diff --git a/pkg/core/blockchain.go b/pkg/core/blockchain.go
index 4994642eb..f47627bc7 100644
--- a/pkg/core/blockchain.go
+++ b/pkg/core/blockchain.go
@@ -58,6 +58,10 @@ var (
 	// ErrInvalidBlockIndex is returned when trying to add block with index
 	// other than expected height of the blockchain.
 	ErrInvalidBlockIndex error = errors.New("invalid block index")
+	// ErrHasConflicts is returned when trying to add some transaction which
+	// conflicts with other transaction in the chain or pool according to
+	// Conflicts attribute.
+	ErrHasConflicts = errors.New("has conflicts")
 )
 var (
 	persistInterval = 1 * time.Second
@@ -617,6 +621,18 @@ func (bc *Blockchain) storeBlock(block *block.Block, txpool *mempool.Pool) error
 			return fmt.Errorf("failed to store tx exec result: %w", err)
 		}
 		writeBuf.Reset()
+
+		if bc.config.P2PSigExtensions {
+			for _, attr := range tx.GetAttributes(transaction.ConflictsT) {
+				hash := attr.Value.(*transaction.Conflicts).Hash
+				dummyTx := transaction.NewTrimmedTX(hash)
+				dummyTx.Version = transaction.DummyVersion
+				if err = cache.StoreAsTransaction(dummyTx, block.Index, writeBuf); err != nil {
+					return fmt.Errorf("failed to store conflicting transaction %s for transaction %s: %w", hash.StringLE(), tx.Hash().StringLE(), err)
+				}
+				writeBuf.Reset()
+			}
+		}
 	}
 
 	aer, err := bc.runPersist(bc.contracts.GetPostPersistScript(), block, cache)
@@ -984,7 +1000,10 @@ func (bc *Blockchain) GetHeader(hash util.Uint256) (*block.Header, error) {
 // HasTransaction returns true if the blockchain contains he given
 // transaction hash.
 func (bc *Blockchain) HasTransaction(hash util.Uint256) bool {
-	return bc.memPool.ContainsKey(hash) || bc.dao.HasTransaction(hash)
+	if bc.memPool.ContainsKey(hash) {
+		return true
+	}
+	return bc.dao.HasTransaction(hash) == dao.ErrAlreadyExists
 }
 
 // HasBlock returns true if the blockchain contains the given
@@ -1227,8 +1246,16 @@ func (bc *Blockchain) verifyAndPoolTx(t *transaction.Transaction, pool *mempool.
 	if netFee < 0 {
 		return fmt.Errorf("%w: net fee is %v, need %v", ErrTxSmallNetworkFee, t.NetworkFee, needNetworkFee)
 	}
-	if bc.dao.HasTransaction(t.Hash()) {
-		return fmt.Errorf("blockchain: %w", ErrAlreadyExists)
+	// check that current tx wasn't included in the conflicts attributes of some other transaction which is already in the chain
+	if err := bc.dao.HasTransaction(t.Hash()); err != nil {
+		switch {
+		case errors.Is(err, dao.ErrAlreadyExists):
+			return fmt.Errorf("blockchain: %w", ErrAlreadyExists)
+		case errors.Is(err, dao.ErrHasConflicts):
+			return fmt.Errorf("blockchain: %w", ErrHasConflicts)
+		default:
+			return err
+		}
 	}
 	err := bc.verifyTxWitnesses(t, nil)
 	if err != nil {
@@ -1248,6 +1275,8 @@ func (bc *Blockchain) verifyAndPoolTx(t *transaction.Transaction, pool *mempool.
 			return ErrInsufficientFunds
 		case errors.Is(err, mempool.ErrOOM):
 			return ErrOOM
+		case errors.Is(err, mempool.ErrConflictsAttribute):
+			return fmt.Errorf("mempool: %w: %s", ErrHasConflicts, err)
 		default:
 			return err
 		}
@@ -1303,6 +1332,14 @@ func (bc *Blockchain) verifyTxAttributes(tx *transaction.Transaction) error {
 			if height := bc.BlockHeight(); height < nvb.Height {
 				return fmt.Errorf("%w: NotValidBefore = %d, current height = %d", ErrTxNotYetValid, nvb.Height, height)
 			}
+		case transaction.ConflictsT:
+			if !bc.config.P2PSigExtensions {
+				return errors.New("Conflicts attribute was found, but P2PSigExtensions are disabled")
+			}
+			conflicts := tx.Attributes[i].Value.(*transaction.Conflicts)
+			if err := bc.dao.HasTransaction(conflicts.Hash); errors.Is(err, dao.ErrAlreadyExists) {
+				return fmt.Errorf("conflicting transaction %s is already on chain", conflicts.Hash.StringLE())
+			}
 		default:
 			if !bc.config.ReservedAttributes && attrType >= transaction.ReservedLowerBound && attrType <= transaction.ReservedUpperBound {
 				return errors.New("attribute of reserved type was found, but ReservedAttributes are disabled")
@@ -1326,10 +1363,10 @@ func (bc *Blockchain) isTxStillRelevant(t *transaction.Transaction, txpool *memp
 		return false
 	}
 	if txpool == nil {
-		if bc.dao.HasTransaction(t.Hash()) {
+		if bc.dao.HasTransaction(t.Hash()) != nil {
 			return false
 		}
-	} else if txpool.ContainsKey(t.Hash()) {
+	} else if txpool.HasConflicts(t, bc) {
 		return false
 	}
 	if err := bc.verifyTxAttributes(t); err != nil {
@@ -1650,3 +1687,8 @@ func (bc *Blockchain) newInteropContext(trigger trigger.Type, d dao.DAO, block *
 	}
 	return ic
 }
+
+// P2PSigExtensionsEnabled defines whether P2P signature extensions are enabled.
+func (bc *Blockchain) P2PSigExtensionsEnabled() bool {
+	return bc.config.P2PSigExtensions
+}
diff --git a/pkg/core/blockchain_test.go b/pkg/core/blockchain_test.go
index 873957da0..a5c552e3c 100644
--- a/pkg/core/blockchain_test.go
+++ b/pkg/core/blockchain_test.go
@@ -18,6 +18,7 @@ import (
 	"github.com/nspcc-dev/neo-go/pkg/core/transaction"
 	"github.com/nspcc-dev/neo-go/pkg/crypto/hash"
 	"github.com/nspcc-dev/neo-go/pkg/crypto/keys"
+	"github.com/nspcc-dev/neo-go/pkg/internal/random"
 	"github.com/nspcc-dev/neo-go/pkg/internal/testchain"
 	"github.com/nspcc-dev/neo-go/pkg/io"
 	"github.com/nspcc-dev/neo-go/pkg/smartcontract"
@@ -629,6 +630,64 @@ func TestVerifyTx(t *testing.T) {
 				require.NoError(t, bc.VerifyTx(tx))
 			})
 		})
+		t.Run("Conflicts", func(t *testing.T) {
+			getConflictsTx := func(hashes ...util.Uint256) *transaction.Transaction {
+				tx := bc.newTestTx(h, testScript)
+				tx.Attributes = make([]transaction.Attribute, len(hashes))
+				for i, h := range hashes {
+					tx.Attributes[i] = transaction.Attribute{
+						Type: transaction.ConflictsT,
+						Value: &transaction.Conflicts{
+							Hash: h,
+						},
+					}
+				}
+				tx.NetworkFee += 4_000_000 // multisig check
+				tx.Signers = []transaction.Signer{{
+					Account: testchain.CommitteeScriptHash(),
+					Scopes:  transaction.None,
+				}}
+				rawScript := testchain.CommitteeVerificationScript()
+				require.NoError(t, err)
+				size := io.GetVarSize(tx)
+				netFee, sizeDelta := fee.Calculate(rawScript)
+				tx.NetworkFee += netFee
+				tx.NetworkFee += int64(size+sizeDelta) * bc.FeePerByte()
+				data := tx.GetSignedPart()
+				tx.Scripts = []transaction.Witness{{
+					InvocationScript:   testchain.SignCommittee(data),
+					VerificationScript: rawScript,
+				}}
+				return tx
+			}
+			t.Run("disabled", func(t *testing.T) {
+				bc.config.P2PSigExtensions = false
+				tx := getConflictsTx(util.Uint256{1, 2, 3})
+				require.Error(t, bc.VerifyTx(tx))
+			})
+			t.Run("enabled", func(t *testing.T) {
+				bc.config.P2PSigExtensions = true
+				t.Run("dummy on-chain conflict", func(t *testing.T) {
+					tx := bc.newTestTx(h, testScript)
+					require.NoError(t, accs[0].SignTx(tx))
+					dummyTx := transaction.NewTrimmedTX(tx.Hash())
+					dummyTx.Version = transaction.DummyVersion
+					require.NoError(t, bc.dao.StoreAsTransaction(dummyTx, bc.blockHeight, nil))
+					require.True(t, errors.Is(bc.VerifyTx(tx), ErrHasConflicts))
+				})
+				t.Run("attribute on-chain conflict", func(t *testing.T) {
+					b, err := bc.GetBlock(bc.GetHeaderHash(0))
+					require.NoError(t, err)
+					conflictsHash := b.Transactions[0].Hash()
+					tx := getConflictsTx(conflictsHash)
+					require.Error(t, bc.VerifyTx(tx))
+				})
+				t.Run("positive", func(t *testing.T) {
+					tx := getConflictsTx(random.Uint256())
+					require.NoError(t, bc.VerifyTx(tx))
+				})
+			})
+		})
 	})
 }
 
diff --git a/pkg/core/dao/dao.go b/pkg/core/dao/dao.go
index 373473320..a508bf2fc 100644
--- a/pkg/core/dao/dao.go
+++ b/pkg/core/dao/dao.go
@@ -3,6 +3,7 @@ package dao
 import (
 	"bytes"
 	"encoding/binary"
+	"errors"
 	"fmt"
 	"sort"
 
@@ -16,6 +17,15 @@ import (
 	"github.com/nspcc-dev/neo-go/pkg/util"
 )
 
+// HasTransaction errors
+var (
+	// ErrAlreadyExists is returned when transaction exists in dao.
+	ErrAlreadyExists = errors.New("transaction already exists")
+	// ErrHasConflicts is returned when transaction is in the list of conflicting
+	// transactions which are already in dao.
+	ErrHasConflicts = errors.New("transaction has conflicts")
+)
+
 // DAO is a data access object.
 type DAO interface {
 	AppendNEP5Transfer(acc util.Uint160, index uint32, tr *state.NEP5Transfer) (bool, error)
@@ -42,7 +52,7 @@ type DAO interface {
 	GetTransaction(hash util.Uint256) (*transaction.Transaction, uint32, error)
 	GetVersion() (string, error)
 	GetWrapped() DAO
-	HasTransaction(hash util.Uint256) bool
+	HasTransaction(hash util.Uint256) error
 	Persist() (int, error)
 	PutAppExecResult(aer *state.AppExecResult, buf *io.BufBinWriter) error
 	PutContractState(cs *state.Contract) error
@@ -515,13 +525,19 @@ func (dao *Simple) GetHeaderHashes() ([]util.Uint256, error) {
 }
 
 // GetTransaction returns Transaction and its height by the given hash
-// if it exists in the store.
+// if it exists in the store. It does not return dummy transactions.
 func (dao *Simple) GetTransaction(hash util.Uint256) (*transaction.Transaction, uint32, error) {
 	key := storage.AppendPrefix(storage.DataTransaction, hash.BytesLE())
 	b, err := dao.Store.Get(key)
 	if err != nil {
 		return nil, 0, err
 	}
+	if len(b) < 5 {
+		return nil, 0, errors.New("bad transaction bytes")
+	}
+	if b[4] == transaction.DummyVersion {
+		return nil, 0, storage.ErrKeyNotFound
+	}
 	r := io.NewBinReaderFromBuf(b)
 
 	var height = r.ReadU32LE()
@@ -558,14 +574,23 @@ func read2000Uint256Hashes(b []byte) ([]util.Uint256, error) {
 	return hashes, nil
 }
 
-// HasTransaction returns true if the given store contains the given
-// Transaction hash.
-func (dao *Simple) HasTransaction(hash util.Uint256) bool {
+// HasTransaction returns nil if the given store does not contain the given
+// Transaction hash. It returns an error in case if transaction is in chain
+// or in the list of conflicting transactions.
+func (dao *Simple) HasTransaction(hash util.Uint256) error {
 	key := storage.AppendPrefix(storage.DataTransaction, hash.BytesLE())
-	if _, err := dao.Store.Get(key); err == nil {
-		return true
+	bytes, err := dao.Store.Get(key)
+	if err != nil {
+		return nil
 	}
-	return false
+
+	if len(bytes) < 5 {
+		return nil
+	}
+	if bytes[4] == transaction.DummyVersion {
+		return ErrHasConflicts
+	}
+	return ErrAlreadyExists
 }
 
 // StoreAsBlock stores given block as DataBlock. It can reuse given buffer for
@@ -609,7 +634,11 @@ func (dao *Simple) StoreAsTransaction(tx *transaction.Transaction, index uint32,
 		buf = io.NewBufBinWriter()
 	}
 	buf.WriteU32LE(index)
-	tx.EncodeBinary(buf.BinWriter)
+	if tx.Version == transaction.DummyVersion {
+		buf.BinWriter.WriteB(tx.Version)
+	} else {
+		tx.EncodeBinary(buf.BinWriter)
+	}
 	if buf.Err != nil {
 		return buf.Err
 	}
diff --git a/pkg/core/dao/dao_test.go b/pkg/core/dao/dao_test.go
index 9fcbd0676..4550da3c6 100644
--- a/pkg/core/dao/dao_test.go
+++ b/pkg/core/dao/dao_test.go
@@ -189,8 +189,8 @@ func TestStoreAsTransaction(t *testing.T) {
 	hash := tx.Hash()
 	err := dao.StoreAsTransaction(tx, 0, nil)
 	require.NoError(t, err)
-	hasTransaction := dao.HasTransaction(hash)
-	require.True(t, hasTransaction)
+	err = dao.HasTransaction(hash)
+	require.NotNil(t, err)
 }
 
 func TestMakeStorageItemKey(t *testing.T) {
diff --git a/pkg/core/mempool/feer.go b/pkg/core/mempool/feer.go
index cc86de243..40b5d0743 100644
--- a/pkg/core/mempool/feer.go
+++ b/pkg/core/mempool/feer.go
@@ -11,4 +11,5 @@ type Feer interface {
 	FeePerByte() int64
 	GetUtilityTokenBalance(util.Uint160) *big.Int
 	BlockHeight() uint32
+	P2PSigExtensionsEnabled() bool
 }
diff --git a/pkg/core/mempool/mem_pool.go b/pkg/core/mempool/mem_pool.go
index a0800ccf3..74f17bf37 100644
--- a/pkg/core/mempool/mem_pool.go
+++ b/pkg/core/mempool/mem_pool.go
@@ -2,6 +2,7 @@ package mempool
 
 import (
 	"errors"
+	"fmt"
 	"math/big"
 	"sort"
 	"sync"
@@ -25,6 +26,9 @@ var (
 	// ErrOOM is returned when transaction just doesn't fit in the memory
 	// pool because of its capacity constraints.
 	ErrOOM = errors.New("out of memory")
+	// ErrConflictsAttribute is returned when transaction conflicts with other transactions
+	// due to its (or theirs) Conflicts attributes.
+	ErrConflictsAttribute = errors.New("conflicts with memory pool due to Conflicts attribute")
 )
 
 // item represents a transaction in the the Memory pool.
@@ -49,6 +53,8 @@ type Pool struct {
 	verifiedMap  map[util.Uint256]*transaction.Transaction
 	verifiedTxes items
 	fees         map[util.Uint160]utilityBalanceAndFees
+	// conflicts is a map of hashes of transactions which are conflicting with the mempooled ones.
+	conflicts map[util.Uint256][]util.Uint256
 
 	capacity   int
 	feePerByte int64
@@ -108,6 +114,29 @@ func (mp *Pool) containsKey(hash util.Uint256) bool {
 	return false
 }
 
+// HasConflicts returns true if transaction is already in pool or in the Conflicts attributes
+// of pooled transactions or has Conflicts attributes for pooled transactions.
+func (mp *Pool) HasConflicts(t *transaction.Transaction, fee Feer) bool {
+	mp.lock.RLock()
+	defer mp.lock.RUnlock()
+
+	if mp.containsKey(t.Hash()) {
+		return true
+	}
+	if fee.P2PSigExtensionsEnabled() {
+		// do not check sender's signature and fee
+		if _, ok := mp.conflicts[t.Hash()]; ok {
+			return true
+		}
+		for _, attr := range t.GetAttributes(transaction.ConflictsT) {
+			if mp.containsKey(attr.Value.(*transaction.Conflicts).Hash) {
+				return true
+			}
+		}
+	}
+	return false
+}
+
 // tryAddSendersFee tries to add system fee and network fee to the total sender`s fee in mempool
 // and returns false if both balance check is required and sender has not enough GAS to pay
 func (mp *Pool) tryAddSendersFee(tx *transaction.Transaction, feer Feer, needCheck bool) bool {
@@ -154,13 +183,19 @@ func (mp *Pool) Add(t *transaction.Transaction, fee Feer) error {
 		mp.lock.Unlock()
 		return ErrDup
 	}
-	err := mp.checkTxConflicts(t, fee)
+	conflictsToBeRemoved, err := mp.checkTxConflicts(t, fee)
 	if err != nil {
 		mp.lock.Unlock()
 		return err
 	}
 
 	mp.verifiedMap[t.Hash()] = t
+	if fee.P2PSigExtensionsEnabled() {
+		// Remove conflicting transactions.
+		for _, conflictingTx := range conflictsToBeRemoved {
+			mp.removeInternal(conflictingTx.Hash(), fee)
+		}
+	}
 	// Insert into sorted array (from max to min, that could also be done
 	// using sort.Sort(sort.Reverse()), but it incurs more overhead. Notice
 	// also that we're searching for position that is strictly more
@@ -181,6 +216,9 @@ func (mp *Pool) Add(t *transaction.Transaction, fee Feer) error {
 		// Ditch the last one.
 		unlucky := mp.verifiedTxes[len(mp.verifiedTxes)-1]
 		delete(mp.verifiedMap, unlucky.txn.Hash())
+		if fee.P2PSigExtensionsEnabled() {
+			mp.removeConflictsOf(unlucky.txn)
+		}
 		mp.verifiedTxes[len(mp.verifiedTxes)-1] = pItem
 	} else {
 		mp.verifiedTxes = append(mp.verifiedTxes, pItem)
@@ -189,6 +227,13 @@ func (mp *Pool) Add(t *transaction.Transaction, fee Feer) error {
 		copy(mp.verifiedTxes[n+1:], mp.verifiedTxes[n:])
 		mp.verifiedTxes[n] = pItem
 	}
+	if fee.P2PSigExtensionsEnabled() {
+		// Add conflicting hashes to the mp.conflicts list.
+		for _, attr := range t.GetAttributes(transaction.ConflictsT) {
+			hash := attr.Value.(*transaction.Conflicts).Hash
+			mp.conflicts[hash] = append(mp.conflicts[hash], t.Hash())
+		}
+	}
 	// we already checked balance in checkTxConflicts, so don't need to check again
 	mp.tryAddSendersFee(pItem.txn, fee, false)
 
@@ -199,8 +244,14 @@ func (mp *Pool) Add(t *transaction.Transaction, fee Feer) error {
 
 // Remove removes an item from the mempool, if it exists there (and does
 // nothing if it doesn't).
-func (mp *Pool) Remove(hash util.Uint256) {
+func (mp *Pool) Remove(hash util.Uint256, feer Feer) {
 	mp.lock.Lock()
+	mp.removeInternal(hash, feer)
+	mp.lock.Unlock()
+}
+
+// removeInternal is an internal unlocked representation of Remove
+func (mp *Pool) removeInternal(hash util.Uint256, feer Feer) {
 	if tx, ok := mp.verifiedMap[hash]; ok {
 		var num int
 		delete(mp.verifiedMap, hash)
@@ -217,9 +268,12 @@ func (mp *Pool) Remove(hash util.Uint256) {
 		senderFee := mp.fees[tx.Sender()]
 		senderFee.feeSum.Sub(senderFee.feeSum, big.NewInt(tx.SystemFee+tx.NetworkFee))
 		mp.fees[tx.Sender()] = senderFee
+		if feer.P2PSigExtensionsEnabled() {
+			// remove all conflicting hashes from mp.conflicts list
+			mp.removeConflictsOf(tx)
+		}
 	}
 	updateMempoolMetrics(len(mp.verifiedTxes))
-	mp.lock.Unlock()
 }
 
 // RemoveStale filters verified transactions through the given function keeping
@@ -232,9 +286,18 @@ func (mp *Pool) RemoveStale(isOK func(*transaction.Transaction) bool, feer Feer)
 	// because items are iterated one-by-one in increasing order.
 	newVerifiedTxes := mp.verifiedTxes[:0]
 	mp.fees = make(map[util.Uint160]utilityBalanceAndFees) // it'd be nice to reuse existing map, but we can't easily clear it
+	if feer.P2PSigExtensionsEnabled() {
+		mp.conflicts = make(map[util.Uint256][]util.Uint256)
+	}
 	for _, itm := range mp.verifiedTxes {
 		if isOK(itm.txn) && mp.checkPolicy(itm.txn, policyChanged) && mp.tryAddSendersFee(itm.txn, feer, true) {
 			newVerifiedTxes = append(newVerifiedTxes, itm)
+			if feer.P2PSigExtensionsEnabled() {
+				for _, attr := range itm.txn.GetAttributes(transaction.ConflictsT) {
+					hash := attr.Value.(*transaction.Conflicts).Hash
+					mp.conflicts[hash] = append(mp.conflicts[hash], itm.txn.Hash())
+				}
+			}
 		} else {
 			delete(mp.verifiedMap, itm.txn.Hash())
 		}
@@ -269,6 +332,7 @@ func New(capacity int) *Pool {
 		verifiedTxes: make([]item, 0, capacity),
 		capacity:     capacity,
 		fees:         make(map[util.Uint160]utilityBalanceAndFees),
+		conflicts:    make(map[util.Uint256][]util.Uint256),
 	}
 }
 
@@ -297,15 +361,59 @@ func (mp *Pool) GetVerifiedTransactions() []*transaction.Transaction {
 	return t
 }
 
-// checkTxConflicts is an internal unprotected version of Verify.
-func (mp *Pool) checkTxConflicts(tx *transaction.Transaction, fee Feer) error {
-	senderFee, ok := mp.fees[tx.Sender()]
+// checkTxConflicts is an internal unprotected version of Verify. It takes into
+// consideration conflicting transactions which are about to be removed from mempool.
+func (mp *Pool) checkTxConflicts(tx *transaction.Transaction, fee Feer) ([]*transaction.Transaction, error) {
+	actualSenderFee, ok := mp.fees[tx.Sender()]
 	if !ok {
-		senderFee.balance = fee.GetUtilityTokenBalance(tx.Sender())
-		senderFee.feeSum = big.NewInt(0)
+		actualSenderFee.balance = fee.GetUtilityTokenBalance(tx.Sender())
+		actualSenderFee.feeSum = big.NewInt(0)
 	}
-	_, err := checkBalance(tx, senderFee)
-	return err
+
+	var expectedSenderFee utilityBalanceAndFees
+	// Check Conflicts attributes.
+	var conflictsToBeRemoved []*transaction.Transaction
+	if fee.P2PSigExtensionsEnabled() {
+		// Step 1: check if `tx` was in attributes of mempooled transactions.
+		if conflictingHashes, ok := mp.conflicts[tx.Hash()]; ok {
+			for _, hash := range conflictingHashes {
+				existingTx := mp.verifiedMap[hash]
+				if existingTx.HasSigner(tx.Sender()) && existingTx.NetworkFee > tx.NetworkFee {
+					return nil, fmt.Errorf("%w: conflicting transaction %s has bigger network fee", ErrConflictsAttribute, existingTx.Hash().StringBE())
+				}
+				conflictsToBeRemoved = append(conflictsToBeRemoved, existingTx)
+			}
+		}
+		// Step 2: check if mempooled transactions were in `tx`'s attributes.
+		for _, attr := range tx.GetAttributes(transaction.ConflictsT) {
+			hash := attr.Value.(*transaction.Conflicts).Hash
+			existingTx, ok := mp.verifiedMap[hash]
+			if !ok {
+				continue
+			}
+			if !tx.HasSigner(existingTx.Sender()) {
+				return nil, fmt.Errorf("%w: not signed by the sender of conflicting transaction %s", ErrConflictsAttribute, existingTx.Hash().StringBE())
+			}
+			if existingTx.NetworkFee >= tx.NetworkFee {
+				return nil, fmt.Errorf("%w: conflicting transaction %s has bigger or equal network fee", ErrConflictsAttribute, existingTx.Hash().StringBE())
+			}
+			conflictsToBeRemoved = append(conflictsToBeRemoved, existingTx)
+		}
+		// Step 3: take into account sender's conflicting transactions before balance check.
+		expectedSenderFee = utilityBalanceAndFees{
+			balance: new(big.Int).Set(actualSenderFee.balance),
+			feeSum:  new(big.Int).Set(actualSenderFee.feeSum),
+		}
+		for _, conflictingTx := range conflictsToBeRemoved {
+			if conflictingTx.Sender().Equals(tx.Sender()) {
+				expectedSenderFee.feeSum.Sub(expectedSenderFee.feeSum, big.NewInt(conflictingTx.SystemFee+conflictingTx.NetworkFee))
+			}
+		}
+	} else {
+		expectedSenderFee = actualSenderFee
+	}
+	_, err := checkBalance(tx, expectedSenderFee)
+	return conflictsToBeRemoved, err
 }
 
 // Verify checks if a Sender of tx is able to pay for it (and all the other
@@ -315,5 +423,26 @@ func (mp *Pool) checkTxConflicts(tx *transaction.Transaction, fee Feer) error {
 func (mp *Pool) Verify(tx *transaction.Transaction, feer Feer) bool {
 	mp.lock.RLock()
 	defer mp.lock.RUnlock()
-	return mp.checkTxConflicts(tx, feer) == nil
+	_, err := mp.checkTxConflicts(tx, feer)
+	return err == nil
+}
+
+// removeConflictsOf removes hash of the given transaction from the conflicts list
+// for each Conflicts attribute.
+func (mp *Pool) removeConflictsOf(tx *transaction.Transaction) {
+	// remove all conflicting hashes from mp.conflicts list
+	for _, attr := range tx.GetAttributes(transaction.ConflictsT) {
+		conflictsHash := attr.Value.(*transaction.Conflicts).Hash
+		if len(mp.conflicts[conflictsHash]) == 1 {
+			delete(mp.conflicts, conflictsHash)
+			continue
+		}
+		for i, existingHash := range mp.conflicts[conflictsHash] {
+			if existingHash == tx.Hash() {
+				// tx.Hash can occur in the conflicting hashes array only once, because we can't add the same transaction to the mempol twice
+				mp.conflicts[conflictsHash] = append(mp.conflicts[conflictsHash][:i], mp.conflicts[conflictsHash][i+1:]...)
+				break
+			}
+		}
+	}
 }
diff --git a/pkg/core/mempool/mem_pool_test.go b/pkg/core/mempool/mem_pool_test.go
index e2a1f670c..16ecbf9f3 100644
--- a/pkg/core/mempool/mem_pool_test.go
+++ b/pkg/core/mempool/mem_pool_test.go
@@ -1,12 +1,14 @@
 package mempool
 
 import (
+	"errors"
 	"math/big"
 	"sort"
 	"testing"
 
 	"github.com/nspcc-dev/neo-go/pkg/config/netmode"
 	"github.com/nspcc-dev/neo-go/pkg/core/transaction"
+	"github.com/nspcc-dev/neo-go/pkg/internal/random"
 	"github.com/nspcc-dev/neo-go/pkg/util"
 	"github.com/nspcc-dev/neo-go/pkg/vm/opcode"
 	"github.com/stretchr/testify/assert"
@@ -15,6 +17,7 @@ import (
 
 type FeerStub struct {
 	feePerByte int64
+	p2pSigExt  bool
 }
 
 var balance = big.NewInt(10000000)
@@ -31,6 +34,10 @@ func (fs *FeerStub) GetUtilityTokenBalance(uint160 util.Uint160) *big.Int {
 	return balance
 }
 
+func (fs *FeerStub) P2PSigExtensionsEnabled() bool {
+	return fs.p2pSigExt
+}
+
 func testMemPoolAddRemoveWithFeer(t *testing.T, fs Feer) {
 	mp := New(10)
 	tx := transaction.New(netmode.UnitTestNet, []byte{byte(opcode.PUSH1)}, 0)
@@ -44,7 +51,7 @@ func testMemPoolAddRemoveWithFeer(t *testing.T, fs Feer) {
 	tx2, ok := mp.TryGetValue(tx.Hash())
 	require.Equal(t, true, ok)
 	require.Equal(t, tx, tx2)
-	mp.Remove(tx.Hash())
+	mp.Remove(tx.Hash(), fs)
 	_, ok = mp.TryGetValue(tx.Hash())
 	require.Equal(t, false, ok)
 	// Make sure nothing left in the mempool after removal.
@@ -148,7 +155,7 @@ func TestGetVerified(t *testing.T) {
 	require.Equal(t, mempoolSize, len(verTxes))
 	require.ElementsMatch(t, txes, verTxes)
 	for _, tx := range txes {
-		mp.Remove(tx.Hash())
+		mp.Remove(tx.Hash(), fs)
 	}
 	verTxes = mp.GetVerifiedTransactions()
 	require.Equal(t, 0, len(verTxes))
@@ -297,3 +304,122 @@ func TestMempoolItemsOrder(t *testing.T) {
 	require.True(t, item3.CompareTo(item4) > 0)
 	require.True(t, item4.CompareTo(item3) < 0)
 }
+
+func TestMempoolAddRemoveConflicts(t *testing.T) {
+	capacity := 6
+	mp := New(capacity)
+	var fs = &FeerStub{
+		p2pSigExt: true,
+	}
+	getConflictsTx := func(netFee int64, hashes ...util.Uint256) *transaction.Transaction {
+		tx := transaction.New(netmode.UnitTestNet, []byte{byte(opcode.PUSH1)}, 0)
+		tx.NetworkFee = netFee
+		tx.Nonce = uint32(random.Int(0, 1e4))
+		tx.Signers = []transaction.Signer{{Account: util.Uint160{1, 2, 3}}}
+		tx.Attributes = make([]transaction.Attribute, len(hashes))
+		for i, h := range hashes {
+			tx.Attributes[i] = transaction.Attribute{
+				Type: transaction.ConflictsT,
+				Value: &transaction.Conflicts{
+					Hash: h,
+				},
+			}
+		}
+		_, ok := mp.TryGetValue(tx.Hash())
+		require.Equal(t, false, ok)
+		return tx
+	}
+
+	// tx1 in mempool and does not conflicts with anyone
+	smallNetFee := int64(3)
+	tx1 := getConflictsTx(smallNetFee)
+	require.NoError(t, mp.Add(tx1, fs))
+
+	// tx2 conflicts with tx1 and has smaller netfee (Step 2, negative)
+	tx2 := getConflictsTx(smallNetFee-1, tx1.Hash())
+	require.True(t, errors.Is(mp.Add(tx2, fs), ErrConflictsAttribute))
+
+	// tx3 conflicts with mempooled tx1 and has larger netfee => tx1 should be replaced by tx3 (Step 2, positive)
+	tx3 := getConflictsTx(smallNetFee+1, tx1.Hash())
+	require.NoError(t, mp.Add(tx3, fs))
+	require.Equal(t, 1, mp.Count())
+	require.Equal(t, 1, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx3.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// tx1 still does not conflicts with anyone, but tx3 is mempooled, conflicts with tx1
+	// and has larger netfee => tx1 shouldn't be added again (Step 1, negative)
+	require.True(t, errors.Is(mp.Add(tx1, fs), ErrConflictsAttribute))
+
+	// tx2 can now safely be added because conflicting tx1 is not in mempool => we
+	// cannot check that tx2 is signed by tx1.Sender
+	require.NoError(t, mp.Add(tx2, fs))
+	require.Equal(t, 1, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx3.Hash(), tx2.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// mempooled tx4 conflicts with tx5, but tx4 has smaller netfee => tx4 should be replaced by tx5 (Step 1, positive)
+	tx5 := getConflictsTx(smallNetFee + 1)
+	tx4 := getConflictsTx(smallNetFee, tx5.Hash())
+	require.NoError(t, mp.Add(tx4, fs)) // unverified
+	require.Equal(t, 2, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx4.Hash()}, mp.conflicts[tx5.Hash()])
+	require.NoError(t, mp.Add(tx5, fs))
+	// tx5 does not conflict with anyone
+	require.Equal(t, 1, len(mp.conflicts))
+
+	// multiple conflicts in attributes of single transaction
+	tx6 := getConflictsTx(smallNetFee)
+	tx7 := getConflictsTx(smallNetFee)
+	tx8 := getConflictsTx(smallNetFee)
+	// need small network fee later
+	tx9 := getConflictsTx(smallNetFee-2, tx6.Hash(), tx7.Hash(), tx8.Hash())
+	require.NoError(t, mp.Add(tx9, fs))
+	require.Equal(t, 4, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx9.Hash()}, mp.conflicts[tx6.Hash()])
+	require.Equal(t, []util.Uint256{tx9.Hash()}, mp.conflicts[tx7.Hash()])
+	require.Equal(t, []util.Uint256{tx9.Hash()}, mp.conflicts[tx8.Hash()])
+	require.Equal(t, []util.Uint256{tx3.Hash(), tx2.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// multiple conflicts in attributes of multiple transactions
+	tx10 := getConflictsTx(smallNetFee, tx6.Hash())
+	tx11 := getConflictsTx(smallNetFee, tx6.Hash())
+	require.NoError(t, mp.Add(tx10, fs)) // unverified, because tx6 is not in the pool
+	require.NoError(t, mp.Add(tx11, fs)) // unverified, because tx6 is not in the pool
+	require.Equal(t, 4, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx9.Hash(), tx10.Hash(), tx11.Hash()}, mp.conflicts[tx6.Hash()])
+	require.Equal(t, []util.Uint256{tx9.Hash()}, mp.conflicts[tx7.Hash()])
+	require.Equal(t, []util.Uint256{tx9.Hash()}, mp.conflicts[tx8.Hash()])
+	require.Equal(t, []util.Uint256{tx3.Hash(), tx2.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// reach capacity, remove less prioritised tx9 with its multiple conflicts
+	require.Equal(t, capacity, len(mp.verifiedTxes))
+	tx12 := getConflictsTx(smallNetFee + 2)
+	require.NoError(t, mp.Add(tx12, fs))
+	require.Equal(t, 2, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx10.Hash(), tx11.Hash()}, mp.conflicts[tx6.Hash()])
+	require.Equal(t, []util.Uint256{tx3.Hash(), tx2.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// manually remove tx11 with its single conflict
+	mp.Remove(tx11.Hash(), fs)
+	require.Equal(t, 2, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx10.Hash()}, mp.conflicts[tx6.Hash()])
+
+	// manually remove last tx which conflicts with tx6 => mp.conflicts[tx6] should also be deleted
+	mp.Remove(tx10.Hash(), fs)
+	require.Equal(t, 1, len(mp.conflicts))
+	require.Equal(t, []util.Uint256{tx3.Hash(), tx2.Hash()}, mp.conflicts[tx1.Hash()])
+
+	// tx13 conflicts with tx2, but is not signed by tx2.Sender
+	tx13 := transaction.New(netmode.UnitTestNet, []byte{byte(opcode.PUSH1)}, 0)
+	tx13.NetworkFee = smallNetFee
+	tx13.Nonce = uint32(random.Int(0, 1e4))
+	tx13.Signers = []transaction.Signer{{Account: util.Uint160{3, 2, 1}}}
+	tx13.Attributes = []transaction.Attribute{{
+		Type: transaction.ConflictsT,
+		Value: &transaction.Conflicts{
+			Hash: tx2.Hash(),
+		},
+	}}
+	_, ok := mp.TryGetValue(tx13.Hash())
+	require.Equal(t, false, ok)
+	require.True(t, errors.Is(mp.Add(tx13, fs), ErrConflictsAttribute))
+}
diff --git a/pkg/core/transaction/attribute.go b/pkg/core/transaction/attribute.go
index ca3e1011e..5ef14dd17 100644
--- a/pkg/core/transaction/attribute.go
+++ b/pkg/core/transaction/attribute.go
@@ -37,6 +37,8 @@ func (attr *Attribute) DecodeBinary(br *io.BinReader) {
 		attr.Value = new(OracleResponse)
 	case NotValidBeforeT:
 		attr.Value = new(NotValidBefore)
+	case ConflictsT:
+		attr.Value = new(Conflicts)
 	default:
 		if t >= ReservedLowerBound && t <= ReservedUpperBound {
 			attr.Value = new(Reserved)
@@ -53,7 +55,7 @@ func (attr *Attribute) EncodeBinary(bw *io.BinWriter) {
 	bw.WriteB(byte(attr.Type))
 	switch t := attr.Type; t {
 	case HighPriority:
-	case OracleResponseT, NotValidBeforeT:
+	case OracleResponseT, NotValidBeforeT, ConflictsT:
 		attr.Value.EncodeBinary(bw)
 	default:
 		if t >= ReservedLowerBound && t <= ReservedUpperBound {
@@ -92,6 +94,9 @@ func (attr *Attribute) UnmarshalJSON(data []byte) error {
 	case NotValidBeforeT.String():
 		attr.Type = NotValidBeforeT
 		attr.Value = new(NotValidBefore)
+	case ConflictsT.String():
+		attr.Type = ConflictsT
+		attr.Value = new(Conflicts)
 	default:
 		return errors.New("wrong Type")
 	}
diff --git a/pkg/core/transaction/attribute_test.go b/pkg/core/transaction/attribute_test.go
index c72b1d278..b769fe88b 100644
--- a/pkg/core/transaction/attribute_test.go
+++ b/pkg/core/transaction/attribute_test.go
@@ -5,6 +5,7 @@ import (
 	"encoding/json"
 	"testing"
 
+	"github.com/nspcc-dev/neo-go/pkg/internal/random"
 	"github.com/nspcc-dev/neo-go/pkg/internal/testserdes"
 	"github.com/stretchr/testify/require"
 )
@@ -59,6 +60,15 @@ func TestAttribute_EncodeBinary(t *testing.T) {
 			require.Error(t, err)
 		})
 	})
+	t.Run("Conflicts", func(t *testing.T) {
+		attr := &Attribute{
+			Type: ConflictsT,
+			Value: &Conflicts{
+				Hash: random.Uint256(),
+			},
+		}
+		testserdes.EncodeDecodeBinary(t, attr, new(Attribute))
+	})
 }
 
 func TestAttribute_MarshalJSON(t *testing.T) {
@@ -104,4 +114,13 @@ func TestAttribute_MarshalJSON(t *testing.T) {
 		}
 		testserdes.MarshalUnmarshalJSON(t, attr, new(Attribute))
 	})
+	t.Run("Conflicts", func(t *testing.T) {
+		attr := &Attribute{
+			Type: ConflictsT,
+			Value: &Conflicts{
+				Hash: random.Uint256(),
+			},
+		}
+		testserdes.MarshalUnmarshalJSON(t, attr, new(Attribute))
+	})
 }
diff --git a/pkg/core/transaction/attrtype.go b/pkg/core/transaction/attrtype.go
index 090e28d28..fa68ae5cc 100644
--- a/pkg/core/transaction/attrtype.go
+++ b/pkg/core/transaction/attrtype.go
@@ -15,10 +15,16 @@ const (
 // List of valid attribute types.
 const (
 	HighPriority    AttrType = 1
-	OracleResponseT AttrType = 0x11               // OracleResponse
-	NotValidBeforeT AttrType = ReservedLowerBound // NotValidBefore
+	OracleResponseT AttrType = 0x11                   // OracleResponse
+	NotValidBeforeT AttrType = ReservedLowerBound     // NotValidBefore
+	ConflictsT      AttrType = ReservedLowerBound + 1 // Conflicts
 )
 
 func (a AttrType) allowMultiple() bool {
-	return false
+	switch a {
+	case ConflictsT:
+		return true
+	default:
+		return false
+	}
 }
diff --git a/pkg/core/transaction/attrtype_string.go b/pkg/core/transaction/attrtype_string.go
index e45529acb..70db86618 100644
--- a/pkg/core/transaction/attrtype_string.go
+++ b/pkg/core/transaction/attrtype_string.go
@@ -11,12 +11,17 @@ func _() {
 	_ = x[HighPriority-1]
 	_ = x[OracleResponseT-17]
 	_ = x[NotValidBeforeT-224]
+	_ = x[ConflictsT-225]
 }
 
 const (
 	_AttrType_name_0 = "HighPriority"
 	_AttrType_name_1 = "OracleResponse"
-	_AttrType_name_2 = "NotValidBefore"
+	_AttrType_name_2 = "NotValidBeforeConflicts"
+)
+
+var (
+	_AttrType_index_2 = [...]uint8{0, 14, 23}
 )
 
 func (i AttrType) String() string {
@@ -25,8 +30,9 @@ func (i AttrType) String() string {
 		return _AttrType_name_0
 	case i == 17:
 		return _AttrType_name_1
-	case i == 224:
-		return _AttrType_name_2
+	case 224 <= i && i <= 225:
+		i -= 224
+		return _AttrType_name_2[_AttrType_index_2[i]:_AttrType_index_2[i+1]]
 	default:
 		return "AttrType(" + strconv.FormatInt(int64(i), 10) + ")"
 	}
diff --git a/pkg/core/transaction/conflicts.go b/pkg/core/transaction/conflicts.go
new file mode 100644
index 000000000..235ed3341
--- /dev/null
+++ b/pkg/core/transaction/conflicts.go
@@ -0,0 +1,30 @@
+package transaction
+
+import (
+	"github.com/nspcc-dev/neo-go/pkg/io"
+	"github.com/nspcc-dev/neo-go/pkg/util"
+)
+
+// Conflicts represents attribute for conflicting transactions.
+type Conflicts struct {
+	Hash util.Uint256 `json:"hash"`
+}
+
+// DecodeBinary implements io.Serializable interface.
+func (c *Conflicts) DecodeBinary(br *io.BinReader) {
+	hash, err := util.Uint256DecodeBytesBE(br.ReadVarBytes(util.Uint256Size))
+	if err != nil {
+		br.Err = err
+		return
+	}
+	c.Hash = hash
+}
+
+// EncodeBinary implements io.Serializable interface.
+func (c *Conflicts) EncodeBinary(w *io.BinWriter) {
+	w.WriteVarBytes(c.Hash.BytesBE())
+}
+
+func (c *Conflicts) toJSONMap(m map[string]interface{}) {
+	m["hash"] = c.Hash
+}
diff --git a/pkg/core/transaction/transaction.go b/pkg/core/transaction/transaction.go
index 2b26be5c1..dc1d9abe5 100644
--- a/pkg/core/transaction/transaction.go
+++ b/pkg/core/transaction/transaction.go
@@ -26,6 +26,8 @@ const (
 	// MaxAttributes is maximum number of attributes including signers that can be contained
 	// within a transaction. It is set to be 16.
 	MaxAttributes = 16
+	// DummyVersion represents reserved transaction version for trimmed transactions.
+	DummyVersion = 255
 )
 
 // Transaction is a process recorded in the NEO blockchain.
@@ -370,7 +372,7 @@ var (
 
 // isValid checks whether decoded/unmarshalled transaction has all fields valid.
 func (t *Transaction) isValid() error {
-	if t.Version > 0 {
+	if t.Version > 0 && t.Version != DummyVersion {
 		return ErrInvalidVersion
 	}
 	if t.SystemFee < 0 {
@@ -407,3 +409,13 @@ func (t *Transaction) isValid() error {
 	}
 	return nil
 }
+
+// HasSigner returns true in case if hash is present in the list of signers.
+func (t *Transaction) HasSigner(hash util.Uint160) bool {
+	for _, h := range t.Signers {
+		if h.Account.Equals(hash) {
+			return true
+		}
+	}
+	return false
+}
diff --git a/pkg/core/transaction/transaction_test.go b/pkg/core/transaction/transaction_test.go
index fd213accd..510351639 100644
--- a/pkg/core/transaction/transaction_test.go
+++ b/pkg/core/transaction/transaction_test.go
@@ -12,6 +12,7 @@ import (
 
 	"github.com/nspcc-dev/neo-go/pkg/config/netmode"
 	"github.com/nspcc-dev/neo-go/pkg/encoding/address"
+	"github.com/nspcc-dev/neo-go/pkg/internal/random"
 	"github.com/nspcc-dev/neo-go/pkg/internal/testserdes"
 	"github.com/nspcc-dev/neo-go/pkg/util"
 )
@@ -248,3 +249,14 @@ func TestTransaction_GetAttributes(t *testing.T) {
 		require.Equal(t, conflictsAttrs, tx.GetAttributes(typ))
 	})
 }
+
+func TestTransaction_HasSigner(t *testing.T) {
+	u1, u2 := random.Uint160(), random.Uint160()
+	tx := Transaction{
+		Signers: []Signer{
+			{Account: u1}, {Account: u2},
+		},
+	}
+	require.True(t, tx.HasSigner(u1))
+	require.False(t, tx.HasSigner(util.Uint160{}))
+}
diff --git a/pkg/network/helper_test.go b/pkg/network/helper_test.go
index 38428daea..5f74e24b7 100644
--- a/pkg/network/helper_test.go
+++ b/pkg/network/helper_test.go
@@ -41,6 +41,10 @@ func (chain testChain) FeePerByte() int64 {
 	panic("TODO")
 }
 
+func (chain testChain) P2PSigExtensionsEnabled() bool {
+	return false
+}
+
 func (chain testChain) GetMaxBlockSystemFee() int64 {
 	panic("TODO")
 }
diff --git a/pkg/rpc/server/server_helper_test.go b/pkg/rpc/server/server_helper_test.go
index 1ea4ab6c4..ee41e0be4 100644
--- a/pkg/rpc/server/server_helper_test.go
+++ b/pkg/rpc/server/server_helper_test.go
@@ -98,3 +98,7 @@ func (fs *FeerStub) BlockHeight() uint32 {
 func (fs *FeerStub) GetUtilityTokenBalance(acc util.Uint160) *big.Int {
 	return big.NewInt(1000000 * native.GASFactor)
 }
+
+func (fs FeerStub) P2PSigExtensionsEnabled() bool {
+	return false
+}