Robert Steinadler, 6 months ago

Bitcoin Core Version 24 sparks controversy over RBF feature

Bitcoin Core activated version 24 and brought some new features that caused a controversy beforehand. The software is the backbone of Bitcoin and is used by millions of user worldwide. What is the replace-by-fee-feature, and why is this feature causing a controversy eight years after its being introduced to Bitcoin?

The mempool and the fee market

Bitcoin’s mempool is a place where all transactions are gathered before they are getting included in a block and get confirmed by the network. Occasionally a transaction gets stuck in the mempool because all Bitcoin users are competing for the available block space. Whoever is going to pay a high fee has the highest chance to get the transaction included in the next block.

If the fee was set too low or the average price for a transaction fee is increasing overtime, a transaction with a low fee can take hours until it gets confirmed.

To tackle this problem, the so-called replace by fee (RBF) feature was introduced in 2014 for the first time. User can opt in to send a transaction with RBF and replace the initial fee with a higher one. This can speed up transactions significantly. The downside of this solution is that the whole transaction can be replaced and this also includes the recipient. Critics always warned that replacing an unconfirmed transaction can lead to fraud. If a recipient accepts an unconfirmed transaction, and it gets replaced before confirmation, he effectively can be defrauded. The solution simple: Only accept confirmed transactions. Once the transaction is part of the blockchain, nothing can be reversed.

It is not that simple

With version 24 of Bitcoin Core, the developers make RBF the default option, and it is no longer required to opt-in. Miners are rejoicing because this will keep the fee market healthy and might even boost their income. However, there are some businesses that rely on unconfirmed transactions for the sake of usability.

Who would like to wait between 15 minutes and up to several hours in a store or at a Bitcoin ATM until a transaction get confirmed?

Most of these businesses accept 0 confirmation transactions for smaller payments. Critics fear that by extending RBF to a full solution, that this model will become obsolete since fraud is way easier than before. It remains to be seen if businesses will have to deal with more cases of involuntary “charge backs” in the future. The average Bitcoin user already enjoyed the option to increase the fee and replace transactions. In effect, this could turn out to be less important as many people believe.

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