BIP 125 (Replace-by-Fee)

BIP 125, known as replace-by-fee or RBF, is the 2015 bitcoin protocol standard that lets a sender replace an unconfirmed transaction with a new version paying a higher fee. It formalized opt-in signaling so wallets and nodes could handle replacements predictably.

Why it matters

Bitcoin fees are a live auction for scarce block space, and users routinely misjudge it. Before RBF, a transaction sent with too low a fee could sit unconfirmed for days with no clean remedy. RBF turns the mistake into an adjustment: broadcast a replacement spending the same coins with a better fee, and miners, who profit from the upgrade, adopt it. The design also clarified an old truth, that unconfirmed transactions were never safe to rely on, since nothing in bitcoin's rules guarantees which version of a pending payment gets mined.

How it works

Under BIP 125, a transaction signals replaceability by setting the sequence field of any input below the maximum value. A valid replacement must spend at least one of the same inputs, pay a higher fee, and cover the network cost of relaying itself, rules that prevent spam through endless cheap replacements. Merchants responded by treating zero-confirmation payments as provisional, waiting for at least one block before releasing goods. Recent Bitcoin Core releases go further, treating effectively all unconfirmed transactions as replaceable regardless of signaling, completing the shift RBF began: finality in bitcoin comes from confirmations, never from a transaction merely being seen by the network.