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What is a mempool? 📖
Mempool is combined term derived out of the words memory and pool. It’s known as a waiting room of sorts to confirm pending transactions. Additionally, it can be defined as the mechanism of cryptocurrency nodes for storing information on unconfirmed/pending transactions.
What are cryptocurrency nodes?
When a transaction is broadcasted on a cryptocurrency it is then sent to nodes to validate its transaction. The validation of each transaction depends on a certain criteria that has already been fixed.
If the transaction is verified, it gets sent to the nodes which are connected and interlinked with each other. This way, the transaction enters the memory pool and is consequently added to the designated block.
Like many other blockchains, mempool mechanism also applies to the Ethereum Blockchain.
When an Ethereum Blockchain node receives a transaction, it waits for the transaction to verify first rather than including it in a block. Which means the node runs a series of checks to validate the transaction.
Example sentence: Eventually, Alex was able to make his chain longer by sending the legitimate transaction back to the mempool 🧠
Here are some usual checks for the verification of transactions 👇🏼
- The output should not be greater than the input
In cryptocurrency, there is an output and then there is an input. Input is the coins that a user is spending in the transaction whereas the output is new coins being created and transferred. Ensuring that both are equal is important.
- The signature of the transaction should be valid
In the blockchain, transactions are digitally signed to verify that they were created by the rightful owner. To check the validity of a transaction signature, the mempool verifies that the digital signature matches the sender’s public key and that the public key is associated with the correct address. If there is a mismatch between both, the transaction is not accepted and is discarded.
- The coin belongs to the seller
This is again a very important point. As mentioned in the second point, there is a method to verify the authenticity of the seller and the people involved in a transaction.
Importance of a mempool
Mempools are important for a number of reasons. If you have been studying cryptocurrency for a long time now, you would know that security and integrity are two essential postulates of cryptocurrency and they set it apart from fiat currency.
Mempool ensures that these two things are not compromised by serving as a checkpoint for transactions before they are added to the blockchain.
Prominent uses of Ethereum mempool 🧠
- The Ethereum mempool is used to obtain trading prices on DEX like Uniswap.
- Important tasks like transaction ordering and transaction fee prioritizing can be done by Ethereum mempool.
- Some transactions with low gas prices are dropped. Mempool allows you to analyze the gas prices and adjust transaction prices to avoid getting dropped.
In Proof-of-Work (PoW), miners used to decide the order of transactions but as the Ethereum Merge is now complete, the nature of Miner Extractable Value (MEV) will shift. In Proof-of-Stake (PoS), Ethereum has introduced a block-builder that helps them decide the order of transactions.
Drawbacks of a mempool
While there are some advantages of mempools, there are also some challenges and limitations.
- Mempools can be congested, resulting in higher transaction fees and an even longer confirmation time. This happens when the number of transactions rises.
- DoS (Denial of Service) attacks and spam transactions can be seen in mempools, disrupting the network and causing delays in transaction processes.
- One of the prominent limitations of mempools is the feature of censorship which can result in certain transactions being censored and not given much priority. Now censorship is generally aimed at avoiding spam or illegal transactions. However, miners can deliberately withhold some transactions to give themselves a mining process advantage and become selfish.
In conclusion, mempools are an important feature of blockchain. While they have some drawbacks and limitations, their core function – serving as a waiting room for pending transactions – is something that is really useful.