[FULL DISCLOSURE]: Replacement Cycling Attacks on Attacks on Bitcoin Miners Block Templates

The report highlights a critical vulnerability in the Bitcoin network known as replacement cycling attacks (RCA), which poses a significant threat to transaction traffic censorship among miners and could potentially disrupt the equitable distribution of bitcoin fee rewards. This attack mechanism was initially tested on the Bitcoin Core 26.0 branch and further examined for its implications on the security of Lightning channels, indicating a broader impact on the network's infrastructure. The discovery of RCA's effect on miner block templates by various experts underscores the ongoing concern about its real-world applicability and the potential consequences for the Bitcoin ecosystem, especially in scenarios where mining subsidies are no longer available.

Replacement cycling attacks exploit the replace-by-fee mechanism and other mempool mechanisms to manipulate the order and inclusion of transactions within a miner's block template. By creating a series of junk transactions that block the processing of legitimate transactions, attackers can force their preferred transactions into the block template, thereby gaining an unfair advantage in the collection of transaction fees. This method shares similarities with known mempool manipulation techniques but introduces novel strategies by targeting the properties of transaction chains directly. Several tests and a comprehensive paper have been made publicly available to demonstrate the feasibility and impact of these attacks across different versions of the Bitcoin Core software.

In response to the discovery and analysis of RCA, the report suggests several mitigation strategies aimed at improving the resilience of miner block templates against such attacks. These include the development of a cluster mempool to better manage related transactions, the introduction of a replace-by-feerate mechanism to prioritize transactions more effectively, restrictions on the topological structure of transaction chains, and enhanced UTXO-based transaction announcements. Each solution aims to address specific aspects of the vulnerability, though their effectiveness remains subject to further analysis.

The timeline of events surrounding the discovery, testing, and disclosure of replacement cycling attacks reveals a coordinated effort among researchers, developers, and the broader cryptocurrency community to address and mitigate the risks posed by this vulnerability. From the initial findings related to Lightning channel security to the eventual full disclosure of the miner-level attack variant, the process reflects the complexity of safeguarding decentralized financial networks against evolving threats. The report concludes with a call to action for continued vigilance and collaborative problem-solving within the Bitcoin development community to ensure the long-term security and stability of the network.