Learning-Bitcoin-from-the-Command-Line/5_3_Funding_a_Transaction_with_CPFP.md

5.3: Funding a Transaction with CPFP

NOTE: This is a draft in progress, so that I can get some feedback from early reviewers. It is not yet ready for learning.

If your Bitcoin transaction is stuck, and you're the recipient, you can clear it using CPFP (child-pays-for-parent). This is alternative to the sender's ability to do so with RBF.

VERSION WARNING: This is an innovation from Bitcoin Core v 0.13.0, which means that many miners should be using it, but not necessarily all of them.

Understand How CPFP Works

RBF was all about the sender. He messed up and needed to increase the fee, or he wanted to be smart and combine transactions for a variety of reasons. It was a powerful sender-oriented feature. In some ways, CPFP is RBF's opposite, because it empowers the recipient who knows that his money hasn't arrived yet and wants to speed it up. However, it's also a much simpler feature, with less wide applicability.

Basically, the idea of CPFP is that a recipient has a transaction that hasn't been confimed in a block that he wants to spend. So, he includes that unconfirmed transaction in a new transaction and pays a high-enough fee to encourage a miner to include both the original (parent) transaction and the new (child) transaction in a block. As a result, the parent and child transactions clear simultaneously.

It should be noted that CPFP is not a new protocol feature, like RBF. It's just a new incentivization scheme that can be used for transaction selection by miners. This also means that it's not as reliable as a protocol change like RBF: there might be reaosns that the parent is never put into a block, and that will prevent the child from ever bring put into a block.

Spend Unconfirmed UTXOs

Funding a transaction with CPFP is a very simple process using the methods you're already familiar with:

1. Find the txid and vout of the unconfirmed transaction. This may be the trickiest part, as bitcoin-cli generally tries to protect you from unconfirmed transactions. The sender might be able to send you this info; even with just the txid, you should be able to figure out the vout in a blockchain explorer.

You do have one other option: bitcoin-cli getmempool, which can be used to list the contents of your entire mempool, where the unconfirmed transactions will be. You can then get more information on a specific transaction:

$ bitcoin-cli getrawmempool
[
"4460175e8276d5a1935f6136e36868a0a3561532d44ddffb09b7cb878f76f927"
]

user1@blockstream:~$ bitcoin-cli getrawtransaction 4460175e8276d5a1935f6136e36868a0a3561532d44ddffb09b7cb878f76f927 1
{
"hex": "02000000014e843e22cb8ee522fbf4d8a0967a733685d2ad92697e63f52ce41bec8f7c8ac0020000006b483045022100a2a9bba6acb1f3b8519ccc7b7805cbfc9cd218ba913105a971d99a15fa84356e022039190918bbde569608a80d53cc6fc81655b42302c0486a7dfdf31393e6b6de4a0121029f39b2a19943fadbceb6697dbc859d4a53fcd3f9a8d2c8d523df2037e7c32a71010000000280969800000000001976a914e7c1345fc8f87c68170b3aa798a956c2fe6a9eff88ac804a5d05000000001976a914c101d8c34de7b8d83b3f8d75416ffaea871d664988ac00000000",
"txid": "4460175e8276d5a1935f6136e36868a0a3561532d44ddffb09b7cb878f76f927",
"hash": "4460175e8276d5a1935f6136e36868a0a3561532d44ddffb09b7cb878f76f927",
"size": 226,
"vsize": 226,
"version": 2,
"locktime": 0,
"vin": [
 {
   "txid": "c08a7c8fec1be42cf5637e6992add28536737a96a0d8f4fb22e58ecb223e844e",
   "vout": 2,
   "scriptSig": {
     "asm": "3045022100a2a9bba6acb1f3b8519ccc7b7805cbfc9cd218ba913105a971d99a15fa84356e022039190918bbde569608a80d53cc6fc81655b42302c0486a7dfdf31393e6b6de4a[ALL] 029f39b2a19943fadbceb6697dbc859d4a53fcd3f9a8d2c8d523df2037e7c32a71",
     "hex": "483045022100a2a9bba6acb1f3b8519ccc7b7805cbfc9cd218ba913105a971d99a15fa84356e022039190918bbde569608a80d53cc6fc81655b42302c0486a7dfdf31393e6b6de4a0121029f39b2a19943fadbceb6697dbc859d4a53fcd3f9a8d2c8d523df2037e7c32a71"
   },
   "sequence": 1
 }
],
"vout": [
 {
   "value": 0.10000000,
   "n": 0,
   "scriptPubKey": {
     "asm": "OP_DUP OP_HASH160 e7c1345fc8f87c68170b3aa798a956c2fe6a9eff OP_EQUALVERIFY OP_CHECKSIG",
     "hex": "76a914e7c1345fc8f87c68170b3aa798a956c2fe6a9eff88ac",
     "reqSigs": 1,
     "type": "pubkeyhash",
     "addresses": [
       "n2eMqTT929pb1RDNuqEnxdaLau1rxy3efi"
     ]
   }
 }, 
 {
   "value": 0.90000000,
   "n": 1,
   "scriptPubKey": {
     "asm": "OP_DUP OP_HASH160 c101d8c34de7b8d83b3f8d75416ffaea871d6649 OP_EQUALVERIFY OP_CHECKSIG",
     "hex": "76a914c101d8c34de7b8d83b3f8d75416ffaea871d664988ac",
     "reqSigs": 1,
     "type": "pubkeyhash",
     "addresses": [
       "my7UvPbPWDbqCxYpAcUZELDbK1X7w9Whmc"
     ]
   }
 }
]
}

2. Create a raw transaction using your unconfirmed transaction an input.
3. Double the transaction fees (or more).
4. Cross your fingers.

That's really all there is to it.

Be Aware of Nuances

Though CPFP is usually described as being about a recipient using a new transaction to pay for an old one that hasn't been confirmed, there's nuance to this.

A sender could use CPFP to free up a transaction if he received change from it. He would just use that change as his input, and the resultant use of CPFP would free up the entire transaction. Mind you, he'd do better to use RBF as long as it was enabled, as the total fees would then be lower.

A recipient could use CPFP even if he wasn't planning on immediately spending the money, for example if he's worried that the funds may not be resent if the transaction expires. In this case, he just creates a child transaction that sends all the money (minus a transaction fee) to a change address.

Summary: Funding a Transaction with CPFP

You can take advantage of the CPFP incentives to free up funds that have been sent to you but have not been confirmed. Just use the unconfirmed transaction as UTXO and pay a higher-than-average transaction fee.

What is the power of CPFP? Mostly, CPFP is just useful to get funds unstuck when you're the recipient and the sender isn't being helpful for whatever reason. It doesn't have the more powerful possibilities of RBF, but is an alternatve way toexert control over a transaction after it's been placed in the mempool, but before it's confirmed in a block.