S14 E4: Peter Todd vs Sergej Kotliar on Full RBF

In the first half of 2023, before ordinal inscriptions emerged and Drivechains stole the spotlight for the rest of the year, Full RBF was the biggest debate in Bitcoin. Replace by Fee (RBF) has been an optional feature in Bitcoin transactions since November 2016 when Bitcoin Core version 0.12 first launched. But it didn’t become the standard way to broadcast transactions until 7 years later, when the mempool started to fill more regularly and some users required a way to either cancel their transactions or else speed them up.

In Bitcoin, there are two way to pay a higher fee to speed up a transaction:

1. RBF (Replace by Fee) – where the sender pays a higher fee to have the transaction included much sooner in a block
2. CPFP (Child Pays for Parent) – where the receiver pays a higher fee to receive a block confirmation much sooner

Technically speaking, RBF makes sense for users who make mistakes in terms of estimation or destination. Philosophically speaking, RBF introduces the idea that the bitcoin doesn’t change ownership until the first confirmation of the transaction. While altcoins such as Bitcoin Cash and Litecoin embrace “zero conf” as a way to get used in commerce (and therefore assume that the funds belong to the receiver as soon as they have been broadcast), Bitcoin takes a more conservative approach which takes human error into account – before you get the first confirmation in a block, you can still send the funds to a different address (and make up for it by paying more in fees).

While RBF entails a degree of optionality where users choose for themselves if they want to benefit from the fee-boosting feature, Full RBF introduces a rule where every Bitcoin client uses RBF by default. It’s a big deal because the behavior of the entirety of network participants gets shaped by this new paradigm of ownership. However, merchants that accept on-chain Bitcoin payments can no longer support 0-conf benefits, as they take the risk of getting defrauded.

Former Bitcoin Core developer and Open Timestamps creator Peter Todd is the architect of Replace by Fee and also the biggest advocate of Full RBF as a paradigm. Yet some businesses are unhappy that their practice to transact without waiting for on-chain confirmations is no longer safe. Sergej Kotliar, CEO of Bitrefill, decided to represent that side of the debate in this recording: he defends the users’ optionality for features such as RBF, as his company could still accept to deliver gift cards in exchange for unconfirmed transactions that did not enable RBF.

This debate has been planned since December 2022, but could only happen in May 2023 during the second annual edition of Paralelni Polis’ Pizza Day event. It gets pretty intense, as both participants have had a history of exchanging passive-aggressive tweets at each other and they never really had the chance to talk about the issues face to face. So I feel really grateful that I could make this debate happen, as it helped both sides better understand each other. In the end, Full RBF received more support because it aligns with Bitcoin’s philosophy of ownership and sovereignty. But when you listen to this debate, it’s pretty hard to guess which side shall emerge victorious.

Listen to the Full RBF debate between Peter Todd and Sergej Kotliar on Spotify, Apple Podcasts & YouTube!

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The Full RBF Debate [00:01:59] Peter Todd and Sergej Kotliar present their opposing views on RBF.

Understanding Full RBF [00:03:00] Sergej explains the concept of full RBF and its impact on transaction replaceability and user experience.

Reliability and Usefulness of RBF [00:06:26] Peter Todd counters Sergej’s arguments, discussing the reliability and usefulness of full RBF in real-world scenarios.

Full RBF and multiparty transactions [00:11:27] Discussion on the trade-offs of full RBF for multiparty transactions and the impact on transactions like Wasabi’s CoinJoins.

Benefits and inconveniences of on-chain payments [00:14:15] Debate on the trade-offs of using zero conf and the advantages and disadvantages of on-chain payments.

The use of RBF for power users [00:19:35] Discussion on the usefulness of RBF for power users, programmatic transactions, and multi-party scenarios.

[00:21:16] Discussion on the frequency of using RBF (Replace-By-Fee) in transactions and assumptions about exchange users.

[00:23:06] The unpredictability of the bitcoin mempool and blocks, in relation to the need to bump fees.

[00:26:37] Debate on the usage of zero-conf (zero confirmation) transactions and examples of merchants accepting them.

[00:30:00] Discussion on the percentage of blockchain space used by low fees and the impact on usage.

[00:30:59] Importance of rough consensus and the difficulty of making changes in the Bitcoin network.

[00:38:48] Discussion about the reliability of zero-conf transactions and the real-world data supporting its usage. [00:39:13] Debate on the risk involved in accepting zero-conf transactions and the potential vulnerabilities.

[00:45:14] Plans for a potential continuation of the discussion on the topic of zero-conf transactions in a future episode.