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Peter,

Recently there was a brouhaha over Coinbase censoring the ability of
firearms businesses to accept bitcoins via Coinbase
https://www.reddit.com/r/Bitcoin/comments/3agbs7/coinbase_shuts_down_bit
coin_biz_for_firearms/

The question and relevance here to this is that for people who are
going for the alternate route (e.g., bailing on Coinbase / Bitpay /
similar web wallets, in favor of setting up with something like
Electrum and using Gear https://gear.mycelium.com/ as payment
processor or Straight
https://github.com/snitko/straight-server,
what would be the answer to "What does this mean for me?" for this topic
?

On 06/19/2015 03:39 AM, Peter Todd wrote:
> Yesterday F2Pool, currently the largest pool with 21% of the
> hashing power, enabled full replace-by-fee (RBF) support after
> discussions with me. This means that transactions that F2Pool has
> will be replaced if a conflicting transaction pays a higher fee.
> There are no requirements for the replacement transaction to pay
> addresses that were paid by the previous transaction.
> 
> 
> I'm a user. What does this mean for me? 
> ---------------------------------------
> 
> In the short term, very little. Wallet software aimed at average
> users has no ability to reliably detect conditions where an
> unconfirmed transaction may be double-spent by the sender. For
> example, Schildbach's Bitcoin Wallet for Android doesn't even
> detect double-spends of unconfirmed transactions when connected to
> a RBF or Bitcoin XT nodes that propagate them. The least
> sophisticated double-spend attack possibly - simply broadcasting
> two conflicting transactions at the same time - has about 50%
> probability of success against these wallets.
> 
> Additionally, SPV wallets based on bitcoinj can't even detect
> invalid transactions reliably, instead trusting the full node(s) it
> is connected too over the unauthenticated, unencrypted, P2P
> protocol to do validation for them. For instance due to a unfixed
> bug¹ Bitcoin XT nodes will relay double-spends that spend the
> output of the conflicting transaction. I've personally tested this
> with Schildbach's Bitcoin Wallet for Android, which shows such
> invalid transactions as standard, unconfirmed, transactions.
> 
> Users should continue to assume that unconfirmed transactions could
> be trivially reversed by the sender until the first confirmation.
> In general, only the sender can reverse a transaction, so if you do
> trust the sender feel free to assume an unconfirmed transaction
> will eventually confirm. However, if you do not trust the sender
> and/or have no other recourse if they double-spend you, wait until
> at least the first confirmation before assuming the transaction
> will go through.
> 
> In the long term, miner support of full RBF has a number of
> advantages to users, allowing you to more efficiently make
> transactions, paying lower fees. However you'll need a wallet
> supporting these features; none exist yet.
> 
> 
> I'm a business. What does this mean for me? 
> -------------------------------------------
> 
> If you use your own node to verify transactions, you probably are
> in a similar situation as average users, so again, this means very
> little to you.
> 
> If you use a payment processor/transaction API such as BitPay,
> Coinbase, BlockCypher, etc. you may or may not be accepting
> unconfirmed transactions, and they may or may not be "guaranteed"
> by your payment processor even if double-spent. If like most
> merchants you're using the API such that confirmations are required
> prior to accepting orders (e.g. taking a meaningful loss such as
> shipping a product if the tx is reversed) nothing changes for you.
> If not I recommend you contact your payment processor.
> 
> 
> I'm a miner. Why should I support replace-by-fee? 
> -------------------------------------------------
> 
> Whether full or first-seen-safe⁵ RBF support (along with 
> child-pays-for-parent) is an important step towards a fully
> functioning transaction fee market that doesn't lead to users'
> transactions getting mysteriously "stuck", particularly during
> network flooding events/attacks. A better functioning fee market
> will help reduce pressure to increase the blocksize, particularly
> from the users creating the most valuable transactions.
> 
> Full RBF also helps make use of the limited blockchain space more 
> efficiently, with up to 90%+ transaction size savings possible in
> some transaction patterns. (e.g. long payment chains⁶) More users
> in less blockchain space will lead to higher overall fees per
> block.
> 
> Finally as we'll discuss below full RBF prevents a number of
> serious threats to the existing level playing field that miners
> operate in.
> 
> 
> Why can't we make accepting unconfirmed txs from untrusted people
> safe? 
> ----------------------------------------------------------------------
- -
>
>  For a decentralized wallet, the situation is pretty bleak. These
> wallets only have a handful of connections to the network, with no
> way of knowing if those connections give an accurate view of what
> transactions miners actually know about.
> 
> The only serious attempt to fix this problem for decentralized
> wallets that has been actually deployed is Andresen/Harding's
> double-spend relaying, implemented in Bitcoin XT. It relays up to
> one double-spend transaction per double-spent txout, with the
> intended effect to warn recipients. In practice however this
> functionality makes it easier to double-spend rather than harder,
> by giving an efficient and easy way to get double-spends to miners
> after the fact. Notably my RBF implementation even connects to
> Bitcoin XT nodes, reserving a % of all incoming and outgoing
> connection slots for them.
> 
> Additionally Bitcoin XT's double-spend relaying is subject to
> attacks include bandwidth exhaustion, sybil attacks, and Gervais's
> non-sybil interactive attacks⁷ among many others.
> 
> 
> What about centralised wallets? -------------------------------
> 
> Here the solutions being deployed, planned, and proposed are
> harmful, and even represent serious threats to Bitcoin's
> decentralization.
> 
> 
> Confidence factors ------------------
> 
> Many services such as BlockCypher² have attempted to predict the 
> probability that unconfirmed transactions will be mined, often 
> guaranteeing merchants payment³ even in the event of a
> double-spend. The key component of these predictions is to sybil
> attack the P2P network as a whole, connecting to as many nodes as
> possible to measure transaction propagation. Additionally these
> services connect to pools directly via the getblocktemplate
> protocol, repeatedly downloading via GBT the lists of transactions
> in the to-be-mined blocks to determine what transactions miners are
> attempting to mine.
> 
> None of these measures scale, wasting significant network and
> miner resources; in one instance a sybil attack by Chainalysis even
> completely blocked the users of the SPV wallet Breadwallet⁴ from
> accessing the network. These measures also don't work very well,
> giving double-spend attackers incentives to sybil attack miners
> themselves.
> 
> 
> Transaction processing contracts with miners 
> --------------------------------------------
> 
> The next step after measuring propagation fails is to contract
> with miners directly, signing contracts with as much of the hashing
> power as possible to get the transactions they want mined and
> double-spends rejected. The miners/pools would then provide an
> authenticated API endpoint for exclusive use of this service that
> would allow the service to add and remove specific transactions to
> the mempool on demand.
> 
> There's a number of serious problems with this:
> 
> 1) Mining contracts can be used to double-spend
> 
> ...even when they're being used "honestly".
> 
> Suppose Alice is a merchant using CoinPayCypher, who has contracts
> with 75% of the hashing power. Bob, another merchant, meanwhile
> uses a decentralized Bitcoin Core backend for payments to his
> website.
> 
> Mallory wants to double-spend Bob's to buy his expensive products.
> He can do this by creating a transaction, tx1, that pays Alice,
> followed by a second transaction, tx2, that pays Bob. In any
> circumstance when Mallory can convince Bob to accept tx2, but
> prevent Bob from seeing tx1, the chance of Malory's double-spend
> succeeding becomes ~75% because CoinPayCypher's contracts with
> mining ensure the transaction paying Alice will get mined.
> 
> Of course, dishonest use and/or compromise makes double-spending 
> trivial: Malory can use the API credentials to ask miners to
> reject Bob's payment at any time.
> 
> 
> 2) They still don't work, without 51% attacking other miners
> 
> Even if CoinPayCypher has 75% of the hashing power on contract,
> that's still a potentially 75% chance of being double-spent. The
> 25% of miners who haven't signed contracts have no _decentralized_
> way of ensuring they don't create blocks with double-spends, let
> alone at low cost. If those miners won't or can't sign contracts
> with CoinPayCypher the only next step available is to reject their
> blocks entirely.
> 
> 
> 3) Legal contracts give the advantage to non-anonymous miners in 
> Western jurisdictions
> 
> Suppose CoinPayCypher is a US company, and you're a miner with 1% 
> hashing power located in northern China. The barriers to you
> succesfully negotiating a contract with CoinPayCypher are
> significant. You don't speak the same langauge, you're in a
> completely different jurisdiction so enforcing the legal contract
> is difficult, and being just 1%, CoinPayCypher sees you as
> insignificant.
> 
> Who's going to get the profitable hashing power contracts first, if
> at all? Your English speaking competitors in the west. This is
> inherently a pressure towards centralization of mining.
> 
> 
> Why isn't this being announced on the bitcoin-security list first? 
> ------------------------------------------------------------------
> 
> I've had repeated discussions with services vulnerable to
> double-spends; they have been made well aware of the risk they're
> taking. If they've followed my own and others' advice they'll at
> minimum have constant monitoring of the rate of double-spends both
> on their own services and on the P2P network in general.
> 
> If you choose to take a risk you should accept the consequences.
> 
> 
> How do I actually use full RBF? -------------------------------
> 
> First get the full-RBF patch to v0.10.2:
> 
> https://github.com/petertodd/bitcoin/tree/replace-by-fee-v0.10.2
> 
> The above implementation of RBF includes additional code to find
> and preferentially connect to other RBF nodes, as well as Bitcoin
> XT nodes. Secondly, try out my replace-by-fee-tools at:
> 
> https://github.com/petertodd/replace-by-fee-tools
> 
> You can watch double-spends on the network here:
> 
> http://respends.thinlink.com/
> 
> 
> References ----------
> 
> 1) "Replace-by-fee v0.10.2 - Serious DoS attack fixed! - Also
> novel variants of existing attacks w/ Bitcoin XT and Android
> Bitcoin Wallet", Peter Todd, May 23rd 2015, Bitcoin-development
> mailing list, 
> http://www.mail-archive.com/bitcoin-development@lists.sourceforge.net/
msg07795.html
>
>  2) "From Zero to Hero: Bitcoin Transactions in 8 Seconds", June
> 2nd, 2014, Erik Voorhees, 
> https://medium.com/blockcypher-blog/from-zero-to-hero-bitcoin-transact
ions-in-8-seconds-7c9edcb3b734
>
>  3) Coinbase Merchant API, Accessed Jun 19th 2015, 
> https://developers.coinbase.com/docs/merchants/callbacks#confirmations
>
>  4) "Chainalysis CEO Denies 'Sybil Attack' on Bitcoin's Network", 
> March 14th 2015, Grace Caffyn, Coindesk, 
> http://www.coindesk.com/chainalysis-ceo-denies-launching-sybil-attack-
on-bitcoin-network/
>
>  5) "First-Seen-Safe Replace-by-Fee", May 25th 2015, Peter Todd,
> Bitcoin-development mailing list, 
> http://www.mail-archive.com/bitcoin-development%40lists.sourceforge.ne
t/msg07829.html
>
>  6) "Cost savings by using replace-by-fee, 30-90%", May 25th 2015,
> Peter Todd, Bitcoin-development mailing list, 
> http://www.mail-archive.com/bitcoin-development@lists.sourceforge.net/
msg07813.html
>
>  7) "Tampering with the Delivery of Blocks and Transactions in
> Bitcoin", Arthur Gervais and Hubert Ritzdorf and Ghassan O. Karame
> and Srdjan Capkun, Cryptology ePrint Archive: Report 2015/578, Jun
> 10th 2015, http://eprint.iacr.org/2015/578
> 
> 
> 
> ----------------------------------------------------------------------
- --------
>
> 
> 
> 
> _______________________________________________ Bitcoin-development
> mailing list Bitcoin-development@lists.sourceforge.net 
> https://lists.sourceforge.net/lists/listinfo/bitcoin-development
> 

- -- 
http://abis.io ~
"a protocol concept to enable decentralization
and expansion of a giving economy, and a new social good"
https://keybase.io/odinn
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