The heated debate in the Bitcoin community throughout the past months not only concerns the block size dispute. Another technical change at the center of conflict is replace-by-fee , a version of which was included in the latest release of Bitcoin Core – while the next version of Bitcoin Classic will have no replace-by-fee at all.
An often-heard criticism against replace-by-fee is that it creates new problems while it doesn’t really solve any existing ones. But that criticism is questionable.
Below is the case for replace-by-fee. (And the case against.)
Replace-by-Fee Explained
What is replace-by-fee?
Replace-by-fee is a mempool policy . Mempools are collections of unconfirmed transactions stored by full nodes, and are used by miners to select transactions to include in blocks.
For the past years, most nodes on the Bitcoin network applied a “first-seen” mempool policy. If a node received two conflicting transactions (spending the same inputs) the latest was always rejected.
Replace-by-fee, as the name suggests, instead allows transactions in the mempool to be replaced by newer transactions, if they include a higher fee.There are some variants of replace-by-fee as well, including the one adopted by Bitcoin Core. But we’ll get to that in a bit. The Case Against Replace-by-Fee What’s the problem with replace-by-fee?Basically, replace-by-fee enables users to easily double-spend unconfirmed transactions. Someone could – for instance – make a purchase with bitcoins, but quickly afterward send these same bitcoins back to himself.Perhaps most important, replace-by-fee could disadvantage Bitcoin payment processors that effectively built (a part of) their business on instant payments. Merchants selling digital goods, and merchants selling physical goods from brick-and-mortar stores, could be negatively affected as well; it’s impractical to have customers wait several minutes for a confirmation. And if services stop accepting (unconfirmed) Bitcoin transactions because of this, their customers would arguably be disadvantaged, too.An additional […]
