JIT fees with TXHASH: comparing options for sponsorring and stacking

It raises a question about the potential efficiency or issues with different approaches to committing output indices in transaction stacking, hinting at an underlying complexity in optimizing blockchain transactions.

In addressing the complexities of fee payments in Bitcoin transactions, especially given the evolution toward second-layer solutions, the conversation shifts to traditional methods like Child Pays for Parent (CPFP) and introduces the concept of Tx Sponsors. CPFP is described as increasingly costly due to the necessity of additional fee anchor outputs and child transactions. In contrast, Tx Sponsors are presented as a more efficient alternative that allows a transaction to cover the fees of another by specifying it by txid, requiring their simultaneous block inclusion without altering the original transaction or creating extra outputs.

David Harding's contribution to the development of this idea includes suggesting a potentially free input/output marker for indicating sponsorship and a commitment mechanism within the sponsor transaction’s input signature hash. The dialogue further explores the innovative TXSIGHASH approach, which leverages TXHASH for selecting parts of the transaction to be included in the hash. This method significantly alters transaction construction and identification through flexible field, input, and output selection, directly impacting protocols reliant on stable txids like Lightning and Ark through rebindable signatures.

The efficiency and cost-effectiveness of TXSIGHASH compared to other methods such as CPFP and Tx Sponsors are highlighted, particularly in scenarios involving both single transactions and stacks of transactions. TXSIGHASH is shown to reduce virtual byte costs consistently and simplify the process by treating multiple transactions as a single entity, thus lowering per-transaction costs. However, it also introduces the challenge of managing multiple signature variants for each transaction, adding complexity despite its benefits.

Ultimately, the exploration concludes that while TXSIGHASH presents a promising method for reducing transaction costs and complexities in Bitcoin, the increased burden of managing signature variations requires careful consideration. Its potential to streamline transaction processing and fee management offers significant advancements in blockchain transaction management, but the practical implications of its complexity must not be overlooked.