UNDERSTANDING THE MEMPOOL AND BLOCKCHAIN TRANSACTIONS
The mempool is a temporary place where unconfirmed blockchain transactions wait to be validated and included in the next block. Learn how this affects transaction speed, fees, and network priorities.
The term "mempool" stands for "memory pool" and refers to the collection of unconfirmed transactions that have been broadcast to a blockchain network but have not yet been added to a block. Think of it as a digital queue or holding area where transactions await confirmation. Each node in a blockchain network maintains its own version of the mempool, which continually updates as new transactions are received or confirmed.
When a user initiates a transaction, such as sending Bitcoin, that transaction is validated by the user's software and then broadcast to the network. It is not included in the blockchain immediately. Instead, it enters the mempool, where it awaits selection by a miner or validator to be included in a forthcoming block.
The mempool serves several critical functions:
- Transaction management: Helps nodes manage which transactions need to be validated.
- Fee market: Transactions with higher fees are often prioritised for faster inclusion in blocks.
- Network synchronisation: Keeps nodes up to date with pending transactions.
The size and condition of the mempool can significantly affect transaction confirmation times and fees. When the network is busy and the mempool is congested, users may need to pay higher fees to prioritise their transactions. Conversely, during low activity periods, fees may drop as there is less competition.
It’s important to note that the mempool is not a universal, single entity. Since each node maintains its version, different nodes may have slightly different views of the mempool at any given moment. However, the core concept remains the same: it is a temporary holding area for unconfirmed transactions within the blockchain infrastructure.
Understanding how a transaction enters the mempool begins with the creation and broadcasting of the transaction through a user’s wallet or application. Here's a step-by-step breakdown of the process:
- Transaction creation: A user or application constructs a transaction, specifying the sender, recipient, and the amount. Cryptographic signatures ensure the transaction's authenticity and integrity.
- Validation: Before being propagated, the transaction is locally validated for correctness—ensuring the sender has sufficient funds, and the format is correct.
- Broadcasting: The transaction is then broadcast to nodes connected to the wallet. Those nodes verify it against their current copy of the blockchain and, if considered valid, include it in their mempool.
- Propagation: These nodes relay the transaction to their peers, and it continues to propagate throughout the network. Nodes that accept the transaction will add it to their own mempool.
Most blockchain nodes apply rules to manage their mempool. Transactions must meet criteria regarding size, fee rate, and validity. If a transaction does not meet these thresholds—typically in terms of transaction fee—it may be rejected or delayed indefinitely.
The mempool acts as a dynamic area where transactions are temporarily stored. Nodes may implement size limits on their mempools to conserve memory resources. If the number of unconfirmed transactions swells beyond a node’s capacity, lower-fee transactions may be dropped to make room for higher-priority ones.
Transactions usually include a transaction fee, known as the miner fee or priority fee. These fees incentivise miners or validators to include a transaction in the next block. During times of high network congestion, competition for block space increases, which drives up the average fees in the mempool.
The duration a transaction stays in the mempool depends on network activity, the attached fee, and the speed at which new blocks are mined. If a transaction remains unconfirmed for an extended period, the broadcasting wallet or application may allow the user to "replace-by-fee" (RBF), increasing the fee to expedite inclusion, or eventually cancel the transaction.
Once transactions are in the mempool, the next step is inclusion in a block—this is where blockchain consensus mechanisms come into play. For networks operating on proof-of-work (e.g., Bitcoin), miners are responsible for collecting transactions from the mempool and packing them into newly mined blocks. Here’s how the process works:
- Block template creation: A miner compiles a block template by selecting from the mempool a group of valid, high-fee transactions. Selection is often economically driven, focusing on maximising fees earned.
- Nonce computation: The miner begins computing a cryptographic puzzle known as the proof-of-work. This process involves altering variables like the nonce until the resulting block hash meets certain difficulty criteria.
- Block broadcast: When a miner successfully solves the puzzle, the new block is broadcast to the network. Other nodes validate the block’s transactions and the solution to the cryptographic puzzle.
- Block confirmation: If the block is accepted, its transactions are removed from the mempool, as they are no longer pending and now form part of the immutable blockchain record.
For proof-of-stake or other consensus types, validators perform a similar role as miners, selecting transactions based on fees, validity, and priority. The chosen transactions become part of the next block added to the chain through an agreed-upon consensus mechanism.
Not every transaction in the mempool makes it into the next block. Blocks have size limits (e.g., Bitcoin enforces a ~1 MB block size), meaning only a portion of the mempool—typically those with the highest fees—will be selected. This introduces a fee market dynamic, encouraging users to attach competitive fees if they want quick confirmations.
Special considerations may also influence inclusion:
- Time-sensitive transactions: Some wallets mark transactions as urgent based on deadlines or execution windows.
- Child-pays-for-parent (CPFP): Users can 'bump up' older stuck transactions by attaching higher-fee dependent transactions.
- Transaction dependencies: Transactions that depend on others being confirmed first will be grouped in order when possible.
In summary, a transaction’s journey from broadcast to block involves multiple stages—validation, mempool aggregation, miner or validator selection, and final confirmation. These mechanisms work together to ensure the integrity, efficiency, and reliability of blockchain networks.
