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Published on 2024-11-01
The arrival of decentralised finance brought new concepts that seem challenging for the average investor. Most of these are well-explained, and many users understand them.
However, some underlying technologies are still vague and have not received wide recognition and reception since they do not play a major role on the surface of blockchain and crypto payment systems.
Today, we will talk about a significant part of the BTC blockchain ecosystem and transaction processing. Many describe this element as the waiting room for Bitcoin transactions. But what is mempool exactly? And how does it contribute to the overall blockchain well-being? Let’s find out.
Explaining BTC Mempool
The name itself is a combination of (memory and pool), which refers to its function and role in the Bitcoin blockchain. It stores BTC unconfirmed transactions as they wait to be picked up by miners and network participants for validation and registration on the mainnet.
When a user initiates a payment on the Bitcoin blockchain, they must enter the transferred amount and recipient wallet address and select their gas fee type (if offered by the platform).
When the transaction is ready to be processed, and the user confirms it, it is queued for network miners to pick up and verify according to the blockchain protocols. Finally, the operation is transmitted to the network’s mainnet and becomes publicly available.
Explaining The Bitcoin Transaction Process
As crypto transfers go through multiple confirmations and checks before they get approved, the Bitcoin mempool is where transactions using BTC are temporarily stored.
Then, blockchain miners pick up pending transactions based on multiple factors, significantly the gas costs and the underlying amount. Nodes choose larger BTC payments because they result in higher fees and more returns for validators.
Once the transaction goes through validation following the proof-of-work protocol, it gets executed and sent to its intended recipient. In the end, the blockchain network registers the payment on its public ledger, stating the sender’s and receiver’s wallet addresses, cryptocurrency type and amount.
How Does The Mempool Work?
Each validating node or mining rig has its unique reserve space that stores pending transactions. Nodes set up their mempool fees, size and process.
Larger nodes tend to be slower because they compile a huge amount of transactions, which can cram the network and cause delays. Therefore, the common trend is to have a low reserve space that contains a handful of transactions, ensuring a faster and more efficient verification process.
When a transaction gets through from the mempool to the validation stage, it must pass all network nodes to reach consensus according to the Bitcoin network regulations. This procedure ensures the safety and legitimacy of the newly registered block on the blockchain mainnet.
The verification process includes checking both addresses’ validity, ensuring the sender has sufficient funds and the receiver’s wallet path.
Bitcoin vs Ethereum Mempool
Just like Bitcoin, Ethereum mempool serves as the waiting room for ETH transactions before getting validated. Both procedures might seem similar because each operation goes through verification. However, the process itself differs because Bitcoin and Ethereum have different validation protocols.
The ETH blockchain uses Ethereum’s virtual machines (EVM) to interact with and execute network operations. The network also uses smart contracts to ensure an automated validation process that is permissionless and reinforces blockchain regulations.
When it comes to selecting transactions from the mempool, Ethereum validating nodes use the maximal extractable value (MEV) to determine the order of transactions in a way that maximises the validator’s returns.
The MEV output motivates nodes to choose pending network transactions and process them in a way that guarantees them higher returns according to the proof-of-stake protocol.
However, this procedure creates a dilemma since small transactions can take longer times because their MEV value is low, and nodes gain too little for the energy spent for validation.
Conclusion
The mempool is the BTC blockchain reserve for unconfirmed transactions. Bitcoin payments and operations are queued in these reserves before getting picked up by miners.
Network nodes select and validate operations on priority, choosing the ones that generate higher returns. This system might seem unfair since low-value payments with lower miner’s returns are not given priority; hence, they can get stuck in the mempool or take longer times before being confirmed.
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