Posted on 21 January 2021

Gloria’s fellowship is made possible by generous donations from Square Crypto and The Human Rights Foundation.


As the Bitcoin ecosystem expands, Bitcoin‘s responsibility as a base-layer protocol becomes more complex. More specifically, as transaction volume more frequently exceeds the default mempool size, fee-bumping is not only a nice feature for users to express urgency in their transactions but also a key mechanism for security. Many second layer applications provide off-chain scaling and privacy solutions but rely on being able to settle on-chain in a timely manner. The ability to promote transactions for inclusion in a block is crucial.

For example, the Lightning Network relies on constructing, but not broadcasting, chains of transactions. Each transfer on the Lightning Network creates contingency transactions that can be broadcast to redeem the channel balance if a counterparty tries to cheat (i.e. tries to close the channel with an outdated balance). The contingency transaction must be broadcast within a certain period of time of the attacker’s malicious one (usually from one day to two weeks). Creating a refund output with a timelock delay is a common technique to give participants enough time to detect malicious activity and broadcast their “justice transaction.” From an attacker’s perspective, however, this means they’ll get away with their money as long as they can prevent the justice transaction from being mined for the duration of the timelock.

While it’s relatively difficult to censor a transaction entirely, an attacker can try to artificially flood mempools with higher-fee transactions to bury it. If one of the transaction’s outputs belongs to the attacker, they may employ transaction pinning methods to prevent it from being fee-bumped. Sometimes, such attacks may not even be necessary, since high congestion can cause transactions to remain unconfirmed for weeks.

Currently, when a transaction becomes “stuck in the mempool” due to a low fee, a user’s options include BIP 125 Replace By Fee (RBF) (creating a higher-fee transaction spending the same inputs) or Child Pays for Parent (CPFP) (spending the transaction’s outputs in a new, higher-fee child transaction, increasing the overall feerate of the two transactions). RBF is not possible in multi-party, possibly adversarial situations since it requires signing a new transaction – it’s unlikely that someone trying to steal from you would agree to co-sign a transaction to prevent it.

In general, CPFP is our best choice in fee-bumping transactions that we are unable to revise, such as Lightning transactions or other multi-party applications like CoinJoin. But CPFP also currently has a restriction: while it can be used to fee-bump transactions, the feerate of that package of transactions is only considered after all the transactions in the package are already in the mempool. Each individual transaction in a package must pass validation and mempool policy, so it’s impossible to use CPFP on a transaction that doesn’t already meet the minimum mempool feerate. Right now, when mempools fill up and a user’s transaction gets evicted, their only option is to wait for space to open up.

The design choice to evaluate packages only after individual transactions are already in the mempool is a defensive one – Bitcoin Core tries to expend as few computational resources as possible on unverified transactions to protect itself from DoS attacks. It’s also what makes package acceptance complex; computationally intensive logic that helps users bump fees could also potentially be abused by adversaries to stall Bitcoin Core nodes.

Project Road Map

Our ultimate goal is Package Relay – relaying transactions as packages on the P2P network. However, much of the early work lies in our validation code and careful considerations around DoS before we expose it to the P2P network. My plan is to introduce packages in small steps, from relatively safer interfaces like RPC, before we make P2P protocol changes.

The first reviewable chunk of work is introducing the concept of package mempool acceptance in Bitcoin Core and enabling dry runs of it through the testmempoolaccept RPC. This feature may be useful for contract protocols to test (but not submit) transaction chains on Bitcoin Core nodes to ensure they are valid and meet mempool policies.

The second step is to enable submitting packages to the mempool through an RPC. This would be limited in terms of new functionality, since the node would still relay transactions individually. It would, however, provide us with a relatively safe way to start testing out package mempool acceptance. Since RPC is a privileged interface – clients are either the node operator themselves or otherwise permissioned to make requests to the node – we can reason about and empirically test DoS vectors without exposing nodes to attacks from unknown network peers.

Finally, we’ll formally specify how to communicate packages on the P2P network and what protocol changes would be most appropriate. Concerns here include privacy (would we leak transaction origins through the way we construct packages?), bandwidth (would this congest network traffic with redundant information?), DoS (could peers exhaust our computational resources by sending us large amounts of invalid transactions?), and backwards compatibility (does this inhibit older nodes from participating fully?).

You can follow my progress and day-to-day activities on Github. I also plan to post updates throughout the fellowship; you can get notified by subscribing to the newsletter or following @bitcoinbrink! :)

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