Mempool Incentive Compatibility

Mempool Incentive Compatibility

Original Postby rustyrussell

Posted on: February 27, 2024 09:43 UTC

In the discussion about version 3 (v3) as a mechanism for Child Pays for Parent (CPFP) within Bitcoin transactions, there emerges a nuanced perspective on its utility and limitations.

The critique of CPFP, especially in a future where transaction fees are anticipated to rise, underscores a preference for a system design that incorporates inline fees and supports the stacking of multiple transactions to efficiently share costs. This approach suggests leveraging future covenant technology to bypass the constraints imposed by CPFP. However, v3's current capability does not align with these forward-looking needs.

The conversation further explores alternative strategies for handling transaction fees in a high-fee environment. One such strategy is the notion of bringing your own fees at the time of spending, which would enable users to navigate fee spikes without renegotiating terms. This method currently finds limited application in specific transaction types due to technological constraints but represents an ideal direction for protocol robustness and efficiency. CPFP, despite its immediate utility facilitated by v3, is seen as a less optimal solution when considering long-term scalability and cost-effectiveness in Bitcoin's ecosystem.

Moreover, the dialogue shifts towards the potential benefits of transaction introspection and aggregation as means to mitigate high fees. The concept involves paying a third party to compile multiple unrelated transactions into a single transaction with one fee input and output, thereby distributing the cost more effectively among participants. This approach may eventually be refined through the use of introspection to manage transaction size or by recognizing the diminishing returns of bundling, which could relax the requirements on transaction size limits.

This complex interplay between current technological capabilities, envisioned improvements, and the strategic management of transaction fees within Bitcoin transactions illustrates the ongoing evolution of digital currency protocols. It highlights the critical balance between addressing immediate usability concerns and planning for sustainable, scalable solutions amidst rising costs and network demands.