictive. Also, if you find a<br>pinning attack or something that=
 makes it unusable for you, I would<br>really really like to know.<br><br>N=
ote that transactions with nVersion=3D3 (&quot;V3 transactions&quot;) are<b=
r>currently non-standard in Bitcoin Core. That means **anything that was<br=
>standard before this policy change would still be standard<br>afterwards.*=
* If you don&#39;t want your transactions to be subject to<br>these rules, =
just continue whatever you&#39;re doing and don&#39;t use<br>nVersion=3D3. =
AFAICT this shouldn&#39;t break anything, but let me know if<br>this would =
be disruptive for you?<br><br>**New Policies:**<br><br>This includes:<br>- =
a set of additional policy rules applying to V3 transactions<br>- modificat=
ions to package RBF rules<br><br>**V3 transactions:**<br><br>Existing stand=
ardness rules apply to V3 (e.g. min/max tx weight,<br>standard output types=
, cleanstack, etc.). The following additional<br>rules apply to V3:<br><br>=
1. A V3 transaction can be replaced, even if it does not signal BIP125<br>=
=C2=A0 =C2=A0replaceability. (It must also meet the other RBF rules around =
fees,<br>etc. for replacement to happen).<br><br>2. Any descendant of an un=
confirmed V3 transaction must also be V3.<br><br>*Rationale*: Combined with=
 Rule 1, this gives us the property of<br>&quot;inherited&quot; replaceabil=
ity signaling when descendants of unconfirmed<br>transactions are created. =
Additionally, checking whether a transaction<br>signals replaceability this=
 way does not require mempool traversal,<br>and does not change based on wh=
at transactions are mined. It also<br>makes subsequent rules about descenda=
nt limits much easier to check.<br><br>*Note*: The descendant of a *confirm=
ed* V3 transaction does not need to be V3.<br><br>3. An unconfirmed V3 tran=
saction cannot have more than 1 descendant.<br><br>*Rationale*: (Upper boun=
d) the larger the descendant limit, the more<br>transactions may need to be=
 replaced. This is a problematic pinning<br>attack, i.e., a malicious count=
erparty prevents the transaction from<br>being replaced by adding many desc=
endant transactions that aren&#39;t<br>fee-bumping.<br><br>(Lower bound) at=
 least 1 descendant is required to allow CPFP of the<br>presigned transacti=
on. The contract protocol can create presigned<br>transactions paying 0 fee=
s and 1 output for attaching a CPFP at<br>broadcast time (&quot;anchor outp=
ut&quot;). Without package RBF, multiple anchor<br>outputs would be require=
d to allow each counterparty to fee-bump any<br>presigned transaction. With=
 package RBF, since the presigned<br>transactions can replace each other, 1=
 anchor output is sufficient.<br><br>4. A V3 transaction that has an unconf=
irmed V3 ancestor cannot be<br>=C2=A0 =C2=A0larger than 1000 virtual bytes.=
<br><br>*Rationale*: (Upper bound) the larger the descendant size limit, th=
e<br>more vbytes may need to be replaced. With default limits, if the child=
<br>is e.g. 100,000vB, that might be an additional 100,000sats (at<br>1sat/=
vbyte) or more, depending on the feerate.<br><br>(Lower bound) the smaller =
this limit, the fewer UTXOs a child may use<br>to fund this fee-bump. For e=
xample, only allowing the V3 child to have<br>2 inputs would require L2 pro=
tocols to manage a wallet with high-value<br>UTXOs and make batched fee-bum=
ping impossible. However, as the<br>fee-bumping child only needs to fund fe=
es (as opposed to payments),<br>just a few UTXOs should suffice.<br><br>Wit=
h a limit of 1000 virtual bytes, depending on the output types, the<br>chil=
d can have 6-15 UTXOs, which should be enough to fund a fee-bump<br>without=
 requiring a carefully-managed UTXO pool. With 1000 virtual<br>bytes as the=
 descendant limit, the cost to replace a V3 transaction<br>has much lower v=
ariance.<br><br>*Rationale*: This makes the rule very easily &quot;tacked o=
n&quot; to existing<br>logic for policy and wallets. A transaction may be u=
p to 100KvB on its<br>own (`MAX_STANDARD_TX_WEIGHT`) and 101KvB with descen=
dants<br>(`DEFAULT_DESCENDANT_SIZE_LIMIT_KVB`). If an existing V3 transacti=
on<br>in the mempool is 100KvB, its descendant can only be 1000vB, even if<=
br>the policy is 10KvB.<br><br>**Package RBF modifications:**<br><br>1. The=
 rule around unconfirmed inputs was<br>originally &quot;A package may inclu=
de new unconfirmed inputs, but the<br>ancestor feerate of the child must be=
 at least as high as the ancestor<br>feerates of every transaction being re=
placed.&quot;<br><br>The package may still include new unconfirmed inputs. =
However,<br>the new rule is modified to be &quot;The minimum between packag=
e feerate<br>and ancestor feerate of the child is not lower than the indivi=
dual<br>feerates of all directly conflicting transactions and the ancestor<=
br>feerates of all original transactions.&quot;<br><br>*Rationale*: We are =
attempting to ensure that the replacement<br>transactions are not less ince=
ntive-compatible to mine. However, a<br>package/transaction&#39;s ancestor =
feerate is not perfectly representative<br>of its incentive compatibility; =
it may overestimate (some subset of<br>the ancestors could be included by i=
tself if it has other high-feerate<br>descendants or are themselves higher =
feerate than this<br>package/transaction). Instead, we use the minimum betw=
een the package<br>feerate and ancestor feerate of the child as a more cons=
ervative value<br>than what was proposed originally.<br><br>2. A new rule i=
s added, requiring that all package transactions with<br>mempool conflicts =
to be V3. This also means the &quot;sponsoring&quot;<br>child transaction m=
ust be V3.<br><br>*Note*: Combined with the V3 rules, this means the packag=
e must be<br>a child-with-parents package. Since package validation is only=
<br>attempted if the transactions do not pay sufficient fees to be<br>accep=
ted on their own, this effectively means that only V3<br>transactions can p=
ay to replace their ancestors&#39; conflicts, and only<br>V3 transactions&#=
39; replacements may be paid for by a descendant.<br><br>*Rationale*: The f=
ee-related rules are economically rational for<br>ancestor packages, but no=
t necessarily other types of packages.<br>A child-with-parents package is a=
 type of ancestor package. It<br>may be fine to allow any ancestor package,=
 but it&#39;s more difficult<br>to account for all of the possibilities. Fo=
r example, it gets much<br>harder to see that we&#39;re applying the descen=
dant limits correctly if<br>the package has a gnarly, many-generation, non-=
tree shape. I&#39;m also<br>not sure if this policy is 100% incentive-compa=
tible if the sponsor<br>is not a direct descendant of the sponsee.<br><br>P=
lease see doc/policy/version3_transactions.md and<br>doc/policy/packages.md=
 in the PR for the full set of rules.<br><br>**Intended usage for LN:**<br>=
<br>Commitment transactions should be V3 and have 1 anchor output. They<br>=
can be signed with 0 fees (or 1sat/vbyte) once package relay is deployed<br=
>on a significant portion of the network. If the commitment tx must<br>be b=
roadcast, determine the desired feerate at broadcast time and<br>spend the =
anchor output in a high feerate transaction. I&#39;m going to<br>call the b=
roadcasted commitment tx &quot;the parent&quot; and the attached<br>fee-bum=
ping tx &quot;the child.&quot;<br><br>- This child must be V3.<br>- This ch=
ild must be at most 1000vB. Note this restricts the<br>=C2=A0 number of inp=
uts you can use to fund the fee bump. Depending<br>on the output types, thi=
s is around 6-15.<br>- One child may fund fees for multiple commitment tx (=
&quot;batched<br>=C2=A0 fee-bumping&quot;).<br>- To do a second fee-bump to=
 add more fees, replace the<br>=C2=A0 *child* with a higher-feerate tx. Do =
not try to attach a grandchild.<br><br>Otherwise, never try to spend from a=
n unconfirmed V3 transaction. The<br>descendant limits for V3 transactions =
are very restrictive.<br><br>**Expected Questions:**<br><br>&quot;Does this=
 fix Rule 3 Pinning?&quot;<br>Yes. The V3 descendant limit restricts both y=
ou and your counterparty.<br>Assuming nodes adopted this policy, you may re=
asonably assume that you<br>only need to replace the commitment transaction=
 + up to 1000vB.<br><br>&quot;Only 1 anchor output? What if I need to bump =
counterparty&#39;s commitment tx in mempool?&quot;<br><div>You won&#39;t ne=
ed to fee-bump a counterparty&#39;s commitment tx using CPFP.</div><div>You=
 would just package RBF it by attaching a high-feerate child to</div>your c=
ommitment tx.<br><br>&quot;Is this a privacy issue, i.e. doesn&#39;t it all=
ow fingerprinting LN<br>transactions based on nVersion?&quot;<br>Indeed it =
may be unrealistic to assume V3 transactions will be in<br>widespread use o=
utside of L2. IIUC, unilateral closes are already<br>obvious LN transaction=
s because of the HTLC inputs. For e.g.<br>cooperative closes and opens, I t=
hink it makes sense to continue using<br>V2. So, unless I&#39;m missing som=
ething, this shouldn&#39;t make it worse.<br><br>&quot;So a V3 transaction =
that doesn&#39;t signal BIP125 replaceability is<br>replaceable? Is that a =
backward compatibility issue?&quot;<br>Yes it&#39;s replaceable. It&#39;s n=
ot an issue AFAICT because,<br>under previous policy, the V3 transaction wo=
uldn&#39;t have been<br>in the mempool in the first place.<br><br>&quot;Can=
 a V2 transaction replace a V3 transaction and vice versa?&quot;<br>Yes, ot=
herwise someone can use V3 transactions to censor V2<br>transactions spendi=
ng shared inputs. Note if the<br>original V3 transaction has an unconfirmed=
 V3 parent, this would<br>violate the &quot;inherited V3&quot; rule and wou=
ld be rejected.<br><br>Thanks for reading! Feedback and review would be muc=
h appreciated.<br><br>[1]: <a href=3D"https://lists.linuxfoundation.org/pip=
ermail/bitcoin-dev/2021-September/019464.html" target=3D"_blank">https://li=
sts.linuxfoundation.org/pipermail/bitcoin-dev/2021-September/019464.html</a=
><br><div>[2]: <a href=3D"https://lists.linuxfoundation.org/pipermail/bitco=
in-dev/2022-January/019817.html" target=3D"_blank">https://lists.linuxfound=
ation.org/pipermail/bitcoin-dev/2022-January/019817.html</a></div><div><br>=
</div>Best,<br>Gloria</div>
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