The Bitcoin Mempool is similar to a queue, or a line, where the total amount of transactions that are yet to be verified await their turn. It is the moment before they become a new block within the blockchain, that every node has their own amount of space where they wait for these transactions to happen, until miners are free to verify them.
This article is a walkthrough of the Bitcoin Mempools and the important role they have in crypto.
Bitcoin is the first decentralized finance project in the world, being at the forefront of blockchain innovation while designing a cryptocurrency and a network that is both secure, independent and offers a structure of rewards for miners that validate every transaction, according to the Proof-of-work protocol, which keeps the whole network safe.
Within this context, creating a system where transactions can be “stored”, validated and queued before they are able to be analyzed enforces a system of priorities. This helps the process to become faster and more efficient.
In the Bitcoin network, validating each and every transaction happens as follows:
Before a miner is able to pick-up their stack of transactions to go through, the cryptographed registries of these potential blocks need to be stored somewhere, and that is, in part, what the Mempool is for.
Each node in the consensus mechanism for Bitcoin has its own mempool, which in turn, is equipped with its own storage capacity for that given amount of data. Once that limit is at a maximum capacity, then the nodes will start charging a minimum capacity fee in order to approve the blocks - the transactions that are free or cost lower, their value will end up being deprioritized, while the transactions with higher fees will come first.
This also serves to organize a priority queue for larger and smaller transactions, in order to gain traction and speed up the process.
The Bitcoin Mempool is a useful way to keep track of all the transactions that are yet to be validated into the Blockchain. Each node has its own queue, to which the assets they are supposed to analyze is sent to while it waits its turn. One recent improvement in this mechanism is that outside nodes are now able to access other nodes’ mempools in order to clear transactions faster. This is an advantage, considering that the faster they are processed, the better the experience becomes of using this cryptocurrency, avoiding the possibility of the system getting too overwhelmed by requests.
Usually, delays in processing happen because either there is a high volume of transactions waiting to be analyzed, or the mining difficulty (trade hash) is increasing rapidly and there are no miners available, resulting that some will have to wait longer.
This system is very useful and effective in giving a fair reward system to miners, who deploy their time and computing power into verifying and accepting these blocks into the chain, according to supply and demand rules.
Another positive aspect is that by having a queue, where they are able to stay until analyzed, saves up space in the nodes, that in turn do not have to become overpowered by a large stack of data, and is less vulnerable to possible attacks and fraud. The size of the pool will depend solely on the amount of transactions being made at the time.
Mempools are considered a very safe method of queuing up new transactions before validation. However, it can pose a few risks, especially when they start to be taken in as absolute and valid transactions. Since there is time for these transactions to take place, a malicious user, in theory, could take advantage of a slow volume of incoming requests, to try and validate an amount of cryptocurrency, and then withdraw the transaction.
For this reason, users are always advised to wait until their transactions have been thoroughly accepted, validated and are a part of the blockchain to count it as completed. It is how decentralized finance is able to assure safety within the system, so coin holders should be aware that the only transactions truly accepted are the ones that went out to the blockchain and are a part of the system.
When it comes to Bitcoin transaction fees, the main principle is that the higher the fee, the more likely a transaction is to be included in the next block. This is because miners, who process and confirm transactions, have an incentive to prioritize transactions with higher fees as it gives them more revenue. Consequently, if a user wants to speed up a transaction, he/she will have to set a fee that is higher than the average, which can vary depending on network congestion. A fee calculator can be used by users to choose the right fee for their transaction. There are various fee estimators available, and they often consider the network’s current state.
Important to note: the fee is not a guarantee for a fast confirmation, it is just an incentive for the miner to include the transaction in the next block, it is possible that a transaction with a high fee could still be delayed if the mempool is extremely congested.
To avoid the problem of transactions ending up in the mempool, users can use a second layer solution, called “Lightning Network“, which allows for faster and cheaper transactions.
The Bitcoin Lightning Network is a second-layer solution that aims to address the scalability issues of the Bitcoin network by enabling off-chain transactions. Users can establish payment channels with one another thanks to the Lightning Network, which is a solution built on top of the Bitcoin blockchain. Without having to broadcast every transaction to the blockchain, these channels can be utilized to conduct a number of off-chain transactions. Once the channel is closed, the final balance is then broadcasted to the bitcoin blockchain. The Lightning Network is still in the development phase and it is not widely adopted yet, but it aims to become one of the leading solutions for allowing people to perform microtransactions in seconds.
There is still a lot of mysticism and doubt around the topic of what the technology and the logic is behind cryptocurrencies, and with mempools this is also the case. In the digital era it can be quite frustrating to have to wait for transactions to be cleared, and when there’s a long hash rate, it may take even longer, which is why some users opt for checking on transactions that are still within the mempool.
But this system is part of what makes cryptocurrency safe: an organized and transparent process aimed to solve the holder’s financial needs, that is decentralized from big institutions and holds every record within its core. The mempool makes sure that this happens in an orderly way, even providing good rewards for those who help make the system work. It is how Bitcoin is able to reward miners, and an interesting case study for blockchains.