Mempool Incentive Compatibility

Mempool Incentive Compatibility

Original Postby ajtowns

Posted on: February 27, 2024 05:39 UTC

Understanding the concept of a pinning transaction (tx) requires delving into its characteristics and implications within the blockchain, particularly relating to Bitcoin's transaction model.

A pinning transaction, denoted as 'P', is defined by several key features: it is accepted into the mempool at a low fee rate, meaning it is unlikely to be mined soon; it conflicts with a higher fee rate transaction 'V' but cannot be replaced by V through the Replace-By-Fee (RBF) mechanism; and rectifying this conflict incurs excessive fees, whether through increasing P's fee rate for quicker mining, augmenting V's fee to make it a valid RBF replacement, or creating an alternative high fee rate transaction 'U' that replaces P.

The determination of what constitutes "excessive" fees remains subjective, emphasizing the need for a balanced approach to prevent fees from becoming prohibitively high. This balance could be maintained by ensuring the total size of transactions displaced by replacing P with U remains minimal, thereby controlling the additional costs required for U to effectively overtake V.

An innovative yet speculative solution to overcome pinning involves introducing new operational codes that would allow for the deconstruction of the pinning transaction. This process entails creating a new transaction 'U' that merges the desired outcomes of both P and V while ensuring miners do not lose out on fees. Additionally, a subsequent transaction 'W' could be designed to cater to the outputs of P, maintaining the integrity of the original signatures from P's inputs. Despite its potential, this approach presents significant technical challenges, especially in defining constraints for the transaction inputs that permit such flexibility without compromising security or feasibility.

Visual representations provided in the text illustrate the distinct structures of the ideal transaction with high fee rate and minimal size, the cumbersome nature of the pinning transaction with potentially high fees but low fee rate, and the proposed solution showcasing how transaction U can achieve the intended contract results while preserving the fee contributions from transaction P through an auxiliary transaction M. This visual aid underscores the complexity and ingenuity required to navigate the limitations of current blockchain transaction protocols while seeking more efficient and cost-effective solutions.