Taxonomy of Transaction Fees in Smart Contracts

The discussion revolves around a novel approach to transaction fee handling within the context of blockchain technology, particularly focusing on Child Pays for Parent (CPFP) transactions. This method involves the receiver of a transaction using CPFP to create an explicit output for miner fees, rather than the conventional implicit burning of fees. This strategy is advantageous for both miners and receivers. Miners benefit because they do not have to wait the standard 100 blocks to spend the received fees, enabling immediate access to their rewards. On the other hand, receivers can potentially see their transactions confirmed more swiftly by utilizing this tactic, as they might submit these CPFP transactions to various mining pools' accelerators to expedite processing.

However, this approach raises concerns about its implications if it were to become widespread, particularly under conditions where the blockchain experiences full blocks. The primary worry is that receivers could be lulled into a false sense of security, mistakenly believing their transactions will always be processed promptly under any network conditions. A more critical issue could arise if the total miner fees generated through explicit outputs begin to significantly overshadow the block subsidy and implicit fees. In such scenarios, there's a concern that miners might have a heightened incentive to engage in reorganizations (reorgs) of recent blocks. This behavior could destabilize the network, especially at block heights near the top of the blockchain (e.g., blocks H-1, H-2, H-3, etc.), where the temptation to reorg might outweigh the current status quo incentives, potentially leading to increased volatility and security risks within the blockchain ecosystem.