Documenting the lifetime of a transaction during mempool congestion from the perspective of a rational user

Summary:

This email from Jeremy Rubin is primarily focused on existing wallet behaviors and user preferences in Bitcoin, as opposed to CTV. The author argues that the rational behavior for a wallet should be to maximize fully trusted balance, process payments requested by the owner within the "urgency budget" requested by the user, and maximize privacy. The author also suggests that rational wallet behavior may not be possible without metadata, including information about trust scores of payment sources and hashrate decreases that could lead to longer reorgs.The post goes on to describe the process of receiving a payment, including scenarios where the payer is a highly trusted source with an unconfirmed transfer, an anonymous donation with no reason to trust it won't be double spent, and a trusted source as part of a long chain of transactions. In each case, the rational wallet behavior is to prioritize spending outputs in order to maximize balance, either through consolidation or CPFP-ing the parent transaction.The author notes that the reasons some of these rational behaviors are not implemented in wallets are due to engineering complexity, UX complexity, and low mempool backlog. However, the author argues that if Bitcoin sees development of a more robust fee market, these rational behaviors would likely become emergent among all Bitcoin wallets.Finally, the author addresses the relevance of CTV congestion control in solving existing wallet architecture problems. While some have criticized CTV as complicating wallet behavior, the author argues that congestion control is designed to be useful in the circumstances already described, and that CTV can help reduce the need for rational behaviors such as CPFP bumping. Additionally, CTV can exert back pressure on transaction urgency and improve time-preference in full on-chain resolution.

Updated on: 2023-06-15T15:13:46.891768+00:00