diff --git a/02-peer-protocol.md b/02-peer-protocol.md
index f43c68611..b0a1d3c48 100644
--- a/02-peer-protocol.md
+++ b/02-peer-protocol.md
@@ -995,7 +995,10 @@ is destined, is described in [BOLT #4](04-onion-routing.md).
     1. type: 0 (`blinding_point`)
     2. data:
         * [`point`:`blinding`]
-
+    1. type: 1 (`endorsed`)
+    2. data:
+        * [`byte`:`endorsed`]
+ 
 #### Requirements
 
 A sending node:
@@ -1033,6 +1036,10 @@ A sending node:
   - MUST increase the value of `id` by 1 for each successive offer.
   - if it is relaying a payment inside a blinded route:
     - MUST set `blinding_point` (see [Route Blinding](04-onion-routing.md#route-blinding))
+  - if it is the original source of the HTLC:
+    - SHOULD set `endorsed` to `1`. 
+  - otherwise: 
+    - SHOULD set `endorsed` as described in [Bolt 4](04-onion-routing.md#resource-bucketing).
 
 `id` MUST NOT be reset to 0 after the update is complete (i.e. after `revoke_and_ack` has
 been received). It MUST continue incrementing instead.
@@ -1059,6 +1066,8 @@ A receiving node:
       `error` and fail the channel.
   - if `blinding_point` is provided:
     - MUST use the corresponding blinded private key to decrypt the `onion_routing_packet` (see [Route Blinding](04-onion-routing.md#route-blinding))
+  - if `endorsed` is provided:
+    - SHOULD interpret `endorsed` as described in [Bolt 4](04-onion-routing.md#resource-bucketing).
 
 The `onion_routing_packet` contains an obfuscated list of hops and instructions for each hop along the path.
 It commits to the HTLC by setting the `payment_hash` as associated data, i.e. includes the `payment_hash` in the computation of HMACs.
diff --git a/04-onion-routing.md b/04-onion-routing.md
index 700c2bb0a..6886e1aa0 100644
--- a/04-onion-routing.md
+++ b/04-onion-routing.md
@@ -53,6 +53,7 @@ A node:
     * [Route Blinding](#route-blinding)
   * [Accepting and Forwarding a Payment](#accepting-and-forwarding-a-payment)
     * [Non-strict Forwarding](#non-strict-forwarding)
+    * [Resource Bucketing](#resource-bucketing)
     * [Payload for the Last Node](#payload-for-the-last-node)
   * [Shared Secret](#shared-secret)
   * [Blinding Ephemeral Keys](#blinding-ephemeral-keys)
@@ -62,6 +63,7 @@ A node:
   * [Returning Errors](#returning-errors)
     * [Failure Messages](#failure-messages)
     * [Receiving Failure Codes](#receiving-failure-codes)
+  * [Recommendations for Reputation](#recommendations-for-reputation)
   * [Test Vector](#test-vector)
     * [Returning Errors](#returning-errors)
   * [References](#references)
@@ -635,6 +637,35 @@ Alternatively, implementations may choose to apply non-strict forwarding only to
 like-policy channels to ensure their expected fee revenue does not deviate by
 using an alternate channel.
 
+## Resource Bucketing
+
+When making the decision to forward a payment on its outgoing channel, a node 
+MAY choose to limit its exposure to HTLCs that put it at risk of a denial of 
+service attack.
+* `unknown_allocation_slots`: defines the number of HTLC slots allocated to 
+   unknown traffic (default: 50% of remote peer's `max_accepted_htlcs`).
+* `unknown_allocation_liquidity`: defines the amount of the channel balance 
+   that is allocated to unknown traffic (default: 50% of remote peer's 
+   `max_htlc_value_in_flight_msat`.
+
+A node implementing resource bucketing limits exposure on its outgoing channel:
+- MUST choose `unknown_allocation_slots` <= the remote channel peer's 
+  `max_accepted_htlcs`.
+- MUST choose `unknown_allocation_liquidity` <= the remote channel peer's 
+  `max_htlc_value_in_flight_msat`.
+- If `endorsed` is set to 1 in the incoming `update_add_htlc` AND the HTLC 
+  is from a node that the forwarding node considers to have good local 
+  reputation (see [Recommendations for Reputation](#recommendations-for-reputation)):
+  - SHOULD proceed with forwarding the HTLC.
+  - SHOULD set `endorsed` to 1 in the outgoing `update_add_htlc`.
+- Otherwise, the HTLC is classified as `unknown`:
+  - If `unknown_allocation_slots` HTLC slots are occupied by other `unknown` HTLCs: 
+    - SHOULD return `temporary_channel_failure` as specified in [Failure Messages](#failure-messages).
+  - If `unknown_allocation_liquidity`  satoshis of liquidity are locked in 
+    other `unknown` HTLCs: 
+    - SHOULD return `temporary_channel_failure` as specified in [Failure Messages](#failure-messages).
+  - SHOULD set `endorsed` to 0 in the outgoing `update_add_htlc`. 
+
 ## Payload for the Last Node
 
 When building the route, the origin node MUST use a payload for
@@ -1407,6 +1438,60 @@ The _origin node_:
   - MAY use the data specified in the various failure types for debugging
   purposes.
 
+## Recommendations for Reputation
+
+Local reputation is used by forwarding nodes to decide whether to endorse a HTLC
+on their outgoing link. Nodes MAY use any metric of their choosing to classify
+a peer as having "good" reputation, though a poor choice of reputation scoring
+metric will affect their downstream reputation.
+
+- `resolution_time`: the time elapsed between `update_add_htlc` and its 
+  resolution (`update_fulfill_hltc` / `update_fail_hltc` / 
+  `update_fail_malformed_htlc`).
+- `resolution_threshold`: the resolution time threshold that is considered 
+  "good" behavior (default: 10 seconds).
+- `fees`: the fees paid by a forwarded HTLC (as described in [BOLT #7](07-routing-gossip.md#htlc-fees), 
+  equal to 0 if the HTLC was failed).
+
+For every incoming HLTC a peer has forwarded through a node, its `effective_fees` 
+are calculated as follows:
+- if `endorsed` = 1 in `update_add_htlc`:
+  - if the HTLC was settled with `update_fulfill_hltc`:
+    - `effective_fees` = `fees` - ceil( (`resolution_time` - `resolution_threshold`) / `resolution_threshold`) * `fees`
+  - otherwise:
+    - `effective_fees` = - ceil( (`resolution_time` - `resolution_threshold`) / `resolution_threshold`) * `fees` 
+- otherwise: 
+  - if successfully resolved AND `resolution_time` <= `resolution_threshold`
+    - `effective_fees` = `fees`
+  - otherwise: 
+    - `effective_fees` = 0
+
+The sum of the `effective_fees` for each HTLC that a peer has forwarded over 
+a sliding window of time is used to assess local reputation.
+
+- `maximum_hold`: the maximum amount of time that a HTLC can be locked in a
+  node's commitment. 
+- `reputation_window`: the period of time over which we assess revenue 
+  (recommended default = 10 * `maximum_hold`)
+- `revenue`: the total routing revenue generated by the node over `maximum_hold`
+- `reputation_revenue`: the total `effective_fees` of HTLCs forwarded by the peer
+  and resolved within `reputation_window`.
+
+The local reputation that a peer has earned is compared to total revenue to 
+classify reputation as good or neutral.
+
+- if `reputation_revenue` over `reputation_window` >= `revenue` over `maximum_hold`
+  - a peer should be considered to have good local reputation.
+- otherwise, the peer should be considered to have neutral local reputation.
+
+### Rationale
+If a HTLC is endorsed by a peer they have signaled that they expect the HTLC
+to resolve honestly, so will be held accountable for the manner in which they
+resolve. By contrast, if a HTLC was not endorsed by the upstream peer, it 
+should not have a negative impact on reputation. In the case where one of 
+these "unknown" HTLCs succeeds within the reasonable resolution threshold, the 
+peer is still credited with fees because the HTLC resolved desirably. 
+
 # Test Vector
 
 ## Returning Errors