Bitcoin Core developers have recently merged Peter Todd’s Replace by Fee (RBF) as default behavior for the bitcoin network.
That means unconfirmed transactions can now easily be double spent by just increasing the fee that was paid and sending it again, with miners so accepting this second transaction.
Something that has become necessary due to considerable backlogs in transactions, with the network able to handle only 1MB of data every ten minutes.
A backlog that has sent fees to $70 per transaction, leading some exchanges, such as Gemini, to no longer process bitcoin withdrawals for amounts that are around less than $100 worth of bitcoin.
It remains to be seen how RBF will affect fees, but logically you’d think they would go up because blind auction like bidding can be continues, rather than as currently where you bid just once.
A further change that might assist in increasing fees has also been made recently. A sent bitcoin transaction now drops off the network’s “memory” after two weeks, rather than the three days it previously took.
That might create a continuous backlog even in quieter times, potentially leading to even higher fees during rush hours or fast price movements.
Something which suggests Bitcoin Core developers are now actively working to increase fees to $1,000 and perhaps even $10,000 if the market can handle it.
With Gregory Maxwell, the CTO of Blockstream Corporation – a for profit company that employs a number of Bitcoin Core developers – recently publicly stating he was opening champagne bottles to celebrate the increasing fees.
This approach is very much the opposite of what Satoshi Nakamoto, bitcoin’s inventor, has publicly stated. In describing how bitcoin transactions can be instant as unconfirmed transactions can be pretty safe, Nakamoto said in July 2010:
“I believe it’ll be possible for a payment processing company to provide as a service the rapid distribution of transactions with good-enough checking in something like 10 seconds or less.
The network nodes only accept the first version of a transaction they receive to incorporate into the block they’re trying to generate. When you broadcast a transaction, if someone else broadcasts a double-spend at the same time, it’s a race to propagate to the most nodes first. If one has a slight head start, it’ll geometrically spread through the network faster and get most of the nodes.
A rough back-of-the-envelope example:
So if a double-spend has to wait even a second, it has a huge disadvantage.
The payment processor has connections with many nodes. When it gets a transaction, it blasts it out, and at the same time monitors the network for double-spends. If it receives a double-spend on any of its many listening nodes, then it alerts that the transaction is bad. A double-spent transaction wouldn’t get very far without one of the listeners hearing it. The double-spender would have to wait until the listening phase is over, but by then, the payment processor’s broadcast has reached most nodes, or is so far ahead in propagating that the double-spender has no hope of grabbing a significant percentage of the remaining nodes.”
That approach is no longer possible with Bitcoin Core, but Bitcoin Cash has removed RBF, with BCH supporters considering it as a bug.
Bitcoin Cash, therefore, continues to enable pretty much instant and virtually free transactions, so moving forward with the roadmap laid down by Nakamoto at a time when bitcoin’s payment system is now pretty much unusable for ordinary commerce.