Understanding the Bitcoin Mempool: Why are Transactions Backlogged?
Overloaded BTC Mempool
In order for Bitcoin (BTC) transactions to be stored on the blockchain, they must first enter the ‘mempool’, which acts as a queue where unconfirmed transactions are collected and stored before miners add them to a new transaction block. Due to the introduction of Ordinals in January, there are currently 393,000 transactions waiting to be confirmed.
The Role of Nodes and Transaction Verification
When a transaction is sent to the network, it is first verified by all the participating nodes, which are the computers involved in the Bitcoin network. Once verified, the transaction becomes part of the mempool until a miner picks it up. The mempool provides an indication of network congestion, and miners can choose which transactions to include in a new block. Naturally, transactions with higher transaction fees are given priority.
Current mempool data reveals that there are over 367,000 transactions waiting to be confirmed. Data from BitInfoCharts also shows that the average transaction fees currently amount to $2,234. In comparison, a year ago, the average fees were $1,047, indicating a 113 percent increase.
While higher fees benefit BTC miners by increasing their profits, it could lead to issues during the next bull market. However, the Lightning Network offers a solution by relieving the pressure on the Bitcoin blockchain.
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The Cause: Bitcoin Inscriptibles
James Check, the head analyst at crypto analysis platform Glassnode, recently explained that inscriptibles are the cause of the overloaded mempool. Ordinals introduced these inscriptibles to the Bitcoin blockchain, enabling the creation and trading of non-fungible tokens (NFTs) and BRC-20 tokens on the network.
Check mentioned that the current transaction fees are not as high as during the absurd Ordinals hype in early May, but the network has been unable to clear its mempool since then. He stated that these inscriptibles, especially text-based ones, now account for 50 to 60 percent of confirmed transactions. However, they only represent about 10 percent of the block size and approximately 20 percent of the transaction fees paid.
Potential Impact and Solutions
The backlog of transactions in the mempool raises concerns regarding scalability and network efficiency. While Ordinals have sparked a surge in activity on the Bitcoin blockchain, the network must find ways to address the congestion issue. The Lightning Network, with its off-chain transaction capabilities, offers a promising solution to alleviate the strain on the mempool and enhance the overall Bitcoin experience.
It is crucial for developers, miners, and the Bitcoin community to work together to explore and implement solutions that can optimize transaction throughput and reduce fees, ensuring a smooth and sustainable operation of the Bitcoin network.