Post
Topic
Board Development & Technical Discussion
Re: Double spend protection with replace by fee
by
DumbFruit
on 10/07/2015, 17:24:51 UTC
I thought "replace by fee" could already be hardened against double spending by the merchant dumping  the whole transaction into fees if a double spend is detected.

However we can make zero-confirmation transactions safe without complex trusted identity systems, ironically by making it easier to double-spend. If we implement replace-by-fee nodes will always forward the transaction with the highest overall fee (including parents) even if it would double-spend a previous transaction. At first glance this appears to make double-spending trivial and zero-confirmation transactions useless, but in fact it enables a powerful counter-measure to an attempted double-spend: the merchant who was ripped off creates a subsequent transaction sending 100% of the funds to mining fees. All replace-by-fee miners will mine that transaction, rather than the one sending the funds back to the fraudster, and there is nothing the fraudster can do about it other than hope they get lucky and some one mines their double-spend before they hear about the counter spend. The transaction can also be constructed such that the payee pays slightly more in advance, with the merchant refunding the extra amount once the transaction confirms, to ensure that a double-spend will result in a net loss for the fraudster.