Presently, Bitcoin Core's RBF policy necessitates that a replacing transaction must offer a higher total fee than the one it replaces, without considering the fee-rate. This method of replacement has been standard since RBF's implementation but has shown limitations, particularly in its vulnerability to transaction pinning attacks within contracting protocols like Lightning.

The proposal introduces a concept known as One-Shot Replace-By-Fee-Rate, offering an alternative to the absolute fee requirement. This new policy allows for a transaction or package of transactions to be replaced only if they significantly increase the fee-rate and move the transaction towards the top of the mempool, ensuring it is likely to be included in the next block. By focusing on fee-rate rather than total fee, this approach directly addresses the issue of transaction pinning by circumventing BIP-125 Rule 3 pinning, thereby reducing the potential for such attacks.

An important distinction between value and fee-rate is made when considering the expected return of unconfirmed transactions to miners. Transactions with low fee-rates act as honest signals in the network, indicating to other transactors that a higher fee-rate is necessary for quicker inclusion in a block. This indirectly benefits miners as it encourages users to compete for block space by raising their transaction fees.

When assessing conflicting transactions based on expected return versus fee-rate, the author points out that miners should prioritize transactions with higher fee-rates as these are more likely to be included promptly in upcoming blocks, thus generating immediate revenue. Under the current rules, a transaction with a high total fee but lower fee-rate might not get mined due to potential competition from a smaller transaction with a much higher fee-rate, which is counterintuitive to maximizing miner revenue.

The One-Shot Replace-By-Fee-Rate policy proposes three key conditions for replacing transactions: the new transaction must have a fee-rate substantially greater than the original; it must possess a high enough fee-rate to place it near the top of the mempool; and the highest mineable fee-rate of the replaced transactions must not be sufficient to achieve this same positioning in the mempool.

This research, sponsored by Fulgur Ventures, demonstrates that both one-shot and pure replace-by-fee-rate policies can resist bandwidth exhaustion attacks, making such mechanisms viable for implementation. This suggests that a shift towards fee-rate-based transaction replacement could enhance the efficiency and security of the Bitcoin network, particularly concerning second-layer contracting protocols.