wallet: Minimal fix to restore conflicted transaction notifications

This fix is a based on the fix by Antoine Riard <ariard@student.42.fr> in
https://github.com/bitcoin/bitcoin/pull/18600.

Unlike that PR, which implements some new behavior, this just restores previous
wallet notification and status behavior for transactions removed from the
mempool because they conflict with transactions in a block. The behavior was
accidentally changed in two `CWallet::BlockConnected` updates:
a31be09bfd77eed497a8e251d31358e16e2f2eb1 and
7e89994133725125dddbfa8d45484e3b9ed51c6e from
https://github.com/bitcoin/bitcoin/pull/16624, causing issue
https://github.com/bitcoin/bitcoin/issues/18325.

The change here could be improved and replaced with a more comprehensive
cleanup, so it includes a detailed comment explaining future considerations.

Fixes #18325

Co-authored-by: Antoine Riard <ariard@student.42.fr>

Github-Pull: #18982
Rebased-From: b604c5c8b5892842f13dee89ae31812a28ab25d1

2 files changed, 34 insertions, 3 deletions

diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
index 45f5542cad..80b4b1f4bf 100644
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -21,6 +21,7 @@
 #include <script/descriptor.h>
 #include <script/script.h>
 #include <script/signingprovider.h>
+#include <txmempool.h>
 #include <util/bip32.h>
 #include <util/error.h>
 #include <util/fees.h>
@@ -1105,12 +1106,42 @@ void CWallet::transactionAddedToMempool(const CTransactionRef& ptx) {
     }
 }
 
-void CWallet::transactionRemovedFromMempool(const CTransactionRef &ptx) {
+void CWallet::transactionRemovedFromMempool(const CTransactionRef &ptx, MemPoolRemovalReason reason) {
     LOCK(cs_wallet);
     auto it = mapWallet.find(ptx->GetHash());
     if (it != mapWallet.end()) {
         it->second.fInMempool = false;
     }
+    // Handle transactions that were removed from the mempool because they
+    // conflict with transactions in a newly connected block.
+    if (reason == MemPoolRemovalReason::CONFLICT) {
+        // Call SyncNotifications, so external -walletnotify notifications will
+        // be triggered for these transactions. Set Status::UNCONFIRMED instead
+        // of Status::CONFLICTED for a few reasons:
+        //
+        // 1. The transactionRemovedFromMempool callback does not currently
+        //    provide the conflicting block's hash and height, and for backwards
+        //    compatibility reasons it may not be not safe to store conflicted
+        //    wallet transactions with a null block hash. See
+        //    https://github.com/bitcoin/bitcoin/pull/18600#discussion_r420195993.
+        // 2. For most of these transactions, the wallet's internal conflict
+        //    detection in the blockConnected handler will subsequently call
+        //    MarkConflicted and update them with CONFLICTED status anyway. This
+        //    applies to any wallet transaction that has inputs spent in the
+        //    block, or that has ancestors in the wallet with inputs spent by
+        //    the block.
+        // 3. Longstanding behavior since the sync implementation in
+        //    https://github.com/bitcoin/bitcoin/pull/9371 and the prior sync
+        //    implementation before that was to mark these transactions
+        //    unconfirmed rather than conflicted.
+        //
+        // Nothing described above should be seen as an unchangeable requirement
+        // when improving this code in the future. The wallet's heuristics for
+        // distinguishing between conflicted and unconfirmed transactions are
+        // imperfect, and could be improved in general, see
+        // https://github.com/bitcoin-core/bitcoin-devwiki/wiki/Wallet-Transaction-Conflict-Tracking
+        SyncTransaction(ptx, {CWalletTx::Status::UNCONFIRMED, /* block height  */ 0, /* block hash */ {}, /* index */ 0});
+    }
 }
 
 void CWallet::blockConnected(const CBlock& block, int height)
@@ -1124,7 +1155,7 @@ void CWallet::blockConnected(const CBlock& block, int height)
     for (size_t index = 0; index < block.vtx.size(); index++) {
         CWalletTx::Confirmation confirm(CWalletTx::Status::CONFIRMED, height, block_hash, index);
         SyncTransaction(block.vtx[index], confirm);
-        transactionRemovedFromMempool(block.vtx[index]);
+        transactionRemovedFromMempool(block.vtx[index], MemPoolRemovalReason::BLOCK);
     }
 }
 
diff --git a/src/wallet/wallet.h b/src/wallet/wallet.h
index 7446a4889a..20f0306c63 100644
--- a/src/wallet/wallet.h
+++ b/src/wallet/wallet.h
@@ -910,7 +910,7 @@ public:
         uint256 last_failed_block;
     };
     ScanResult ScanForWalletTransactions(const uint256& first_block, const uint256& last_block, const WalletRescanReserver& reserver, bool fUpdate);
-    void transactionRemovedFromMempool(const CTransactionRef &ptx) override;
+    void transactionRemovedFromMempool(const CTransactionRef &ptx, MemPoolRemovalReason reason) override;
     void ReacceptWalletTransactions() EXCLUSIVE_LOCKS_REQUIRED(cs_wallet);
     void ResendWalletTransactions();
     struct Balance {