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From: Michael Folkson <michaelfolkson@gmail.com>
Date: Tue, 29 Jun 2021 10:44:11 +0100
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Subject: [bitcoin-dev] Last week's second IRC workshop on L2 onchain support
	and wrap up
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A summary of the first workshop is here:
https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2021-June/019079.ht=
ml

The focus for this second workshop was fee bumping and package relay.
For more details on package relay see:
https://github.com/ariard/L2-zoology/blob/master/workshops/package-relay-an=
d-friends.md

The conversation log for the second workshop is here:
https://gist.github.com/ariard/32b51ecceccc5c6f647bae86d083c442

Package relay background

Package relay is potentially useful for L2 protocols to address the
inherent unpredictability of future fees. CPFP (child-pays-for-parent)
seeks to ensure say a justice transaction, in Lightning=E2=80=99s case, wit=
h a
lower fee, gets confirmed in a more timely manner because miners are
incentivized to include the child transaction in a block. To do so
they must include the parent transaction in that block or a preceding
block. By =E2=80=9Cpackaging=E2=80=9D the parent and the child the initiato=
r of the
transaction(s) can ensure the miner=E2=80=99s mempool doesn=E2=80=99t initi=
ally reject
the parent transaction for having a too low fee.

There has been prior work done in previous years on package relay,
mainly by Suhas Daftuar.

Draft BIP: https://gist.github.com/sdaftuar/8756699bfcad4d3806ba9f3396d4e66=
a

Package relay design questions: https://github.com/bitcoin/bitcoin/issues/1=
4895

Recently Gloria Zhao has been advancing package relay in Bitcoin Core:
https://gist.github.com/glozow/7064717e727a3eb27fad4f8504513add

Package relay implementation

Attendees seemed in agreement that enabling 2 transaction packages
would be sufficient (at least for now) for Lightning and DLCs. A L2
protocol should always be able to design a two step process where the
first transaction has an effective zero fee rate and the second
transaction sets the fee. Restricting the size of the package to 2 may
have the cost of slightly longer confirmation times and/or slightly
higher fees (t-bast) but it compares well to the increased
implementation complexity of larger package sizes. Two generation:
multi parent, single child shouldn=E2=80=99t introduce material implementat=
ion
complexity over two generation: single parent, single child (glozow).

Package RBF (replace-by-fee) is possible where there are two competing
packages with competing Lightning commitment transactions in them and
the second package is given a higher fee to attempt to get it
confirmed before the first package. However, supporting RBF within a
package (ie replacing a transaction in a package with a higher fee
transaction) increases implementation complexity and makes it harder
to reason about (glozow).

rgrant raised the possibility of using two packages {A,B} and {B,C} if
three transaction packages e.g. {A,B,C} weren=E2=80=99t supported but it wa=
s
suggested it is perhaps better to just broadcast a high fee CPFP
transaction for the {A,B} package rather than creating two packages.
If the first package has been evicted from the mempool the {B,C}
package wouldn=E2=80=99t propagate because it would be an orphan package
(t-bast).

glozow suggested that only hints (wtxids of transactions you think
should be package validated) could be communicated rather than
relaying the transaction themselves but there were concerns from
others on whether these hints would successfully propagate across the
network. Instead fee rate hints could be sent to inform a peer=E2=80=99s
decision on whether it makes sense to fetch the rest of the package
(t-bast).

darosior suggested the idea of a package based CBlockPolicyEstimator
in Bitcoin Core if CPFP is going to be increasingly used on the
network.

Witness replacement and Taproot

Tapscripts can be unlimited in size so with current Taproot rules you
could in theory go from a 100,000 vbyte witness to an empty witness.
L2 protocols may have a UTXO shared by two parties where Alice=E2=80=99s
witness for her branch is say 1,000 vbytes and Bob=E2=80=99s witness is onl=
y
say 250 vbytes. Replacing Alice=E2=80=99s larger witness with Bob=E2=80=99s=
 smaller
witness could reduce transaction fees. For Lightning the best case is
a Taproot key path spend (16 vbyte witness) and the worst case is
going to be a 150 vbyte witness. Miniscript can tell you your worst
case transaction size and this can be used to assess the transaction
pinning risk of a bloated witness (all harding).

A future soft fork could give meaning to the annex in Taproot
(darosior) which could be used for inflating the fee rate of a
witness. Then you could have a same-txid-different-wtxid coming after
with a lower fee rate but higher vbytes size to override package
limits (ariard). But fee rate is purely a policy concept and the annex
operates at the consensus level. In addition the annex can only
increase the weight of a transaction, it cannot decrease it (harding).

Wrap up and initial goals

With regards to the goals of the workshops that were initially
announced here:
https://lists.linuxfoundation.org/pipermail/lightning-dev/2021-April/003002=
.html

1) 2 transactions packages sounds enough to support currently deployed
L2 protocols
2) There are ongoing discussions in the ecosystem regarding
deprecation of opt in RBF and implementation of full RBF:
https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2021-June/019074.ht=
ml
3) Generally status quo and ad hoc security incident response policy
in the case of cross-layer security issues
4) Generally status quo on L2 security philosophy design. L2 protocol
designers should seek to minimize assumptions on the base layer.

--=20
Michael Folkson
Email: michaelfolkson@gmail.com
Keybase: michaelfolkson
PGP: 43ED C999 9F85 1D40 EAF4 9835 92D6 0159 214C FEE3