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What is Replace-By-Fee (RBF)?
Shailee Adinolfi
&
Annie Pei
General Wallet Use
New protocols and increasing adoption are driving up the number of Bitcoin transactions on-chain every day. High transaction volumes are a good thing, but they can also lead to slower transaction confirmations. That's why Replace-By-Fee (RBF) can help manage congestion delays, even when the Bitcoin network is very busy.
What is Replace-By-Fee?
Replace-By-Fee (RBF) is a practical feature embedded in the Bitcoin network that allows users to pay for transaction priority. RBF makes it possible to replace an unconfirmed transaction with a new one that includes a higher transaction fee. This prevents transactions from getting stuck in the mempool—a place where unconfirmed transactions await inclusion in a block—because of insufficient funds.
When the Bitcoin network is congested, transactions with low fees can have longer confirmation times. Bitcoin miners, who are responsible for processing transactions, prioritize the ones with higher fees because they are more profitable. RBF addresses this challenge by enabling users to increase the fee of their transaction after it has been sent. This also increases its attractiveness to miners for faster confirmation.
How Does RBF Work?
When you initiate a Bitcoin transaction on Leather, it’s possible to set a low, standard, or high fee. The higher the fee, the faster your transaction will be confirmed. During low traffic times or when a transaction is not urgent, a low fee option may save on costs. But sometimes a user can misjudge traffic or find their transaction stuck.
If a transaction with a low fee remains unconfirmed in the mempool, RBF is an option to add fees and increase its likelihood of being confirmed. Using RBF, you can broadcast a new version of the same transaction but with a higher fee. This revised transaction retains the same inputs—mainly the source of the Bitcoin—but offers a higher fee to incentivize miners to prioritize it in the next block they mine. Once the new transaction is confirmed, the original unconfirmed transaction is automatically dropped from the mempool.
There are two primary types of RBF.
Full RBF allows a transaction to be replaced multiple times with progressively higher fees until it is confirmed.
Opt-In RBF requires the transaction to be initially marked as replaceable by setting a specific field (nSequence) to a value below a predefined threshold. This ensures only transactions explicitly marked for replacement can benefit from RBF.
Why Use RBF?
Using Replace-By-Fee (RBF) is easy and straightforward with Bitcoin wallets like Leather, which provides a user-friendly interface to configure transaction fees and manage transactions effectively.
A user-focused Bitcoin wallet that integrates the latest features and supports the most popular integrations will make your Bitcoin experience extremely versatile.
Here’s how to use RBF in a transaction using Leather wallet:
After sending a transaction, if it gets stuck due to a low fee, go to the “Activity” tab in your Leather wallet
Choose “Increase fee” on the transaction you want to modify
Set the increase amount and submit
Every wallet may have slightly different steps for using RBF. Follow the specific instructions provided by your wallet. This typically involves selecting the transaction you want to replace, choosing a higher fee, and confirming the changes.
Once you’re done, keep an eye on the status of your transaction in the wallet's activity or transaction history. Wallets like Leather will show the current fee rate, transaction ID, and status (pending, confirmed, etc.).
Make sure you’re always aware of the risks associated with RBF, such as the potential for double-spending and transaction errors. Use RBF judiciously, especially during times of high network activity.
Conclusion
Bitcoin has long held its position as the most secure and decentralized blockchain in the world. But it has not always been known as the fastest or cheapest blockchain for sending transactions. Tools and features like Replace-By-Fee and even emerging layer-2 solutions that help with network congestion and transaction speed are becoming more important.
As the Bitcoin ecosystem grows and more use cases become available, speed, efficiency, and cost effectiveness will remain a priority. Wallets like Leather, which provide all the best features in a user-friendly interface, make your Bitcoin experience better. And tools like RBF are steps forward on the path to solving long standing blockchain challenges.