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Date: Wed, 17 Apr 2013 11:48:59 +0200
Message-ID: <CANEZrP0z6W0ZDsytQ7Rcqb5L6rswn1wv8cbR7c383Dmpzu+gyg@mail.gmail.com>
From: Mike Hearn <mike@plan99.net>
To: Peter Todd <pete@petertodd.org>
Content-Type: multipart/alternative; boundary=089e012280f22ca3f504da8b6588
Cc: Bitcoin Dev <bitcoin-development@lists.sourceforge.net>
Subject: Re: [Bitcoin-development] Anti DoS for tx replacement
Precedence: list

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When this system was first being discussed, Gavin was concerned that miner
incentives were to ignore replacements because it meant extra work and the
replacement might have equal or lower fees than before (or indeed, no
fees). He proposed two solutions: one is to progressively raise the fee on
each replacement. The other is to specify lock time in terms of blocks and
then step it backwards once for each replacement, thus ensuring that by
replacing the transaction you get to claim any attached fee earlier.

It should be apparent that both solutions can be implemented by whichever
application is running the contract - the core Bitcoin network and software
is agnostic either way.

Now, Gavin and I disagreed on whether this would actually be necessary. As
I already pointed out, both solutions seriously reduce the utility of HFT
because they limit how often you can update the contract. Instead of an
online game billing you per second, maybe it can only do it per minute or
per 10 minutes with the lock time solution because otherwise you run out of
blocks, and with ever-increasing fees perhaps the contract becomes too
expensive to justify after a while.

So it'd be nice if this ended up not being necessary. Experience indicates
that rational miners typically don't pursue a short-termist
profit-at-any-cost agenda - free transactions have always been included in
blocks, miners include transactions even though you could avoid a lot of
complexity by just not including any at all, etc. Some miners like BTC
Guild have actually sacrificed significant amounts of money for the good of
the system. You can see this in terms of rational self interest - miners
earn Bitcoins thus it's in their interest for Bitcoins to be as useful as
possible, as that is what gives them value. Or you can see it in terms of
ideologically-driven altruism. Or both.

If I were to implement an application that used tx replacement, I would
probably start with replacements that don't change the fees and don't count
down the lock time field. We can then observe whether miners bother
changing their software to behave differently, or whether the inherent
utility of the application is enough to convince them to play by the
default rules. Ideally at least one application made possible by this
feature is a "killer app" - something so useful / unique / compelling that
people want to obtain Bitcoin just to use it. If someone can find such an
app, then rational miners should want tx replacement to work as reliably as
possible because it boosts the value of their earnings.

There are some other misc details - reactivation requires that we bump the
protocol version and start relaying non-final transactions to new nodes
again. Those nodes should relay replacements but not let them enter wallets
unless/until the wallet software itself can handle them better, for
instance, by communicating via APIs anticipated confirmation times. This is
something for individual wallet APIs to handle on their own, and just
ignoring non-final transactions is a perfectly workable approach for
Bitcoin-Qt.

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<div dir=3D"ltr">When this system was first being discussed, Gavin was conc=
erned that miner incentives were to ignore replacements because it meant ex=
tra work and the replacement might have equal or lower fees than before (or=
 indeed, no fees). He proposed two solutions: one is to progressively raise=
 the fee on each replacement. The other is to specify lock time in terms of=
 blocks and then step it backwards once for each replacement, thus ensuring=
 that by replacing the transaction you get to claim any attached fee earlie=
r.<div>
<br></div><div style>It should be apparent that both solutions can be imple=
mented by whichever application is running the contract - the core Bitcoin =
network and software is agnostic either way.</div><div style><br></div>
<div style>Now, Gavin and I disagreed on whether this would actually be nec=
essary. As I already pointed out, both solutions seriously reduce the utili=
ty of HFT because they limit how often you can update the contract. Instead=
 of an online game billing you per second, maybe it can only do it per minu=
te or per 10 minutes with the lock time solution because otherwise you run =
out of blocks, and with ever-increasing fees perhaps the contract becomes t=
oo expensive to justify after a while.</div>
<div style><br></div><div style>So it&#39;d be nice if this ended up not be=
ing necessary. Experience indicates that rational miners typically don&#39;=
t pursue a short-termist profit-at-any-cost agenda - free transactions have=
 always been included in blocks, miners include transactions even though yo=
u could avoid a lot of complexity by just not including any at all, etc. So=
me miners like BTC Guild have actually sacrificed significant amounts of mo=
ney for the good of the system. You can see this in terms of rational self =
interest - miners earn Bitcoins thus it&#39;s in their interest for Bitcoin=
s to be as useful as possible, as that is what gives them value. Or you can=
 see it in terms of ideologically-driven altruism. Or both.</div>
<div style><br></div><div style>If I were to implement an application that =
used tx replacement, I would probably start with replacements that don&#39;=
t change the fees and don&#39;t count down the lock time field. We can then=
 observe whether miners bother changing their software to behave differentl=
y, or whether the inherent utility of the application is enough to convince=
 them to play by the default rules. Ideally at least one application made p=
ossible by this feature is a &quot;killer app&quot; - something so useful /=
 unique / compelling that people want to obtain Bitcoin just to use it. If =
someone can find such an app, then rational miners should want tx replaceme=
nt to work as reliably as possible because it boosts the value of their ear=
nings.</div>
<div style><br></div><div style>There are some other misc details - reactiv=
ation requires that we bump the protocol version and start relaying non-fin=
al transactions to new nodes again. Those nodes should relay replacements b=
ut not let them enter wallets unless/until the wallet software itself can h=
andle them better, for instance, by communicating via APIs anticipated conf=
irmation times. This is something for individual wallet APIs to handle on t=
heir own, and just ignoring non-final transactions is a perfectly workable =
approach for Bitcoin-Qt.</div>
</div>

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