Available Now for Clients, BitGo Introduces Replace-By-Fee

BitGo announces Replace-By-Fee (RBF) integration today, enhancing processing speed for stuck Bitcoin transactions

• BitGo launches support for RBF, which allows clients to replace transactions that are stuck in mempool with higher fees, incentivizing miners to confirm them on-chain
• Available for BitGo hot, custodial, and self-managed cold Bitcoin wallets
• The pioneer of multisig, BitGo is also the first to offer the most secure, fully commercialized bitcoin wallet available in qualified custodyBitGo Wallets and Replace-By-Fee Integration

BitGo, a leading provider of cryptocurrency wallets and custody solutions, has recently announced support for Replace-By-Fee (RBF) in its wallets. This development reflects BitGo’s commitment to providing its clients with cutting-edge features and functionalities to navigate the dynamic landscape of Bitcoin transactions.

With RBF support in BitGo wallets, clients gain access to a powerful tool for transaction management, mainly adjusting fees for acceleration. In this blog post, we will dive into what RBF is, its benefits, and the recent integration of RBF support in BitGo Bitcoin wallets, marking a significant step forward in client transaction management.

Understanding RBF

RBF on Bitcoin is a mechanism that replaces a previously transmitted transaction with a new transaction that pays a higher fee. This feature is extremely useful in the Bitcoin network, especially during times of high network congestion. RBF ensures that transactions can be prioritized based on the willingness to pay higher fees.

RBF stems from Satoshi Nakamoto’s active contribution to Bitcoin. This feature was initially disabled due to concerns over abuse and the network’s ability to handle additional complexity. Over time, the network grew and needed functionality, particularly during the Block Size debate when congestion was a significant issue.

The formalization of RBF came in 2015 with the introduction of opt-in RBF by developer Peter Todd, leading to the creation of Bitcoin Improvement Proposal 125 (BIP 125). This proposal outlined how transactions could be marked as replaceable and set the conditions under which the network would accept them. The adoption of BIP 125 marked a significant milestone, allowing clients to signal explicitly that their transactions could be replaced, thereby offering a way to adjust transaction fees after the fact.

RBF vs. CPFP

A transaction can only be included in a block when all of its inputs are confirmed. This requirement can be used to increase the effective fee rate of a stuck low-fee transaction by a technique called Child-Pays-for-Parent (CPFP). In this scenario, one of the outputs from the stuck transaction is used as an input in a subsequent child transaction that offers a significantly higher fee. Miners typically prioritize transactions with the highest fees to maximize their revenue, but the high-fee child transaction can only be included once the parent transaction is confirmed. The miners are, therefore, incentivized to include both the parent and the child transaction together in a block. A CPFP transaction can be created by a recipient of the transaction or by the sender if the target transaction has a change output.

With RBF, a transaction can be replaced by a new transaction with a higher fee as long as it spends a few or all of the same inputs used by the original transaction. Unlike CPFP, only the transaction’s sender can create a Replace-By-Fee transaction, and only one of them can be confirmed. More often than not, the replacement transaction with the higher fee will be accepted by the miners.

One key benefit of RBF over CPFP is that it does not require the presence of a change output in the original stuck transaction.

Benefits of RBF

The introduction of RBF brings several benefits to Bitcoin clients:

Transaction flexibility: RBF provides clients with greater control over their transactions. In situations where the initial fee was insufficient to attract miners’ attention, RBF allows clients to increase the fee dynamically to accelerate confirmation.

Enhanced client experience: By empowering clients to manage their transactions post-broadcast, RBF contributes to a smooth and more efficient transaction experience, particularly during periods of network congestion.

Empowering BitGo Clients

As demonstrated by BitGo’s recent integration, RBF is increasingly becoming a standard feature in Bitcoin wallets, enhancing the overall client experience and ensuring smooth transaction processing despite network congestion or unexpected errors. With RBF at their disposal, Bitcoin clients can confidently navigate the complexities of the network, knowing that they have the tools to adapt and optimize transactions as needed including the flexibility to interact with the Bitcoin network seamlessly, such as:

• Clients will have an option to signal for RBF in their withdrawals by enabling Transaction Acceleration in the withdrawal flow. Similarly, they will be able to see if a withdrawal is enabled for Transaction Acceleration in the Transfers detail view.

• Clients will have an option to accelerate their low-fee stuck transaction in the Stuck Transactions tab using RBF if the client had enabled Transaction Acceleration previously. This is in addition to the already present ability to accelerate the stuck transaction using CPFP.
• Clients will be able to see the replacement details on the transfer when a stuck transaction is accelerated via RBF

• For internal management transactions such as consolidations and fanouts, BitGo will, by default, signal for RBF so that later these transactions can be accelerated easily if such transactions get stuck.
• API users will be able to accelerate the transaction using the APIs by passing the new RBF-related request parameters. See more details in the BitGo Developer Portal.

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FAQs about BitGo’s RBF Bitcoin functionality:

What is Replace-By-Fee?

• Replace-By-Fee (RBF) is a functionality in Bitcoin that allows clients to replace an unconfirmed transaction with a new one that includes a higher fee. This feature is particularly useful when a Bitcoin transaction gets stuck due to low fees or network congestion.

Why would I need to use RBF?

• RBF is useful in scenarios where a Bitcoin transaction is not getting confirmed due to low fees or high network congestion. By creating a new transaction with a higher fee, clients can expedite the confirmation process.

Can I use RBF to increase the fee of any Bitcoin transaction?

• RBF can be used for bitcoin transactions that have enabled RBF on withdrawal within a BitGo wallet.

Does RBF impact the security of Bitcoin transactions?

• RBF itself does not inherently impact the security of Bitcoin transactions.

Can RBF be used for small transactions?

• Yes. RBF can technically be used for any Bitcoin transaction, including small transactions. However, clients should consider whether the increased fees associated with RBF are justified for smaller transactions.

Are there alternatives to RBF for accelerating Bitcoin transactions?

• Yes, there are alternatives to RBF, such as Child-Pays-for-Parent (CPFP), which involves spending the unconfirmed output of a transaction with a high fee to incentivize miners to confirm its parent transaction. For CPFP, both the sender and the receiver can accelerate transactions, while only the sender can via RBF.

Can I disable RBF if I don’t want to use it?

• Yes. BitGo’s Bitcoin wallet allows clients to disable RBF if they prefer not to use it.

Does RBF affect the overall scalability of the Bitcoin network?

• RBF itself does not significantly affect the overall scalability of the Bitcoin network. However, it can help improve the client experience by allowing for more flexible fee management in times of network congestion.

About BitGo

BitGo, founded in 2013, is a leading provider of secure digital asset wallet solutions, offering institutional-grade custody, staking, trading, and core wallet infrastructure. Notably, it pioneered the multi-signature wallet and launched BitGo Trust Company in 2018, the first qualified custodian for digital assets. With a $250 million insurance policy, SOC 1 Type 2 and SOC 2 Type 2 certifications, and rigorous regulatory compliance, BitGo ensures high standards of security and confidentiality. Expanding its services, BitGo introduced institutional-grade DeFi, NFT, web3 offerings, and the Go Network. In 2023, it secured $100M Series C financing, valuing the company at $1.75B. BitGo supports 700+ digital assets, processes 20% of on-chain Bitcoin transactions, and serves over 1,500 institutional clients across 50 countries.

For more information, please visit www.bitgo.com.

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