What is a mempool?

‘Mempool’ is an amalgamation of the words ‘memory’ and ‘pool.’ Within the cryptocurrency industry, it refers to a system for storing information on unconfirmed transactions that are waiting to be processed. Transactions sitting in a mempool are yet to be recorded into a block and added to the blockchain, which cannot happen until they have been through a series of checks.

In this AAG Academy guide, we’ll go into more detail on what exactly a mempool is, and explain how they work and why they are important. We’ll also look at some of the problems posed by mempools, and answer some frequently asked questions.

What is a mempool for?

Mempools are a critical component of a blockchain network. They help ensure that transactions are dealt with properly, that the necessary checks can be carried out on them to ensure their validity before they are confirmed, and that transactions are not lost after being submitted to the network for processing. They also allow transactions to be sorted based on their priority.

When a cryptocurrency transaction is submitted to a blockchain network for processing, it cannot be approved and added to the database immediately. There are checks it must go through first to ensure it is valid, so it needs a place to sit while these take place. A mempool, which you can think of like a virtual waiting room, solves that problem.

How does a mempool work?

Those checks we touched on above involve broadcasting the transaction information to a series of nodes, which are essentially computers on the network. They check that the transaction is valid, that any necessary data — such as the sender’s signature and the receiver’s address — is present and correct, and confirm that the sender has enough funds in their wallet.

During these checks, the transaction sits in a ‘queued’ state in the mempool. Once a certain number of nodes have decided they are happy with the transaction and approved it, it then enters into a ‘pending’ state in the mempool, where it remains until it can be written into a new block. It will eventually be picked up by a miner or validator for processing.

Once the miner or the validator has carried out their work and the transaction has been processed and recorded, it is confirmed. At this point, the funds are deposited from the sender’s wallet and credited to the receiver’s wallet. Finally, nodes are informed that the transaction is complete and it is then removed from any mempools it was sitting in.

There are a couple of important things to bear in mind about mempools and how transactions are handled. Firstly, there is not just one mempool on a blockchain network; every node has its own mempool, and these can vary in size depending on how much space has been allocated to them by the node’s operator. Each of them may receive transactions at a different time.

Secondly, blockchain transactions are not processed in the order in which they are received. Instead, they are sorted by priority while they are sitting in the mempool, and those that are deemed highest priority are picked up by miners and validators first. These are usually the transactions that have higher fees attached because those are obviously more lucrative.

As a result, how long a transaction sits in the mempool for before it is confirmed is difficult to determine. Things like network congestion, hash rate decreases, and a fluctuation in fees can all have an impact on processing times. It’s also worth noting that larger, more popular networks like Bitcoin and Ethereum typically have longer waiting times than smaller networks.

Why is a mempool important?

As we touched on above, mempools are incredibly important because they provide a safe place for transactions to sit before they can be processed by a blockchain network. This allows them to be checked and prioritized properly, which contributes to network security and efficiency. It also ensures transactions do not get lost when a network is extremely busy.

Without a mempool, blockchain nodes would not be able to see pending transactions, which would make it incredibly difficult — if not impossible — to check their validity and prioritize them before they are handed over to miners or validators. It is likely that fraudulent and invalid transactions would then slip through the gaps and end up being confirmed inadvertently.

Problems with mempools

Mempools do have their downsides as well, of course. During times of high transaction volume, they can become congested, which results in increased transaction fees and longer processing times. Users who need their transactions to be processed quickly may need to pay excessive fees to ensure that they are prioritized by nodes and that their transactions are dealt with first.

A lack of mempool synchronization can also be a problem. As we noted above, there is usually a large number of mempools on a blockchain network, and none of these talk to each other to share transaction data. This can sometimes mean that certain transactions essentially get stuck in one node’s mempool and may never be passed onto a miner or validator for confirmation.

In addition, mempools can be susceptible to transaction spam, which is when attackers attempt to overwhelm a network with invalid transaction data. This contributes to mempool congestion and slows down the network, and because those transactions must go through the same validity checks as others, there is no quick and easy way to weed them out.

Finally, mempools also enable what we refer to as DeFi sandwich attacks. This is when an attacker with knowledge of upcoming transactions — usually because they are operating a node — places ‘frontrunning’ and ‘backrunning’ transactions that cause the value of an asset to change so that they can claim a profit from unsuspecting users.

Sources:

• Mempool
• What is a mempool