Merge bitcoin/bitcoin#28984: Cluster size 2 package rbf

94ed4fbf8e1a396c650b5134d396d6c0be35ce10 Add release note for size 2 package rbf (Greg Sanders)
afd52d8e63ed323a159ea49fd1f10542abeacb97 doc: update package RBF comment (Greg Sanders)
6e3c4394cfadf32c06c8c4732d136ca10c316721 mempool: Improve logging of replaced transactions (Greg Sanders)
d3466e4cc5051c314873dd14ec8f7a88494c0780 CheckPackageMempoolAcceptResult: Check package rbf invariants (Greg Sanders)
316d7b63c97144ba3e21201315c784852210f8ff Fuzz: pass mempool to CheckPackageMempoolAcceptResult (Greg Sanders)
4d15bcf448eb3c4451b63e8f78cc61f3f9f9b639 [test] package rbf (glozow)
dc21f61c72e5a97d974ca2c5cb70b8328f4fab2a [policy] package rbf (Suhas Daftuar)
5da396781589177d4ceb3b4b59c9f309a5e4d029 PackageV3Checks: Relax assumptions (Greg Sanders)

Pull request description:

  Allows any 2 transaction package with no in-mempool ancestors to do package RBF when directly conflicting with other mempool clusters of size two or less.

  Proposed validation steps:
  1) If the transaction package is of size 1, legacy rbf rules apply.
  2) Otherwise the transaction package consists of a (parent, child) pair with no other in-mempool ancestors (or descendants, obviously), so it is also going to create a cluster of size 2. If larger, fail.
  3) The package rbf may not evict more than 100 transactions from the mempool(bip125 rule 5)
  4) The package is a single chunk
  5) Every directly conflicted mempool transaction is connected to at most 1 other in-mempool transaction (ie the cluster size of the conflict is at most 2).
  6) Diagram check: We ensure that the replacement is strictly superior, improving the mempool
  7) The total fee of the package, minus the total fee of what is being evicted, is at least the minrelayfee * size of the package (equivalent to bip125 rule 3 and 4)

  Post-cluster mempool this will likely be expanded to general package rbf, but this is what we can safely support today.

ACKs for top commit:
  achow101:
    ACK 94ed4fbf8e1a396c650b5134d396d6c0be35ce10
  glozow:
    reACK 94ed4fbf8e via range-diff
  ismaelsadeeq:
    re-ACK 94ed4fbf8e1a396c650b5134d396d6c0be35ce10
  theStack:
    Code-review ACK 94ed4fbf8e1a396c650b5134d396d6c0be35ce10
  murchandamus:
    utACK 94ed4fbf8e1a396c650b5134d396d6c0be35ce10

Tree-SHA512: 9bd383e695964f362f147482bbf73b1e77c4d792bda2e91d7f30d74b3540a09146a5528baf86854a113005581e8c75f04737302517b7d5124296bd7a151e3992

9 files changed, 916 insertions, 34 deletions

diff --git a/doc/policy/packages.md b/doc/policy/packages.md
index 7e983221c5..a220bdd17f 100644
--- a/doc/policy/packages.md
+++ b/doc/policy/packages.md
@@ -36,10 +36,29 @@ The following rules are enforced for all packages:
 * Packages cannot have conflicting transactions, i.e. no two transactions in a package can spend
    the same inputs. Packages cannot have duplicate transactions. (#20833)
 
-* No transaction in a package can conflict with a mempool transaction. Replace By Fee is
-  currently disabled for packages. (#20833)
+* Only limited package replacements are currently considered. (#28984)
 
-   - Package RBF may be enabled in the future.
+   - All direct conflicts must signal replacement (or have `-mempoolfullrbf=1` set).
+
+   - Packages are 1-parent-1-child, with no in-mempool ancestors of the package.
+
+   - All conflicting clusters(connected components of mempool transactions) must be clusters of up to size 2.
+
+   - No more than MAX_REPLACEMENT_CANDIDATES transactions can be replaced, analogous to
+     regular [replacement rule](./mempool-replacements.md) 5).
+
+   - Replacements must pay more total total fees at the incremental relay fee (analogous to
+     regular [replacement rules](./mempool-replacements.md) 3 and 4).
+
+   - Parent feerate must be lower than package feerate.
+
+   - Must improve [feerate diagram](https://delvingbitcoin.org/t/mempool-incentive-compatibility/553). (#29242)
+
+   - *Rationale*: Basic support for package RBF can be used by wallets
+     by making chains of no longer than two, then directly conflicting
+     those chains when needed. Combined with V3 transactions this can
+     result in more robust fee bumping. More general package RBF may be
+     enabled in the future.
 
 * When packages are evaluated against ancestor/descendant limits, the union of all transactions'
   descendants and ancestors is considered. (#21800)
diff --git a/doc/release-28984.md b/doc/release-28984.md
new file mode 100644
index 0000000000..3da64f6578
--- /dev/null
+++ b/doc/release-28984.md
@@ -0,0 +1,6 @@
+P2P and network changes
+-----------------------
+
+- Limited package RBF is now enabled, where the proposed conflicting package would result in
+  a connected component, aka cluster, of size 2 in the mempool. All clusters being conflicted
+  against must be of size 2 or lower.
diff --git a/src/policy/v3_policy.cpp b/src/policy/v3_policy.cpp
index bcf0b2b236..6bd043b8e3 100644
--- a/src/policy/v3_policy.cpp
+++ b/src/policy/v3_policy.cpp
@@ -91,7 +91,6 @@ std::optional<std::string> PackageV3Checks(const CTransactionRef& ptx, int64_t v
             const auto parent_info = [&] {
                 if (mempool_ancestors.size() > 0) {
                     auto& mempool_parent = *mempool_ancestors.begin();
-                    Assume(mempool_parent->GetCountWithDescendants() == 1);
                     return ParentInfo{mempool_parent->GetTx().GetHash(),
                                       mempool_parent->GetTx().GetWitnessHash(),
                                       mempool_parent->GetTx().version,
@@ -135,10 +134,7 @@ std::optional<std::string> PackageV3Checks(const CTransactionRef& ptx, int64_t v
                 }
             }
 
-            // It shouldn't be possible to have any mempool siblings at this point. SingleV3Checks
-            // catches mempool siblings and sibling eviction is not extended to packages. Also, if the package consists of connected transactions,
-            // any tx having a mempool ancestor would mean the package exceeds ancestor limits.
-            if (!Assume(!parent_info.m_has_mempool_descendant)) {
+            if (parent_info.m_has_mempool_descendant) {
                 return strprintf("tx %s (wtxid=%s) would exceed descendant count limit",
                                 parent_info.m_txid.ToString(), parent_info.m_wtxid.ToString());
             }
diff --git a/src/test/fuzz/package_eval.cpp b/src/test/fuzz/package_eval.cpp
index 122543ebad..53aedf23ea 100644
--- a/src/test/fuzz/package_eval.cpp
+++ b/src/test/fuzz/package_eval.cpp
@@ -314,7 +314,7 @@ FUZZ_TARGET(tx_package_eval, .init = initialize_tx_pool)
             // just use result_package.m_state here. This makes the expect_valid check meaningless, but
             // we can still verify that the contents of m_tx_results are consistent with m_state.
             const bool expect_valid{result_package.m_state.IsValid()};
-            Assert(!CheckPackageMempoolAcceptResult(txs, result_package, expect_valid, nullptr));
+            Assert(!CheckPackageMempoolAcceptResult(txs, result_package, expect_valid, &tx_pool));
         } else {
             // This is empty if it fails early checks, or "full" if transactions are looked at deeper
             Assert(result_package.m_tx_results.size() == txs.size() || result_package.m_tx_results.empty());
diff --git a/src/test/txpackage_tests.cpp b/src/test/txpackage_tests.cpp
index d5f3412aed..478121cc6f 100644
--- a/src/test/txpackage_tests.cpp
+++ b/src/test/txpackage_tests.cpp
@@ -6,6 +6,7 @@
 #include <key_io.h>
 #include <policy/packages.h>
 #include <policy/policy.h>
+#include <policy/rbf.h>
 #include <primitives/transaction.h>
 #include <script/script.h>
 #include <serialize.h>
@@ -938,4 +939,147 @@ BOOST_FIXTURE_TEST_CASE(package_cpfp_tests, TestChain100Setup)
         BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
     }
 }
+
+BOOST_FIXTURE_TEST_CASE(package_rbf_tests, TestChain100Setup)
+{
+    mineBlocks(5);
+    LOCK(::cs_main);
+    size_t expected_pool_size = m_node.mempool->size();
+    CKey child_key{GenerateRandomKey()};
+    CScript parent_spk = GetScriptForDestination(WitnessV0KeyHash(child_key.GetPubKey()));
+    CKey grandchild_key{GenerateRandomKey()};
+    CScript child_spk = GetScriptForDestination(WitnessV0KeyHash(grandchild_key.GetPubKey()));
+
+    const CAmount coinbase_value{50 * COIN};
+    // Test that de-duplication works. This is not actually package rbf.
+    {
+        // 1 parent paying 200sat, 1 child paying 300sat
+        Package package1;
+        // 1 parent paying 200sat, 1 child paying 500sat
+        Package package2;
+        // Package1 and package2 have the same parent. The children conflict.
+        auto mtx_parent = CreateValidMempoolTransaction(/*input_transaction=*/m_coinbase_txns[0], /*input_vout=*/0,
+                                                        /*input_height=*/0, /*input_signing_key=*/coinbaseKey,
+                                                        /*output_destination=*/parent_spk,
+                                                        /*output_amount=*/coinbase_value - low_fee_amt, /*submit=*/false);
+        CTransactionRef tx_parent = MakeTransactionRef(mtx_parent);
+        package1.push_back(tx_parent);
+        package2.push_back(tx_parent);
+
+        CTransactionRef tx_child_1 = MakeTransactionRef(CreateValidMempoolTransaction(tx_parent, 0, 101, child_key, child_spk, coinbase_value - low_fee_amt - 300, false));
+        package1.push_back(tx_child_1);
+        CTransactionRef tx_child_2 = MakeTransactionRef(CreateValidMempoolTransaction(tx_parent, 0, 101, child_key, child_spk, coinbase_value - low_fee_amt - 500, false));
+        package2.push_back(tx_child_2);
+
+        LOCK(m_node.mempool->cs);
+        const auto submit1 = ProcessNewPackage(m_node.chainman->ActiveChainstate(), *m_node.mempool, package1, /*test_accept=*/false, std::nullopt);
+        if (auto err_1{CheckPackageMempoolAcceptResult(package1, submit1, /*expect_valid=*/true, m_node.mempool.get())}) {
+            BOOST_ERROR(err_1.value());
+        }
+
+        // Check precise ResultTypes and mempool size. We know it_parent_1 and it_child_1 exist from above call
+        auto it_parent_1 = submit1.m_tx_results.find(tx_parent->GetWitnessHash());
+        auto it_child_1 = submit1.m_tx_results.find(tx_child_1->GetWitnessHash());
+        BOOST_CHECK_EQUAL(it_parent_1->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(it_child_1->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        expected_pool_size += 2;
+        BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
+
+        const auto submit2 = ProcessNewPackage(m_node.chainman->ActiveChainstate(), *m_node.mempool, package2, /*test_accept=*/false, std::nullopt);
+        if (auto err_2{CheckPackageMempoolAcceptResult(package2, submit2, /*expect_valid=*/true, m_node.mempool.get())}) {
+            BOOST_ERROR(err_2.value());
+        }
+
+        // Check precise ResultTypes and mempool size. We know it_parent_2 and it_child_2 exist from above call
+        auto it_parent_2 = submit2.m_tx_results.find(tx_parent->GetWitnessHash());
+        auto it_child_2 = submit2.m_tx_results.find(tx_child_2->GetWitnessHash());
+        BOOST_CHECK_EQUAL(it_parent_2->second.m_result_type, MempoolAcceptResult::ResultType::MEMPOOL_ENTRY);
+        BOOST_CHECK_EQUAL(it_child_2->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
+
+        // child1 has been replaced
+        BOOST_CHECK(!m_node.mempool->exists(GenTxid::Txid(tx_child_1->GetHash())));
+    }
+
+    // Test package rbf.
+    {
+        CTransactionRef tx_parent_1 = MakeTransactionRef(CreateValidMempoolTransaction(
+            m_coinbase_txns[1], /*input_vout=*/0, /*input_height=*/0,
+            coinbaseKey, parent_spk, coinbase_value - 200, /*submit=*/false));
+        CTransactionRef tx_child_1 = MakeTransactionRef(CreateValidMempoolTransaction(
+            tx_parent_1, /*input_vout=*/0, /*input_height=*/101,
+            child_key, child_spk, coinbase_value - 400, /*submit=*/false));
+
+        CTransactionRef tx_parent_2 = MakeTransactionRef(CreateValidMempoolTransaction(
+            m_coinbase_txns[1], /*input_vout=*/0, /*input_height=*/0,
+            coinbaseKey, parent_spk, coinbase_value - 800, /*submit=*/false));
+        CTransactionRef tx_child_2 = MakeTransactionRef(CreateValidMempoolTransaction(
+            tx_parent_2, /*input_vout=*/0, /*input_height=*/101,
+            child_key, child_spk, coinbase_value - 800 - 200, /*submit=*/false));
+
+        CTransactionRef tx_parent_3 = MakeTransactionRef(CreateValidMempoolTransaction(
+            m_coinbase_txns[1], /*input_vout=*/0, /*input_height=*/0,
+            coinbaseKey, parent_spk, coinbase_value - 199, /*submit=*/false));
+        CTransactionRef tx_child_3 = MakeTransactionRef(CreateValidMempoolTransaction(
+            tx_parent_3, /*input_vout=*/0, /*input_height=*/101,
+            child_key, child_spk, coinbase_value - 199 - 1300, /*submit=*/false));
+
+        // In all packages, the parents conflict with each other
+        BOOST_CHECK(tx_parent_1->GetHash() != tx_parent_2->GetHash() && tx_parent_2->GetHash() != tx_parent_3->GetHash());
+
+        // 1 parent paying 200sat, 1 child paying 200sat.
+        Package package1{tx_parent_1, tx_child_1};
+        // 1 parent paying 800sat, 1 child paying 200sat.
+        Package package2{tx_parent_2, tx_child_2};
+        // 1 parent paying 199sat, 1 child paying 1300sat.
+        Package package3{tx_parent_3, tx_child_3};
+
+        const auto submit1 = ProcessNewPackage(m_node.chainman->ActiveChainstate(), *m_node.mempool, package1, false, std::nullopt);
+        if (auto err_1{CheckPackageMempoolAcceptResult(package1, submit1, /*expect_valid=*/true, m_node.mempool.get())}) {
+            BOOST_ERROR(err_1.value());
+        }
+        auto it_parent_1 = submit1.m_tx_results.find(tx_parent_1->GetWitnessHash());
+        auto it_child_1 = submit1.m_tx_results.find(tx_child_1->GetWitnessHash());
+        BOOST_CHECK_EQUAL(it_parent_1->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(it_child_1->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        expected_pool_size += 2;
+        BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
+
+        // This replacement is actually not package rbf; the parent carries enough fees
+        // to replace the entire package on its own.
+        const auto submit2 = ProcessNewPackage(m_node.chainman->ActiveChainstate(), *m_node.mempool, package2, false, std::nullopt);
+        if (auto err_2{CheckPackageMempoolAcceptResult(package2, submit2, /*expect_valid=*/true, m_node.mempool.get())}) {
+            BOOST_ERROR(err_2.value());
+        }
+        auto it_parent_2 = submit2.m_tx_results.find(tx_parent_2->GetWitnessHash());
+        auto it_child_2 = submit2.m_tx_results.find(tx_child_2->GetWitnessHash());
+        BOOST_CHECK_EQUAL(it_parent_2->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(it_child_2->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
+
+        // Package RBF, in which the replacement transaction's child sponsors the fees to meet RBF feerate rules
+        const auto submit3 = ProcessNewPackage(m_node.chainman->ActiveChainstate(), *m_node.mempool, package3, false, std::nullopt);
+        if (auto err_3{CheckPackageMempoolAcceptResult(package3, submit3, /*expect_valid=*/true, m_node.mempool.get())}) {
+            BOOST_ERROR(err_3.value());
+        }
+        auto it_parent_3 = submit3.m_tx_results.find(tx_parent_3->GetWitnessHash());
+        auto it_child_3 = submit3.m_tx_results.find(tx_child_3->GetWitnessHash());
+        BOOST_CHECK_EQUAL(it_parent_3->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+        BOOST_CHECK_EQUAL(it_child_3->second.m_result_type, MempoolAcceptResult::ResultType::VALID);
+
+        // package3 was considered as a package to replace both package2 transactions
+        BOOST_CHECK(it_parent_3->second.m_replaced_transactions.size() == 2);
+        BOOST_CHECK(it_child_3->second.m_replaced_transactions.empty());
+
+        std::vector<Wtxid> expected_package3_wtxids({tx_parent_3->GetWitnessHash(), tx_child_3->GetWitnessHash()});
+        const auto package3_total_vsize{GetVirtualTransactionSize(*tx_parent_3) + GetVirtualTransactionSize(*tx_child_3)};
+        BOOST_CHECK(it_parent_3->second.m_wtxids_fee_calculations.value() == expected_package3_wtxids);
+        BOOST_CHECK(it_child_3->second.m_wtxids_fee_calculations.value() == expected_package3_wtxids);
+        BOOST_CHECK_EQUAL(it_parent_3->second.m_effective_feerate.value().GetFee(package3_total_vsize), 199 + 1300);
+        BOOST_CHECK_EQUAL(it_child_3->second.m_effective_feerate.value().GetFee(package3_total_vsize), 199 + 1300);
+
+        BOOST_CHECK_EQUAL(m_node.mempool->size(), expected_pool_size);
+    }
+
+}
 BOOST_AUTO_TEST_SUITE_END()
diff --git a/src/test/util/txmempool.cpp b/src/test/util/txmempool.cpp
index 249ce9503c..94d50bba50 100644
--- a/src/test/util/txmempool.cpp
+++ b/src/test/util/txmempool.cpp
@@ -7,6 +7,7 @@
 #include <chainparams.h>
 #include <node/context.h>
 #include <node/mempool_args.h>
+#include <policy/rbf.h>
 #include <policy/v3_policy.h>
 #include <txmempool.h>
 #include <util/check.h>
@@ -68,6 +69,28 @@ std::optional<std::string> CheckPackageMempoolAcceptResult(const Package& txns,
             return strprintf("tx %s unexpectedly failed: %s", wtxid.ToString(), atmp_result.m_state.ToString());
         }
 
+        // Each subpackage is allowed MAX_REPLACEMENT_CANDIDATES replacements (only checking individually here)
+        if (atmp_result.m_replaced_transactions.size() > MAX_REPLACEMENT_CANDIDATES) {
+            return strprintf("tx %s result replaced too many transactions",
+                                wtxid.ToString());
+        }
+
+        // Replacements can't happen for subpackages larger than 2
+        if (!atmp_result.m_replaced_transactions.empty() &&
+            atmp_result.m_wtxids_fee_calculations.has_value() && atmp_result.m_wtxids_fee_calculations.value().size() > 2) {
+             return strprintf("tx %s was part of a too-large package RBF subpackage",
+                                wtxid.ToString());
+        }
+
+        if (!atmp_result.m_replaced_transactions.empty() && mempool) {
+            LOCK(mempool->cs);
+            // If replacements occurred and it used 2 transactions, this is a package RBF and should result in a cluster of size 2
+            if (atmp_result.m_wtxids_fee_calculations.has_value() && atmp_result.m_wtxids_fee_calculations.value().size() == 2) {
+                const auto cluster = mempool->GatherClusters({tx->GetHash()});
+                if (cluster.size() != 2) return strprintf("tx %s has too many ancestors or descendants for a package rbf", wtxid.ToString());
+            }
+        }
+
         // m_vsize and m_base_fees should exist iff the result was VALID or MEMPOOL_ENTRY
         const bool mempool_entry{atmp_result.m_result_type == MempoolAcceptResult::ResultType::MEMPOOL_ENTRY};
         if (atmp_result.m_base_fees.has_value() != (valid || mempool_entry)) {
@@ -108,6 +131,11 @@ std::optional<std::string> CheckPackageMempoolAcceptResult(const Package& txns,
                     return strprintf("wtxid %s should not be in mempool", wtxid.ToString());
                 }
             }
+            for (const auto& tx_ref : atmp_result.m_replaced_transactions) {
+                if (mempool->exists(GenTxid::Txid(tx_ref->GetHash()))) {
+                    return strprintf("tx %s should not be in mempool as it was replaced", tx_ref->GetWitnessHash().ToString());
+                }
+            }
         }
     }
     return std::nullopt;
diff --git a/src/validation.cpp b/src/validation.cpp
index cf9bfe0e2b..c34d60f137 100644
--- a/src/validation.cpp
+++ b/src/validation.cpp
@@ -525,7 +525,7 @@ public:
                             /* m_bypass_limits */ false,
                             /* m_coins_to_uncache */ coins_to_uncache,
                             /* m_test_accept */ false,
-                            /* m_allow_replacement */ false,
+                            /* m_allow_replacement */ true,
                             /* m_allow_sibling_eviction */ false,
                             /* m_package_submission */ true,
                             /* m_package_feerates */ true,
@@ -603,8 +603,8 @@ public:
     /**
      * Submission of a subpackage.
      * If subpackage size == 1, calls AcceptSingleTransaction() with adjusted ATMPArgs to avoid
-     * package policy restrictions like no CPFP carve out (PackageMempoolChecks) and disabled RBF
-     * (m_allow_replacement), and creates a PackageMempoolAcceptResult wrapping the result.
+     * package policy restrictions like no CPFP carve out (PackageMempoolChecks)
+     * and creates a PackageMempoolAcceptResult wrapping the result.
      *
      * If subpackage size > 1, calls AcceptMultipleTransactions() with the provided ATMPArgs.
      *
@@ -667,12 +667,13 @@ private:
     // only tests that are fast should be done here (to avoid CPU DoS).
     bool PreChecks(ATMPArgs& args, Workspace& ws) EXCLUSIVE_LOCKS_REQUIRED(cs_main, m_pool.cs);
 
-    // Run checks for mempool replace-by-fee.
+    // Run checks for mempool replace-by-fee, only used in AcceptSingleTransaction.
     bool ReplacementChecks(Workspace& ws) EXCLUSIVE_LOCKS_REQUIRED(cs_main, m_pool.cs);
 
     // Enforce package mempool ancestor/descendant limits (distinct from individual
-    // ancestor/descendant limits done in PreChecks).
+    // ancestor/descendant limits done in PreChecks) and run Package RBF checks.
     bool PackageMempoolChecks(const std::vector<CTransactionRef>& txns,
+                              std::vector<Workspace>& workspaces,
                               int64_t total_vsize,
                               PackageValidationState& package_state) EXCLUSIVE_LOCKS_REQUIRED(cs_main, m_pool.cs);
 
@@ -950,7 +951,7 @@ bool MemPoolAccept::PreChecks(ATMPArgs& args, Workspace& ws)
     ws.m_iters_conflicting = m_pool.GetIterSet(ws.m_conflicts);
 
     // Note that these modifications are only applicable to single transaction scenarios;
-    // carve-outs and package RBF are disabled for multi-transaction evaluations.
+    // carve-outs are disabled for multi-transaction evaluations.
     CTxMemPool::Limits maybe_rbf_limits = m_pool.m_opts.limits;
 
     // Calculate in-mempool ancestors, up to a limit.
@@ -1089,10 +1090,9 @@ bool MemPoolAccept::ReplacementChecks(Workspace& ws)
     //   descendant transaction of a direct conflict to pay a higher feerate than the transaction that
     //   might replace them, under these rules.
     if (const auto err_string{PaysMoreThanConflicts(ws.m_iters_conflicting, newFeeRate, hash)}) {
-        // Even though this is a fee-related failure, this result is TX_MEMPOOL_POLICY, not
-        // TX_RECONSIDERABLE, because it cannot be bypassed using package validation.
-        // This must be changed if package RBF is enabled.
-        return state.Invalid(TxValidationResult::TX_MEMPOOL_POLICY,
+        // This fee-related failure is TX_RECONSIDERABLE because validating in a package may change
+        // the result.
+        return state.Invalid(TxValidationResult::TX_RECONSIDERABLE,
                              strprintf("insufficient fee%s", ws.m_sibling_eviction ? " (including sibling eviction)" : ""), *err_string);
     }
 
@@ -1117,16 +1117,15 @@ bool MemPoolAccept::ReplacementChecks(Workspace& ws)
     }
     if (const auto err_string{PaysForRBF(m_subpackage.m_conflicting_fees, ws.m_modified_fees, ws.m_vsize,
                                          m_pool.m_opts.incremental_relay_feerate, hash)}) {
-        // Even though this is a fee-related failure, this result is TX_MEMPOOL_POLICY, not
-        // TX_RECONSIDERABLE, because it cannot be bypassed using package validation.
-        // This must be changed if package RBF is enabled.
-        return state.Invalid(TxValidationResult::TX_MEMPOOL_POLICY,
+        // Result may change in a package context
+        return state.Invalid(TxValidationResult::TX_RECONSIDERABLE,
                              strprintf("insufficient fee%s", ws.m_sibling_eviction ? " (including sibling eviction)" : ""), *err_string);
     }
     return true;
 }
 
 bool MemPoolAccept::PackageMempoolChecks(const std::vector<CTransactionRef>& txns,
+                                         std::vector<Workspace>& workspaces,
                                          const int64_t total_vsize,
                                          PackageValidationState& package_state)
 {
@@ -1137,12 +1136,88 @@ bool MemPoolAccept::PackageMempoolChecks(const std::vector<CTransactionRef>& txn
     assert(std::all_of(txns.cbegin(), txns.cend(), [this](const auto& tx)
                        { return !m_pool.exists(GenTxid::Txid(tx->GetHash()));}));
 
+    assert(txns.size() == workspaces.size());
+
     auto result = m_pool.CheckPackageLimits(txns, total_vsize);
     if (!result) {
         // This is a package-wide error, separate from an individual transaction error.
         return package_state.Invalid(PackageValidationResult::PCKG_POLICY, "package-mempool-limits", util::ErrorString(result).original);
     }
-   return true;
+
+    // No conflicts means we're finished. Further checks are all RBF-only.
+    if (!m_subpackage.m_rbf) return true;
+
+    // We're in package RBF context; replacement proposal must be size 2
+    if (workspaces.size() != 2 || !Assume(IsChildWithParents(txns))) {
+        return package_state.Invalid(PackageValidationResult::PCKG_POLICY, "package RBF failed: package must be 1-parent-1-child");
+    }
+
+    // If the package has in-mempool ancestors, we won't consider a package RBF
+    // since it would result in a cluster larger than 2.
+    // N.B. To relax this constraint we will need to revisit how CCoinsViewMemPool::PackageAddTransaction
+    // is being used inside AcceptMultipleTransactions to track available inputs while processing a package.
+    for (const auto& ws : workspaces) {
+        if (!ws.m_ancestors.empty()) {
+            return package_state.Invalid(PackageValidationResult::PCKG_POLICY, "package RBF failed: new transaction cannot have mempool ancestors");
+        }
+    }
+
+    // Aggregate all conflicts into one set.
+    CTxMemPool::setEntries direct_conflict_iters;
+    for (Workspace& ws : workspaces) {
+        // Aggregate all conflicts into one set.
+        direct_conflict_iters.merge(ws.m_iters_conflicting);
+    }
+
+    const auto& parent_ws = workspaces[0];
+    const auto& child_ws = workspaces[1];
+
+    // Don't consider replacements that would cause us to remove a large number of mempool entries.
+    // This limit is not increased in a package RBF. Use the aggregate number of transactions.
+    if (const auto err_string{GetEntriesForConflicts(*child_ws.m_ptx, m_pool, direct_conflict_iters,
+                                                     m_subpackage.m_all_conflicts)}) {
+        return package_state.Invalid(PackageValidationResult::PCKG_POLICY,
+                                     "package RBF failed: too many potential replacements", *err_string);
+    }
+
+    for (CTxMemPool::txiter it : m_subpackage.m_all_conflicts) {
+        m_subpackage.m_conflicting_fees += it->GetModifiedFee();
+        m_subpackage.m_conflicting_size += it->GetTxSize();
+    }
+
+    // Use the child as the transaction for attributing errors to.
+    const Txid& child_hash = child_ws.m_ptx->GetHash();
+    if (const auto err_string{PaysForRBF(/*original_fees=*/m_subpackage.m_conflicting_fees,
+                                         /*replacement_fees=*/m_subpackage.m_total_modified_fees,
+                                         /*replacement_vsize=*/m_subpackage.m_total_vsize,
+                                         m_pool.m_opts.incremental_relay_feerate, child_hash)}) {
+        return package_state.Invalid(PackageValidationResult::PCKG_POLICY,
+                                     "package RBF failed: insufficient anti-DoS fees", *err_string);
+    }
+
+    // Ensure this two transaction package is a "chunk" on its own; we don't want the child
+    // to be only paying anti-DoS fees
+    const CFeeRate parent_feerate(parent_ws.m_modified_fees, parent_ws.m_vsize);
+    const CFeeRate package_feerate(m_subpackage.m_total_modified_fees, m_subpackage.m_total_vsize);
+    if (package_feerate <= parent_feerate) {
+        return package_state.Invalid(PackageValidationResult::PCKG_POLICY,
+                                     "package RBF failed: package feerate is less than parent feerate",
+                                     strprintf("package feerate %s <= parent feerate is %s", package_feerate.ToString(), parent_feerate.ToString()));
+    }
+
+    // Check if it's economically rational to mine this package rather than the ones it replaces.
+    // This takes the place of ReplacementChecks()'s PaysMoreThanConflicts() in the package RBF setting.
+    if (const auto err_tup{ImprovesFeerateDiagram(m_pool, direct_conflict_iters, m_subpackage.m_all_conflicts, m_subpackage.m_total_modified_fees, m_subpackage.m_total_vsize)}) {
+        return package_state.Invalid(PackageValidationResult::PCKG_POLICY,
+                                     "package RBF failed: " + err_tup.value().second, "");
+    }
+
+    LogPrint(BCLog::TXPACKAGES, "package RBF checks passed: parent %s (wtxid=%s), child %s (wtxid=%s)\n",
+        txns.front()->GetHash().ToString(), txns.front()->GetWitnessHash().ToString(),
+        txns.back()->GetHash().ToString(), txns.back()->GetWitnessHash().ToString());
+
+
+    return true;
 }
 
 bool MemPoolAccept::PolicyScriptChecks(const ATMPArgs& args, Workspace& ws)
@@ -1216,16 +1291,19 @@ bool MemPoolAccept::Finalize(const ATMPArgs& args, Workspace& ws)
     const bool bypass_limits = args.m_bypass_limits;
     std::unique_ptr<CTxMemPoolEntry>& entry = ws.m_entry;
 
+    if (!m_subpackage.m_all_conflicts.empty()) Assume(args.m_allow_replacement);
     // Remove conflicting transactions from the mempool
     for (CTxMemPool::txiter it : m_subpackage.m_all_conflicts)
     {
-        LogPrint(BCLog::MEMPOOL, "replacing tx %s (wtxid=%s) with %s (wtxid=%s) for %s additional fees, %d delta bytes\n",
+        LogPrint(BCLog::MEMPOOL, "replacing mempool tx %s (wtxid=%s, fees=%s, vsize=%s). New tx %s (wtxid=%s, fees=%s, vsize=%s)\n",
                 it->GetTx().GetHash().ToString(),
                 it->GetTx().GetWitnessHash().ToString(),
+                it->GetFee(),
+                it->GetTxSize(),
                 hash.ToString(),
                 tx.GetWitnessHash().ToString(),
-                FormatMoney(ws.m_modified_fees - m_subpackage.m_conflicting_fees),
-                (int)entry->GetTxSize() - (int)m_subpackage.m_conflicting_size);
+                entry->GetFee(),
+                entry->GetTxSize());
         TRACE7(mempool, replaced,
                 it->GetTx().GetHash().data(),
                 it->GetTxSize(),
@@ -1319,6 +1397,13 @@ bool MemPoolAccept::SubmitPackage(const ATMPArgs& args, std::vector<Workspace>&
     std::transform(workspaces.cbegin(), workspaces.cend(), std::back_inserter(all_package_wtxids),
                    [](const auto& ws) { return ws.m_ptx->GetWitnessHash(); });
 
+    if (!m_subpackage.m_replaced_transactions.empty()) {
+        LogPrint(BCLog::MEMPOOL, "replaced %u mempool transactions with %u new one(s) for %s additional fees, %d delta bytes\n",
+                 m_subpackage.m_replaced_transactions.size(), workspaces.size(),
+                 m_subpackage.m_total_modified_fees - m_subpackage.m_conflicting_fees,
+                 m_subpackage.m_total_vsize - static_cast<int>(m_subpackage.m_conflicting_size));
+    }
+
     // Add successful results. The returned results may change later if LimitMempoolSize() evicts them.
     for (Workspace& ws : workspaces) {
         const auto effective_feerate = args.m_package_feerates ? ws.m_package_feerate :
@@ -1362,7 +1447,13 @@ MempoolAcceptResult MemPoolAccept::AcceptSingleTransaction(const CTransactionRef
         return MempoolAcceptResult::Failure(ws.m_state);
     }
 
-    if (m_subpackage.m_rbf && !ReplacementChecks(ws)) return MempoolAcceptResult::Failure(ws.m_state);
+    if (m_subpackage.m_rbf && !ReplacementChecks(ws)) {
+        if (ws.m_state.GetResult() == TxValidationResult::TX_RECONSIDERABLE) {
+            // Failed for incentives-based fee reasons. Provide the effective feerate and which tx was included.
+            return MempoolAcceptResult::FeeFailure(ws.m_state, CFeeRate(ws.m_modified_fees, ws.m_vsize), single_wtxid);
+        }
+        return MempoolAcceptResult::Failure(ws.m_state);
+    }
 
     // Perform the inexpensive checks first and avoid hashing and signature verification unless
     // those checks pass, to mitigate CPU exhaustion denial-of-service attacks.
@@ -1394,6 +1485,13 @@ MempoolAcceptResult MemPoolAccept::AcceptSingleTransaction(const CTransactionRef
         m_pool.m_opts.signals->TransactionAddedToMempool(tx_info, m_pool.GetAndIncrementSequence());
     }
 
+    if (!m_subpackage.m_replaced_transactions.empty()) {
+        LogPrint(BCLog::MEMPOOL, "replaced %u mempool transactions with 1 new transaction for %s additional fees, %d delta bytes\n",
+                 m_subpackage.m_replaced_transactions.size(),
+                 ws.m_modified_fees - m_subpackage.m_conflicting_fees,
+                 ws.m_vsize - static_cast<int>(m_subpackage.m_conflicting_size));
+    }
+
     return MempoolAcceptResult::Success(std::move(m_subpackage.m_replaced_transactions), ws.m_vsize, ws.m_base_fees,
                                         effective_feerate, single_wtxid);
 }
@@ -1435,11 +1533,14 @@ PackageMempoolAcceptResult MemPoolAccept::AcceptMultipleTransactions(const std::
         }
 
         // Make the coins created by this transaction available for subsequent transactions in the
-        // package to spend. Since we already checked conflicts in the package and we don't allow
-        // replacements, we don't need to track the coins spent. Note that this logic will need to be
-        // updated if package replace-by-fee is allowed in the future.
-        assert(!args.m_allow_replacement);
-        assert(!m_subpackage.m_rbf);
+        // package to spend. If there are no conflicts within the package, no transaction can spend a coin
+        // needed by another transaction in the package. We also need to make sure that no package
+        // tx replaces (or replaces the ancestor of) the parent of another package tx. As long as we
+        // check these two things, we don't need to track the coins spent.
+        // If a package tx conflicts with a mempool tx, PackageMempoolChecks() ensures later that any package RBF attempt
+        // has *no* in-mempool ancestors, so we don't have to worry about subsequent transactions in
+        // same package spending the same in-mempool outpoints. This needs to be revisited for general
+        // package RBF.
         m_viewmempool.PackageAddTransaction(ws.m_ptx);
     }
 
@@ -1480,7 +1581,7 @@ PackageMempoolAcceptResult MemPoolAccept::AcceptMultipleTransactions(const std::
 
     // Apply package mempool ancestor/descendant limits. Skip if there is only one transaction,
     // because it's unnecessary.
-    if (txns.size() > 1 && !PackageMempoolChecks(txns, m_subpackage.m_total_vsize, package_state)) {
+    if (txns.size() > 1 && !PackageMempoolChecks(txns, workspaces, m_subpackage.m_total_vsize, package_state)) {
         return PackageMempoolAcceptResult(package_state, std::move(results));
     }
 
diff --git a/test/functional/mempool_package_rbf.py b/test/functional/mempool_package_rbf.py
new file mode 100755
index 0000000000..ceb9530394
--- /dev/null
+++ b/test/functional/mempool_package_rbf.py
@@ -0,0 +1,587 @@
+#!/usr/bin/env python3
+# Copyright (c) 2021 The Bitcoin Core developers
+# Distributed under the MIT software license, see the accompanying
+# file COPYING or http://www.opensource.org/licenses/mit-license.php.
+
+from decimal import Decimal
+
+from test_framework.messages import (
+    COIN,
+    MAX_BIP125_RBF_SEQUENCE,
+)
+from test_framework.test_framework import BitcoinTestFramework
+from test_framework.mempool_util import fill_mempool
+from test_framework.util import (
+    assert_greater_than_or_equal,
+    assert_equal,
+)
+from test_framework.wallet import (
+    DEFAULT_FEE,
+    MiniWallet,
+)
+
+MAX_REPLACEMENT_CANDIDATES = 100
+
+# Value high enough to cause evictions in each subtest
+# for typical cases
+DEFAULT_CHILD_FEE = DEFAULT_FEE * 4
+
+class PackageRBFTest(BitcoinTestFramework):
+    def set_test_params(self):
+        self.num_nodes = 2
+        self.setup_clean_chain = True
+        # Required for fill_mempool()
+        self.extra_args = [[
+            "-datacarriersize=100000",
+            "-maxmempool=5",
+        ]] * self.num_nodes
+
+    def assert_mempool_contents(self, expected=None):
+        """Assert that all transactions in expected are in the mempool,
+        and no additional ones exist.
+        """
+        if not expected:
+            expected = []
+        mempool = self.nodes[0].getrawmempool(verbose=False)
+        assert_equal(len(mempool), len(expected))
+        for tx in expected:
+            assert tx.rehash() in mempool
+
+    def create_simple_package(self, parent_coin, parent_fee=DEFAULT_FEE, child_fee=DEFAULT_CHILD_FEE, heavy_child=False):
+        """Create a 1 parent 1 child package using the coin passed in as the parent's input. The
+        parent has 1 output, used to fund 1 child transaction.
+        All transactions signal BIP125 replaceability, but nSequence changes based on self.ctr. This
+        prevents identical txids between packages when the parents spend the same coin and have the
+        same fee (i.e. 0sat).
+
+        returns tuple (hex serialized txns, CTransaction objects)
+        """
+        self.ctr += 1
+        # Use fee_rate=0 because create_self_transfer will use the default fee_rate value otherwise.
+        # Passing in fee>0 overrides fee_rate, so this still works for non-zero parent_fee.
+        parent_result = self.wallet.create_self_transfer(
+            fee=parent_fee,
+            utxo_to_spend=parent_coin,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        num_child_outputs = 10 if heavy_child else 1
+        child_result = self.wallet.create_self_transfer_multi(
+            utxos_to_spend=[parent_result["new_utxo"]],
+            num_outputs=num_child_outputs,
+            fee_per_output=int(child_fee * COIN // num_child_outputs),
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+        package_hex = [parent_result["hex"], child_result["hex"]]
+        package_txns = [parent_result["tx"], child_result["tx"]]
+        return package_hex, package_txns
+
+    def run_test(self):
+        # Counter used to count the number of times we constructed packages. Since we're constructing parent transactions with the same
+        # coins (to create conflicts), and perhaps giving them the same fee, we might accidentally just create the same transaction again.
+        # To prevent this, set nSequences to MAX_BIP125_RBF_SEQUENCE - self.ctr.
+        self.ctr = 0
+
+        self.log.info("Generate blocks to create UTXOs")
+        self.wallet = MiniWallet(self.nodes[0])
+
+        # Make more than enough coins for the sum of all tests,
+        # otherwise a wallet rescan is needed later
+        self.generate(self.wallet, 300)
+        self.coins = self.wallet.get_utxos(mark_as_spent=False)
+
+        self.test_package_rbf_basic()
+        self.test_package_rbf_singleton()
+        self.test_package_rbf_additional_fees()
+        self.test_package_rbf_max_conflicts()
+        self.test_too_numerous_ancestors()
+        self.test_package_rbf_with_wrong_pkg_size()
+        self.test_insufficient_feerate()
+        self.test_wrong_conflict_cluster_size_linear()
+        self.test_wrong_conflict_cluster_size_parents_child()
+        self.test_wrong_conflict_cluster_size_parent_children()
+        self.test_0fee_package_rbf()
+        self.test_child_conflicts_parent_mempool_ancestor()
+
+    def test_package_rbf_basic(self):
+        self.log.info("Test that a child can pay to replace its parents' conflicts of cluster size 2")
+        node = self.nodes[0]
+        # Reuse the same coins so that the transactions conflict with one another.
+        parent_coin = self.coins.pop()
+        package_hex1, package_txns1 = self.create_simple_package(parent_coin, DEFAULT_FEE, DEFAULT_FEE)
+        package_hex2, package_txns2 = self.create_simple_package(parent_coin, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        node.submitpackage(package_hex1)
+        self.assert_mempool_contents(expected=package_txns1)
+
+        # Make sure 2nd node gets set up for basic package RBF
+        self.sync_all()
+
+        # Test run rejected because conflicts are not allowed in subpackage evaluation
+        testres = node.testmempoolaccept(package_hex2)
+        assert_equal(testres[0]["reject-reason"], "bip125-replacement-disallowed")
+
+        # But accepted during normal submission
+        submitres = node.submitpackage(package_hex2)
+        assert_equal(set(submitres["replaced-transactions"]), set([tx.rehash() for tx in package_txns1]))
+        self.assert_mempool_contents(expected=package_txns2)
+
+        # Make sure 2nd node gets a basic package RBF over p2p
+        self.sync_all()
+
+        self.generate(node, 1)
+
+    def test_package_rbf_singleton(self):
+        self.log.info("Test child can pay to replace a parent's single conflicted tx")
+        node = self.nodes[0]
+
+        # Make singleton tx to conflict with in next batch
+        singleton_coin = self.coins.pop()
+        singleton_tx = self.wallet.create_self_transfer(utxo_to_spend=singleton_coin)
+        node.sendrawtransaction(singleton_tx["hex"])
+        self.assert_mempool_contents(expected=[singleton_tx["tx"]])
+
+        package_hex, package_txns = self.create_simple_package(singleton_coin, DEFAULT_FEE, singleton_tx["fee"] * 2)
+
+        submitres = node.submitpackage(package_hex)
+        assert_equal(submitres["replaced-transactions"], [singleton_tx["tx"].rehash()])
+        self.assert_mempool_contents(expected=package_txns)
+
+        self.generate(node, 1)
+
+    def test_package_rbf_additional_fees(self):
+        self.log.info("Check Package RBF must increase the absolute fee")
+        node = self.nodes[0]
+        coin = self.coins.pop()
+
+        package_hex1, package_txns1 = self.create_simple_package(coin, parent_fee=DEFAULT_FEE, child_fee=DEFAULT_CHILD_FEE, heavy_child=True)
+        assert_greater_than_or_equal(1000, package_txns1[-1].get_vsize())
+        node.submitpackage(package_hex1)
+        self.assert_mempool_contents(expected=package_txns1)
+
+        PACKAGE_FEE = DEFAULT_FEE + DEFAULT_CHILD_FEE
+        PACKAGE_FEE_MINUS_ONE = PACKAGE_FEE - Decimal("0.00000001")
+
+        # Package 2 has a higher feerate but lower absolute fee
+        package_hex2, package_txns2 = self.create_simple_package(coin, parent_fee=DEFAULT_FEE, child_fee=DEFAULT_CHILD_FEE - Decimal("0.00000001"))
+        pkg_results2 = node.submitpackage(package_hex2)
+        assert_equal(f"package RBF failed: insufficient anti-DoS fees, rejecting replacement {package_txns2[1].rehash()}, less fees than conflicting txs; {PACKAGE_FEE_MINUS_ONE} < {PACKAGE_FEE}", pkg_results2["package_msg"])
+        self.assert_mempool_contents(expected=package_txns1)
+
+        self.log.info("Check replacement pays for incremental bandwidth")
+        package_hex3, package_txns3 = self.create_simple_package(coin, parent_fee=DEFAULT_FEE, child_fee=DEFAULT_CHILD_FEE)
+        pkg_results3 = node.submitpackage(package_hex3)
+        assert_equal(f"package RBF failed: insufficient anti-DoS fees, rejecting replacement {package_txns3[1].rehash()}, not enough additional fees to relay; 0.00 < 0.00000{sum([tx.get_vsize() for tx in package_txns3])}", pkg_results3["package_msg"])
+
+        self.assert_mempool_contents(expected=package_txns1)
+        self.generate(node, 1)
+
+        self.log.info("Check Package RBF must have strict cpfp structure")
+        coin = self.coins.pop()
+        package_hex4, package_txns4 = self.create_simple_package(coin, parent_fee=DEFAULT_FEE, child_fee=DEFAULT_CHILD_FEE)
+        node.submitpackage(package_hex4)
+        self.assert_mempool_contents(expected=package_txns4)
+        package_hex5, package_txns5 = self.create_simple_package(coin, parent_fee=DEFAULT_CHILD_FEE, child_fee=DEFAULT_CHILD_FEE - Decimal("0.00000001"))
+        pkg_results5 = node.submitpackage(package_hex5)
+        assert 'package RBF failed: package feerate is less than parent feerate' in pkg_results5["package_msg"]
+
+        self.assert_mempool_contents(expected=package_txns4)
+        self.generate(node, 1)
+
+    def test_package_rbf_max_conflicts(self):
+        node = self.nodes[0]
+        self.log.info("Check Package RBF cannot replace more than MAX_REPLACEMENT_CANDIDATES transactions")
+        num_coins = 51
+        parent_coins = self.coins[:num_coins]
+        del self.coins[:num_coins]
+
+        # Original transactions: 51 transactions with 1 descendants each -> 102 total transactions
+        size_two_clusters = []
+        for coin in parent_coins:
+            size_two_clusters.append(self.wallet.send_self_transfer_chain(from_node=node, chain_length=2, utxo_to_spend=coin))
+        expected_txns = [txn["tx"] for parent_child_txns in size_two_clusters for txn in parent_child_txns]
+        assert_equal(len(expected_txns), num_coins * 2)
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # parent feeerate needs to be high enough for minrelay
+        # child feerate needs to be large enough to trigger package rbf with a very large parent and
+        # pay for all evicted fees. maxfeerate turned off for all submissions since child feerate
+        # is extremely high
+        parent_fee_per_conflict = 10000
+        child_feerate = 10000 * DEFAULT_FEE
+
+        # Conflict against all transactions by double-spending each parent, causing 102 evictions
+        package_parent = self.wallet.create_self_transfer_multi(utxos_to_spend=parent_coins, fee_per_output=parent_fee_per_conflict)
+        package_child = self.wallet.create_self_transfer(fee_rate=child_feerate, utxo_to_spend=package_parent["new_utxos"][0])
+
+        pkg_results = node.submitpackage([package_parent["hex"], package_child["hex"]], maxfeerate=0)
+        assert_equal(f"package RBF failed: too many potential replacements, rejecting replacement {package_child['tx'].rehash()}; too many potential replacements (102 > 100)\n", pkg_results["package_msg"])
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # Make singleton tx to conflict with in next batch
+        singleton_coin = self.coins.pop()
+        singleton_tx = self.wallet.create_self_transfer(utxo_to_spend=singleton_coin)
+        node.sendrawtransaction(singleton_tx["hex"])
+        expected_txns.append(singleton_tx["tx"])
+
+        # Double-spend same set minus last, and double-spend singleton. This hits 101 evictions; should still fail.
+        # N.B. we can't RBF just a child tx in the clusters, as that would make resulting cluster of size 3.
+        double_spending_coins = parent_coins[:-1] + [singleton_coin]
+        package_parent = self.wallet.create_self_transfer_multi(utxos_to_spend=double_spending_coins, fee_per_output=parent_fee_per_conflict)
+        package_child = self.wallet.create_self_transfer(fee_rate=child_feerate, utxo_to_spend=package_parent["new_utxos"][0])
+        pkg_results = node.submitpackage([package_parent["hex"], package_child["hex"]], maxfeerate=0)
+        assert_equal(f"package RBF failed: too many potential replacements, rejecting replacement {package_child['tx'].rehash()}; too many potential replacements (101 > 100)\n", pkg_results["package_msg"])
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # Finally, evict MAX_REPLACEMENT_CANDIDATES
+        package_parent = self.wallet.create_self_transfer_multi(utxos_to_spend=parent_coins[:-1], fee_per_output=parent_fee_per_conflict)
+        package_child = self.wallet.create_self_transfer(fee_rate=child_feerate, utxo_to_spend=package_parent["new_utxos"][0])
+        pkg_results = node.submitpackage([package_parent["hex"], package_child["hex"]], maxfeerate=0)
+        assert_equal(pkg_results["package_msg"], "success")
+        self.assert_mempool_contents(expected=[singleton_tx["tx"], size_two_clusters[-1][0]["tx"], size_two_clusters[-1][1]["tx"], package_parent["tx"], package_child["tx"]] )
+
+        self.generate(node, 1)
+
+    def test_too_numerous_ancestors(self):
+        self.log.info("Test that package RBF doesn't work with packages larger than 2 due to ancestors")
+        node = self.nodes[0]
+        coin = self.coins.pop()
+
+        package_hex1, package_txns1 = self.create_simple_package(coin, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        node.submitpackage(package_hex1)
+        self.assert_mempool_contents(expected=package_txns1)
+
+        # Double-spends the original package
+        self.ctr += 1
+        parent_result1 = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        coin2 = self.coins.pop()
+
+        # Added to make package too large for package RBF;
+        # it will enter mempool individually
+        self.ctr += 1
+        parent_result2 = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin2,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        # Child that spends both, violating cluster size rule due
+        # to in-mempool ancestry
+        self.ctr += 1
+        child_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_CHILD_FEE * COIN),
+            utxos_to_spend=[parent_result1["new_utxo"], parent_result2["new_utxo"]],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        package_hex2 = [parent_result1["hex"], parent_result2["hex"], child_result["hex"]]
+        package_txns2_succeed = [parent_result2["tx"]]
+
+        pkg_result = node.submitpackage(package_hex2)
+        assert_equal(pkg_result["package_msg"], 'package RBF failed: new transaction cannot have mempool ancestors')
+        self.assert_mempool_contents(expected=package_txns1 + package_txns2_succeed)
+        self.generate(node, 1)
+
+    def test_wrong_conflict_cluster_size_linear(self):
+        self.log.info("Test that conflicting with a cluster not sized two is rejected: linear chain")
+        node = self.nodes[0]
+
+        # Coins we will conflict with
+        coin1 = self.coins.pop()
+        coin2 = self.coins.pop()
+        coin3 = self.coins.pop()
+
+        # Three transactions chained; package RBF against any of these
+        # should be rejected
+        self.ctr += 1
+        parent_result = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin1,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        child_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[parent_result["new_utxo"], coin2],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        grandchild_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[child_result["new_utxos"][0], coin3],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        expected_txns = [parent_result["tx"], child_result["tx"], grandchild_result["tx"]]
+        for tx in expected_txns:
+            node.sendrawtransaction(tx.serialize().hex())
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # Now make conflicting packages for each coin
+        package_hex1, package_txns1 = self.create_simple_package(coin1, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+
+        package_result = node.submitpackage(package_hex1)
+        assert_equal(f"package RBF failed: {parent_result['tx'].rehash()} has 2 descendants, max 1 allowed", package_result["package_msg"])
+
+        package_hex2, package_txns2 = self.create_simple_package(coin2, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex2)
+        assert_equal(f"package RBF failed: {child_result['tx'].rehash()} has both ancestor and descendant, exceeding cluster limit of 2", package_result["package_msg"])
+
+        package_hex3, package_txns3 = self.create_simple_package(coin3, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex3)
+        assert_equal(f"package RBF failed: {grandchild_result['tx'].rehash()} has 2 ancestors, max 1 allowed", package_result["package_msg"])
+
+        # Check that replacements were actually rejected
+        self.assert_mempool_contents(expected=expected_txns)
+        self.generate(node, 1)
+
+    def test_wrong_conflict_cluster_size_parents_child(self):
+        self.log.info("Test that conflicting with a cluster not sized two is rejected: two parents one child")
+        node = self.nodes[0]
+
+        # Coins we will conflict with
+        coin1 = self.coins.pop()
+        coin2 = self.coins.pop()
+        coin3 = self.coins.pop()
+
+        self.ctr += 1
+        parent1_result = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin1,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        parent2_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[coin2],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        child_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[parent1_result["new_utxo"], parent2_result["new_utxos"][0], coin3],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        expected_txns = [parent1_result["tx"], parent2_result["tx"], child_result["tx"]]
+        for tx in expected_txns:
+            node.sendrawtransaction(tx.serialize().hex())
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # Now make conflicting packages for each coin
+        package_hex1, package_txns1 = self.create_simple_package(coin1, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex1)
+        assert_equal(f"package RBF failed: {parent1_result['tx'].rehash()} is not the only parent of child {child_result['tx'].rehash()}", package_result["package_msg"])
+
+        package_hex2, package_txns2 = self.create_simple_package(coin2, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex2)
+        assert_equal(f"package RBF failed: {parent2_result['tx'].rehash()} is not the only parent of child {child_result['tx'].rehash()}", package_result["package_msg"])
+
+        package_hex3, package_txns3 = self.create_simple_package(coin3, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex3)
+        assert_equal(f"package RBF failed: {child_result['tx'].rehash()} has 2 ancestors, max 1 allowed", package_result["package_msg"])
+
+        # Check that replacements were actually rejected
+        self.assert_mempool_contents(expected=expected_txns)
+        self.generate(node, 1)
+
+    def test_wrong_conflict_cluster_size_parent_children(self):
+        self.log.info("Test that conflicting with a cluster not sized two is rejected: one parent two children")
+        node = self.nodes[0]
+
+        # Coins we will conflict with
+        coin1 = self.coins.pop()
+        coin2 = self.coins.pop()
+        coin3 = self.coins.pop()
+
+        self.ctr += 1
+        parent_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            num_outputs=2,
+            utxos_to_spend=[coin1],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        child1_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[parent_result["new_utxos"][0], coin2],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        self.ctr += 1
+        child2_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_FEE * COIN),
+            utxos_to_spend=[parent_result["new_utxos"][1], coin3],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        # Submit them to mempool
+        expected_txns = [parent_result["tx"], child1_result["tx"], child2_result["tx"]]
+        for tx in expected_txns:
+            node.sendrawtransaction(tx.serialize().hex())
+        self.assert_mempool_contents(expected=expected_txns)
+
+        # Now make conflicting packages for each coin
+        package_hex1, package_txns1 = self.create_simple_package(coin1, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex1)
+        assert_equal(f"package RBF failed: {parent_result['tx'].rehash()} has 2 descendants, max 1 allowed", package_result["package_msg"])
+
+        package_hex2, package_txns2 = self.create_simple_package(coin2, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex2)
+        assert_equal(f"package RBF failed: {child1_result['tx'].rehash()} is not the only child of parent {parent_result['tx'].rehash()}", package_result["package_msg"])
+
+        package_hex3, package_txns3 = self.create_simple_package(coin3, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_result = node.submitpackage(package_hex3)
+        assert_equal(f"package RBF failed: {child2_result['tx'].rehash()} is not the only child of parent {parent_result['tx'].rehash()}", package_result["package_msg"])
+
+        # Check that replacements were actually rejected
+        self.assert_mempool_contents(expected=expected_txns)
+        self.generate(node, 1)
+
+    def test_package_rbf_with_wrong_pkg_size(self):
+        self.log.info("Test that package RBF doesn't work with packages larger than 2 due to pkg size")
+        node = self.nodes[0]
+        coin1 = self.coins.pop()
+        coin2 = self.coins.pop()
+
+        # Two packages to require multiple direct conflicts, easier to set up illicit pkg size
+        package_hex1, package_txns1 = self.create_simple_package(coin1, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+        package_hex2, package_txns2 = self.create_simple_package(coin2, DEFAULT_FEE, DEFAULT_CHILD_FEE)
+
+        node.submitpackage(package_hex1)
+        node.submitpackage(package_hex2)
+
+        self.assert_mempool_contents(expected=package_txns1 + package_txns2)
+        assert_equal(len(node.getrawmempool()), 4)
+
+        # Double-spends the first package
+        self.ctr += 1
+        parent_result1 = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin1,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        # Double-spends the second package
+        self.ctr += 1
+        parent_result2 = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin2,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        # Child that spends both, violating cluster size rule due
+        # to pkg size
+        self.ctr += 1
+        child_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_CHILD_FEE * COIN),
+            utxos_to_spend=[parent_result1["new_utxo"], parent_result2["new_utxo"]],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        package_hex3 = [parent_result1["hex"], parent_result2["hex"], child_result["hex"]]
+
+        pkg_result = node.submitpackage(package_hex3)
+        assert_equal(pkg_result["package_msg"], 'package RBF failed: package must be 1-parent-1-child')
+        self.assert_mempool_contents(expected=package_txns1 + package_txns2)
+        self.generate(node, 1)
+
+    def test_insufficient_feerate(self):
+        self.log.info("Check Package RBF must beat feerate of direct conflict")
+        node = self.nodes[0]
+        coin = self.coins.pop()
+
+        # Non-cpfp structure
+        package_hex1, package_txns1 = self.create_simple_package(coin, parent_fee=DEFAULT_CHILD_FEE, child_fee=DEFAULT_FEE)
+        node.submitpackage(package_hex1)
+        self.assert_mempool_contents(expected=package_txns1)
+
+        # Package 2 feerate is below the feerate of directly conflicted parent, so it fails even though
+        # total fees are higher than the original package
+        package_hex2, package_txns2 = self.create_simple_package(coin, parent_fee=DEFAULT_CHILD_FEE - Decimal("0.00000001"), child_fee=DEFAULT_CHILD_FEE)
+        pkg_results2 = node.submitpackage(package_hex2)
+        assert_equal(pkg_results2["package_msg"], 'package RBF failed: insufficient feerate: does not improve feerate diagram')
+        self.assert_mempool_contents(expected=package_txns1)
+        self.generate(node, 1)
+
+    def test_0fee_package_rbf(self):
+        self.log.info("Test package RBF: TRUC 0-fee parent + high-fee child replaces parent's conflicts")
+        node = self.nodes[0]
+        # Reuse the same coins so that the transactions conflict with one another.
+        self.wallet.rescan_utxos()
+        parent_coin = self.wallet.get_utxo(confirmed_only=True)
+
+        # package1 pays default fee on both transactions
+        parent1 = self.wallet.create_self_transfer(utxo_to_spend=parent_coin, version=3)
+        child1 = self.wallet.create_self_transfer(utxo_to_spend=parent1["new_utxo"], version=3)
+        package_hex1 = [parent1["hex"], child1["hex"]]
+        fees_package1 = parent1["fee"] + child1["fee"]
+        submitres1 = node.submitpackage(package_hex1)
+        assert_equal(submitres1["package_msg"], "success")
+        self.assert_mempool_contents([parent1["tx"], child1["tx"]])
+
+        # package2 has a 0-fee parent (conflicting with package1) and very high fee child
+        parent2 = self.wallet.create_self_transfer(utxo_to_spend=parent_coin, fee=0, fee_rate=0, version=3)
+        child2 = self.wallet.create_self_transfer(utxo_to_spend=parent2["new_utxo"], fee=fees_package1*10, version=3)
+        package_hex2 = [parent2["hex"], child2["hex"]]
+
+        submitres2 = node.submitpackage(package_hex2)
+        assert_equal(submitres2["package_msg"], "success")
+        assert_equal(set(submitres2["replaced-transactions"]), set([parent1["txid"], child1["txid"]]))
+        self.assert_mempool_contents([parent2["tx"], child2["tx"]])
+
+        self.generate(node, 1)
+
+    def test_child_conflicts_parent_mempool_ancestor(self):
+        fill_mempool(self, self.nodes[0])
+        # Reset coins since we filled the mempool with current coins
+        self.coins = self.wallet.get_utxos(mark_as_spent=False, confirmed_only=True)
+
+        self.log.info("Test that package RBF doesn't have issues with mempool<->package conflicts via inconsistency")
+        node = self.nodes[0]
+        coin = self.coins.pop()
+
+        self.ctr += 1
+        grandparent_result = self.wallet.create_self_transfer(
+            fee=DEFAULT_FEE,
+            utxo_to_spend=coin,
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        node.sendrawtransaction(grandparent_result["hex"])
+
+        # Now make package of two descendants that looks
+        # like a cpfp where the parent can't get in on its own
+        self.ctr += 1
+        parent_result = self.wallet.create_self_transfer(
+            fee_rate=Decimal('0.00001000'),
+            utxo_to_spend=grandparent_result["new_utxo"],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+        # Last tx double-spends grandparent's coin,
+        # which is not inside the current package
+        self.ctr += 1
+        child_result = self.wallet.create_self_transfer_multi(
+            fee_per_output=int(DEFAULT_CHILD_FEE * COIN),
+            utxos_to_spend=[parent_result["new_utxo"], coin],
+            sequence=MAX_BIP125_RBF_SEQUENCE - self.ctr,
+        )
+
+        pkg_result = node.submitpackage([parent_result["hex"], child_result["hex"]])
+        assert_equal(pkg_result["package_msg"], 'package RBF failed: new transaction cannot have mempool ancestors')
+        mempool_info = node.getrawmempool()
+        assert grandparent_result["txid"] in mempool_info
+        assert parent_result["txid"] not in mempool_info
+        assert child_result["txid"] not in mempool_info
+
+if __name__ == "__main__":
+    PackageRBFTest().main()
diff --git a/test/functional/test_runner.py b/test/functional/test_runner.py
index 1f07a80164..8475dc5faa 100755
--- a/test/functional/test_runner.py
+++ b/test/functional/test_runner.py
@@ -282,6 +282,7 @@ BASE_SCRIPTS = [
     'mempool_packages.py',
     'mempool_package_onemore.py',
     'mempool_package_limits.py',
+    'mempool_package_rbf.py',
     'feature_versionbits_warning.py',
     'rpc_preciousblock.py',
     'wallet_importprunedfunds.py --legacy-wallet',