Understanding the Bitcoin Mempool and Why It’s So Important
The Bitcoin Mempool is a critical component of Bitcoin’s core functionality. Mempool is simply a shortened version of the phrase “Memory Pool.” This protocol is the first place that any new transactions are noted on Bitcoin’s blockchain. In essence, it’s a holding pen for all pending transactions before they are presented to miners. Notably, every node maintains a Mempool.
Mempool allows Bitcoin’s network to keep track and manage all of its transactions in an organized and democratic manner. Remember, Bitcoin has a block size of just 1MB. Each of these blocks is capable of holding a few thousand transactions at most. The Mempool acts as a holding pen where miners can sort through the transactions available and choose the ones they want to include in the next block.
When there’s a lot of network congestion, miner fees go up. You will need to include a miner fee comparable to the current rate if you want your transaction to be selected and completed in a reasonable amount of time. On average, a Bitcoin transaction can take anywhere from a minute to hours to complete.
What Problems Does Bitcoin Mempool Attempt to Fix?
The Bitcoin Mempool solves a variety of problems that would otherwise make the network unusable. For one, it helps ensure that miners receive a fair fee for their efforts. It accomplishes this task by allowing miners to sift through stuck transactions, low-paying transactions, and minimal transactions, also known as dust.
Benefits of Bitcoin Mempool
The Bitcoin Mempool provides the network to manage and monitor all transactions from one convenient location. Both miners and users benefit from this protocol. For miners, the Mempool equalizes the level of commissions in the network. For users, it provides an extra layer of security and resistance against DDoS attacks. DDoS attacks occur when a network is flooded with minuscule transactions to provide unmanageable congestion.
How Does Bitcoin Mempool Work
To fully understand how the Mempool works and its importance, you first need a brief overview of how Bitcoin transactions process. The first step in any Bitcoin transaction is the creation of a send within a Bitcoin wallet. From here, the Mempool receives the transaction request. These requests reside in the Mempool, awaiting a miner’s selection. In this way, the Mempool allows for large amounts of transactions to be processed efficiently.
The next step is where miners become aware of the transactions in the Mempool. The miners will sort through the awaiting transactions in the Mempool and select their choices to include in the next block. Importantly, every time a transaction is selected to go into a block, it frees up more room in the Mempool. This freeing up of space is crucial because the closer the Mempool is to 1MB, the faster all transactions will complete.
This selection process is also why the Mempool is often compared to a waiting room. Think of going to your doctor’s office. If you walk in and see a packed waiting room, you already know that there will be significant delays. The same goes for Mempool. If there are 3MB of transactions in the pool, then it’s safe to assume there will be delays with your transactions unless you place your miner fee above the average.
After a transaction is selected from the Mempool, it’s included in the block and verified by all of the Bitcoin nodes available. After receiving 3-6 confirmations from the network, it’s officially added to the blockchain and part of the immutable chain of transactions.
Mempool is a critical component in network management. Whenever the Mempool reaches full capacity, the nodes will prioritize transactions via a minimal transaction fee threshold. In this scenario, only new transactions with fees that meet the minimum criteria are allowed access to the Mempool.
History of Bitcoin Mempool
The history of the Mempool begins with BIP-35 (Bitcoin Improvement Proposal No.35). This coding is what manages and implements the functions of the Mempool. It includes additional functionalities such as allowing outside nodes to access other nodes’ Mempools. This feature is important because it allows for other critical actions such as network diagnostics. In this way, outside nodes can check for lucrative fees simply by downloading the transaction waiting list.
Mempool does have some concerns associated with its operation. Primarily, transactions in the Mempool are not added to the blockchain until they are confirmed. You should wait for 3-6 transaction approvals on Bitcoin’s network before assuming the transaction is complete.
Problems arise when someone sends a transaction with a meager fee and then cancels it and resends the same transaction to another party with a higher fee. These actions will result in the lower fee being invalidated. If you were to consider the payment complete before the recommended 3 approvals, you would be surprised to learn that your transaction is no longer valid.
While this double-spend tactic isn’t common, it is still possible when a new user doesn’t wait for multiple transaction approvals to complete. Most users and wallets will require at least three transaction approvals before they post the transaction. In this way, new users receive an extra layer of protection against this attack.
The downside of Mempool is that miner fees can skyrocket when the network gets heavily congested. During these times of increased usage, Bitcoin fees can reach dizzying heights. For example, there were reports in 2017 of Bitcoin transaction fees averaging more than the transaction.
Luckily, the introduction of SegWit and other creative off-chain solutions, such as the Lightning Network, has expanded Bitcoin’s capabilities significantly. Nowadays, there are various ways to keep these fees down and still receive and send payments in seconds.
Mempool – A Smart Way to Organize a Decentralized Ecosystem
Bitcoin’s Mempool has proven to be an effective way to ensure that miners get paid fairly, and users are protected against DDoS attacks. This “holding pen” gives miners the added confidence to select the highest paying transactions. It also provides users with a way to expedite their transactions when needed. As Bitcoin continues to see more use globally, the Mempool will continue to play a pivotal role in the network’s effectiveness.