Peter Todd again. I don't like this.
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.
http://www.mail-archive.com/bitcoin-development@lists.sourceforge.net/msg08422.htmlI've never understood Peter Todd's rationale for promoting replace-by-fee.
The way Bitcoin was designed, if a node sees a second transaction that spends an output already spent by a previous transaction, it ignores the second transaction. The result is that
the second (and in most cases, fraudulent) transaction propagates to very few nodes and has little chance of being mined into a block. If the entire network applies this policy homogeneously, double-spending zero-confirm transactions is very difficult, especially if merchants just wait a few second to monitor the propagation of the TX with a well-connected listening node.
This only works if mining is homogeneous throughout the network, which is very much not how Bitcoin exists today. Otherwise it is up to the policies of a few individual (large) miners how likely a transaction is to get mined, not an emergent property of network propagation.
The motivation behind replace-by-fee is not to just go and break things, as detractors argue. It is to make instant payments safer by removing the incentive to double spend. The reason being that if you can double spend by increasing the fee, the recipient can too. The result is a bidding war where the entire amount gets burned in fees, and you gain nothing, removing the incentive to double spend in the first place.
However, this too only works if mining is diffuse (essentially homogenous) because otherwise you can conspire with a miner to refund part of the fee back to you under the table.
So rbf is largely pointless, and at this point indeed is an instance of the ongoing philosophical debate over whether Bitcoin should be a real time ecommerce payment system or a batch settlement system.