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From: Bastien TEINTURIER <bastien@acinq.fr>
Date: Mon, 26 Sep 2022 17:27:40 +0200
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To: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org>, 
 Gloria Zhao <gloriajzhao@gmail.com>
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Subject: Re: [bitcoin-dev] New transaction policies (nVersion=3) for
 contracting protocols
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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 becom=
e
> 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 i=
s
> 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 alway=
s
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 =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 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 t=
o
> constraint the pinning counterparty to attach a high fee to a child due t=
o
> 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 empt=
y
> 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 form=
er
> 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 *latte=
r*
> making for a utxo considered the best ancestor set. Maybe in the long-ter=
m
> 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 wallet=
s
> 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 L=
N
> 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 ne=
w
> 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 =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 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=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 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/0=
19464.html
>> [2]:
>> https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-January/019=
817.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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<div dir=3D"ltr">Thanks Gloria for this great post.<br><br>This is very val=
uable work for L2 contracts, and will greatly improve<br>their security mod=
el.<br><br>&gt; &quot;Only 1 anchor output? What if I need to bump counterp=
arty&#39;s commitment tx in mempool?&quot;<br>&gt; You won&#39;t need to fe=
e-bump a counterparty&#39;s commitment tx using CPFP.<br>&gt; You would jus=
t package RBF it by attaching a high-feerate child to<br>&gt; your commitme=
nt tx.<br><br>Note that we can also very easily make that single anchor spe=
ndable by<br>both participants (or even anyone), so if you see your counter=
party&#39;s<br>commitment in your mempool, you can bump it without publishi=
ng your<br>own commitment, which is quite desirable (your own commitment tx=
 has<br>CSV delays on your outputs, whereas your counterparty&#39;s commitm=
ent tx<br>doesn&#39;t).<br><br>&gt; &quot;Is this a privacy issue, i.e. doe=
sn&#39;t it allow fingerprinting LN<br>transactions based on nVersion?&quot=
;<br><br>I agree with you, this isn&#39;t worse than today, unilateral clos=
es will<br>probably always be identifiable on-chain.<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 mempool via the other replacement=
 rules?<br>&gt; Getting rid of the requirement to 1 block csv lock every ou=
tput would be<br>&gt; quite nice from a smart contracting composability poi=
nt of view.<br><br>+1, that would be very neat!<br><br>This may be already =
covered by the current package RBF logic, in that<br>scenario we are simply=
 replacing [ParentTx, ChildTx1] with<br>[ParentTx, ChildTx2] that pays more=
 fees, right?<br><br>&gt; 1) I do think that we should seriously consider a=
llowing OP_TRUE to become<br>&gt; a standard script type as part of this po=
licy update. If pinning is solved,<br>&gt; then there&#39;s no reason to re=
quire all those extra bytes for &quot;binding&quot; an<br>&gt; anchor to a =
specific wallet/user. We can save quite a few bytes by having<br>&gt; the i=
nput be empty of witness data.<br>&gt; 2) If we allow for a single dust-val=
ue(0 on up) output which is immediately<br>&gt; spent by the package, ancho=
rs become even easier to to design. No value has<br>&gt; to be &quot;sapped=
&quot; from contract participants to make an anchor output. There&#39;s<br>=
&gt; more complications for this, such as making sure the parent transactio=
n is<br>&gt; dropped if the child spend is dropped, but maybe it&#39;s wort=
h the squeeze.<br><br>I also think both of these could be quite useful. Thi=
s would probably always<br>be used in combination with a parent transaction=
 that pays 0 fees, so the<br>0-value output would always be spent in the sa=
me 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 is CPFP-ed via another outpu=
t 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 creating utxo set bloat with th=
e 330 sat anchor outputs (especially<br>since we use two of them, but only =
one is usually spent), so it would<br>probably be *better* than what we&#39=
;re doing today.<br><br>Thanks,<br>Bastien</div><br><div class=3D"gmail_quo=
te"><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-de=
v@lists.linuxfoundation.org">bitcoin-dev@lists.linuxfoundation.org</a>&gt; =
a =C3=A9crit=C2=A0:<br></div><blockquote class=3D"gmail_quote" style=3D"mar=
gin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,204,204);padding-left:1=
ex"><div dir=3D"ltr">Hi Gloria,<br><br>Thanks for the progress on package R=
BF, 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 descendant.<br><br>If you&#39;re a miner and you re=
ceive 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 intere=
st to accept such a transaction.<br><br>So I&#39;m not sure if those two ru=
les are compatible with miners incentives...<br><br>&gt; 4. A V3 transactio=
n 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 uppe=
r bound rational, it would be to constraint the pinning counterparty to att=
ach 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=C2=A0 this chi=
ld 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 of size 100Kvb offering 2 sat/vb, it&#39;s more=
 interesting than a V3 replacement candidate of size 1000 vb offering 10 sa=
t/vb. It could be argued the former should be conserved.<br><br>(That said,=
 the hard thing with any replacement strategy we might evict a parent trans=
action *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 shou=
ld keep every transaction ever accepted...)<br><br>&gt; (Lower bound) the s=
maller this limit, the fewer UTXOs a child may use<br>&gt; to fund this fee=
-bump. For example, only allowing the V3 child to have<br>&gt; 2 inputs wou=
ld require L2 protocols to manage a wallet with high-value<br>&gt; UTXOs an=
d make batched fee-bumping impossible. 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 t=
ime-sensitive confirmations of commitment transactions is unsafe, as the co=
unterparty could enter in a &quot;cat-and-mouse&quot; game to replace one o=
f the batch element at each block to delay confirmation of the remaining el=
ements in the batch, I think.<br><br>On the other hand, I wonder if we woul=
dn&#39;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&#39;t need to do unilateral closure. Le=
t&#39;s say you close dozens of channels at the same time, a UTXO pool mana=
gement strategy might be to fan-out the first spends UTXOs in N fan-out out=
puts ready to feed the remaining in-flight channels.<br><br>&gt; 1. The rul=
e around unconfirmed inputs was<br>&gt; originally &quot;A package may incl=
ude new unconfirmed inputs, but the<br>&gt; ancestor feerate of the child m=
ust be at least as high as the ancestor<br>&gt; feerates of every transacti=
on being replaced.&quot;<br><br>Note, I think we would like this new RBF ru=
le to also apply to single transaction package, e.g second-stage HTLC trans=
actions, where a counterparty pins a HTLC-preimage by abusing rule 3. In th=
at case, the honest LN node should be able to broadcast a &quot;at least as=
 high ancestor feerate&quot; HTLC-timeout transaction. With `option_anchor_=
outputs&quot; there is no unconfirmed ancestor to replace, as the commitmen=
t transaction, whatever the party 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>transactions 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 alw=
ays one of them on post-anchor commitment transactions. And sadly I would s=
ay we&#39;ll always have tricky fingerprints leaking from unilateral LN clo=
sures such as HTLC/PTLC timelocks...<br><br>&gt; &quot;Can a V2 transaction=
 replace a V3 transaction and vice versa?&quot;<br><br>IIUC, a V3 package c=
ould replace a V2 package, with the benefit of the new package RBF rules ap=
plied. I think this would be a significant advantage for LN, as for the cur=
rent ~85k of opened channels, the old V2 states shouldn&#39;t be pinning ve=
ctors. 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@lists.linuxfoundation.org" target=3D"_blank">bi=
tcoin-dev@lists.linuxfoundation.org</a>&gt; a =C3=A9crit=C2=A0:<br></div><b=
lockquote class=3D"gmail_quote" style=3D"margin:0px 0px 0px 0.8ex;border-le=
ft:1px solid rgb(204,204,204);padding-left:1ex"><div dir=3D"ltr">Hi everyon=
e,<br><br>I&#39;m writing to propose a very simple set of mempool/transacti=
on relay<br>policies intended to aid L2/contract protocols. I realized that=
<br>the previously proposed Package Mempool Accept package RBF [1]<br><div>=
had a few remaining problems after digging into the RBF logic more [2].</di=
v><div>This additional set of policies solves them without requiring a huge=
 RBF overhaul.<br></div><br>I&#39;ve written an implementation (and docs) f=
or Bitcoin Core:<br><a href=3D"https://github.com/bitcoin/bitcoin/pull/2503=
8" target=3D"_blank">https://github.com/bitcoin/bitcoin/pull/25038</a><br><=
br>(You may notice that this proposal incorporates feedback on the PR - tha=
nks Suhas Daftuar, Gregory Sanders, Bastien Teinturier, Anthony Towns, and =
others.)<br><br>If you are interested in using package RBF/relay to bump pr=
esigned<br>transactions, I think you may be interested in reviewing this pr=
oposal.<br>This should solve Rule 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 limit too restrictive. Also, if you find a<br>p=
inning attack or something that makes it unusable for you, I would<br>reall=
y really like to know.<br><br>Note that transactions with nVersion=3D3 (&qu=
ot;V3 transactions&quot;) are<br>currently non-standard in Bitcoin Core. Th=
at means **anything that was<br>standard before this policy change would st=
ill 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, bu=
t 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>- modifications to package RBF rules<br><br>**V3 transa=
ctions:**<br><br>Existing standardness rules apply to V3 (e.g. min/max tx w=
eight,<br>standard output types, cleanstack, etc.). The following additiona=
l<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 me=
et the other RBF rules around fees,<br>etc. for replacement to happen).<br>=
<br>2. Any descendant of an unconfirmed V3 transaction must also be V3.<br>=
<br>*Rationale*: Combined with Rule 1, this gives us the property of<br>&qu=
ot;inherited&quot; replaceability 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>a=
nd does not change based on what transactions are mined. It also<br>makes s=
ubsequent rules about descendant limits much easier to check.<br><br>*Note*=
: The descendant of a *confirmed* V3 transaction does not need to be V3.<br=
><br>3. An unconfirmed V3 transaction cannot have more than 1 descendant.<b=
r><br>*Rationale*: (Upper bound) the larger the descendant limit, the more<=
br>transactions may need to be replaced. This is a problematic pinning<br>a=
ttack, i.e., a malicious counterparty prevents the transaction from<br>bein=
g replaced by adding many descendant transactions that aren&#39;t<br>fee-bu=
mping.<br><br>(Lower bound) at least 1 descendant is required to allow CPFP=
 of the<br>presigned transaction. The contract protocol can create presigne=
d<br>transactions paying 0 fees and 1 output for attaching a CPFP at<br>bro=
adcast time (&quot;anchor output&quot;). Without package RBF, multiple anch=
or<br>outputs would be required to allow each counterparty to fee-bump any<=
br>presigned transaction. With package RBF, since the presigned<br>transact=
ions can replace each other, 1 anchor output is sufficient.<br><br>4. A V3 =
transaction that has an unconfirmed V3 ancestor cannot be<br>=C2=A0 =C2=A0l=
arger than 1000 virtual bytes.<br><br>*Rationale*: (Upper bound) the larger=
 the descendant size limit, the<br>more vbytes may need to be replaced. Wit=
h default limits, if the child<br>is e.g. 100,000vB, that might be an addit=
ional 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<b=
r>to fund this fee-bump. For example, only allowing the V3 child to have<br=
>2 inputs would require L2 protocols to manage a wallet with high-value<br>=
UTXOs and make batched fee-bumping impossible. However, as the<br>fee-bumpi=
ng child only needs to fund fees (as opposed to payments),<br>just a few UT=
XOs should suffice.<br><br>With a limit of 1000 virtual bytes, depending on=
 the output types, the<br>child can have 6-15 UTXOs, which should be enough=
 to fund a fee-bump<br>without requiring a carefully-managed UTXO pool. Wit=
h 1000 virtual<br>bytes as the descendant limit, the cost to replace a V3 t=
ransaction<br>has much lower variance.<br><br>*Rationale*: This makes the r=
ule very easily &quot;tacked on&quot; to existing<br>logic for policy and w=
allets. A transaction may be up to 100KvB on its<br>own (`MAX_STANDARD_TX_W=
EIGHT`) and 101KvB with descendants<br>(`DEFAULT_DESCENDANT_SIZE_LIMIT_KVB`=
). If an existing V3 transaction<br>in the mempool is 100KvB, its descendan=
t 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>origin=
ally &quot;A package may include new unconfirmed inputs, but the<br>ancesto=
r feerate of the child must be at least as high as the ancestor<br>feerates=
 of every transaction being replaced.&quot;<br><br>The package may still in=
clude new unconfirmed inputs. However,<br>the new rule is modified to be &q=
uot;The minimum between package feerate<br>and ancestor feerate of the chil=
d is not lower than the individual<br>feerates of all directly conflicting =
transactions and the ancestor<br>feerates of all original transactions.&quo=
t;<br><br>*Rationale*: We are attempting to ensure that the replacement<br>=
transactions are not less incentive-compatible to mine. However, a<br>packa=
ge/transaction&#39;s ancestor feerate is not perfectly representative<br>of=
 its incentive compatibility; it may overestimate (some subset of<br>the an=
cestors could be included by itself if it has other high-feerate<br>descend=
ants or are themselves higher feerate than this<br>package/transaction). In=
stead, we use the minimum between the package<br>feerate and ancestor feera=
te of the child as a more conservative value<br>than what was proposed orig=
inally.<br><br>2. A new rule is added, requiring that all package transacti=
ons with<br>mempool conflicts to be V3. This also means the &quot;sponsorin=
g&quot;<br>child transaction must be V3.<br><br>*Note*: Combined with the V=
3 rules, this means the package must be<br>a child-with-parents package. Si=
nce package validation is only<br>attempted if the transactions do not pay =
sufficient fees to be<br>accepted on their own, this effectively means that=
 only V3<br>transactions can pay to replace their ancestors&#39; conflicts,=
 and only<br>V3 transactions&#39; replacements may be paid for by a descend=
ant.<br><br>*Rationale*: The fee-related rules are economically rational fo=
r<br>ancestor packages, but not necessarily other types of packages.<br>A c=
hild-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 fo=
r all of the possibilities. For example, it gets much<br>harder to see that=
 we&#39;re applying the descendant 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-compatible if the sponsor<br>is not a direct desce=
ndant of the sponsee.<br><br>Please 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) onc=
e package relay is deployed<br>on a significant portion of the network. If =
the commitment tx must<br>be broadcast, determine the desired feerate at br=
oadcast time and<br>spend the anchor output in a high feerate transaction. =
I&#39;m going to<br>call the broadcasted commitment tx &quot;the parent&quo=
t; and the attached<br>fee-bumping tx &quot;the child.&quot;<br><br>- This =
child must be V3.<br>- This child must be at most 1000vB. Note this restric=
ts the<br>=C2=A0 number of inputs you can use to fund the fee bump. Dependi=
ng<br>on the output types, this is around 6-15.<br>- One child may fund fee=
s for multiple commitment tx (&quot;batched<br>=C2=A0 fee-bumping&quot;).<b=
r>- 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>Otherw=
ise, never try to spend from an unconfirmed V3 transaction. The<br>descenda=
nt limits for V3 transactions are very restrictive.<br><br>**Expected Quest=
ions:**<br><br>&quot;Does this fix Rule 3 Pinning?&quot;<br>Yes. The V3 des=
cendant limit restricts both you and your counterparty.<br>Assuming nodes a=
dopted this policy, you may reasonably assume that you<br>only need to repl=
ace the commitment transaction + up to 1000vB.<br><br>&quot;Only 1 anchor o=
utput? What if I need to bump counterparty&#39;s commitment tx in mempool?&=
quot;<br><div>You won&#39;t need to fee-bump a counterparty&#39;s commitmen=
t tx using CPFP.</div><div>You would just package RBF it by attaching a hig=
h-feerate child to</div>your commitment tx.<br><br>&quot;Is this a privacy =
issue, i.e. doesn&#39;t it allow fingerprinting LN<br>transactions based on=
 nVersion?&quot;<br>Indeed it may be unrealistic to assume V3 transactions =
will be in<br>widespread use outside of L2. IIUC, unilateral closes are alr=
eady<br>obvious LN transactions because of the HTLC inputs. For e.g.<br>coo=
perative closes and opens, I think it makes sense to continue using<br>V2. =
So, unless I&#39;m missing something, 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 not an issue AFAICT because,<br>under previous=
 policy, the V3 transaction wouldn&#39;t have been<br>in the mempool in the=
 first place.<br><br>&quot;Can a V2 transaction replace a V3 transaction an=
d vice versa?&quot;<br>Yes, otherwise someone can use V3 transactions to ce=
nsor V2<br>transactions spending shared inputs. Note if the<br>original V3 =
transaction has an unconfirmed V3 parent, this would<br>violate the &quot;i=
nherited V3&quot; rule and would be rejected.<br><br>Thanks for reading! Fe=
edback and review would be much appreciated.<br><br>[1]: <a href=3D"https:/=
/lists.linuxfoundation.org/pipermail/bitcoin-dev/2021-September/019464.html=
" target=3D"_blank">https://lists.linuxfoundation.org/pipermail/bitcoin-dev=
/2021-September/019464.html</a><br><div>[2]: <a href=3D"https://lists.linux=
foundation.org/pipermail/bitcoin-dev/2022-January/019817.html" target=3D"_b=
lank">https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2022-January/=
019817.html</a></div><div><br></div>Best,<br>Gloria</div>
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</blockquote></div>
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