What is a Bitcoin mempool?

The Bitcoin mempool (short for "memory pool") is a temporary storage area where pending Bitcoin transactions are held before they are confirmed and added to a block on the blockchain.

When someone initiates a Bitcoin transaction, it is broadcasted to the network of nodes (computers) running the Bitcoin software. These transactions are initially stored in the mempool of each node that receives them. The mempool serves as a waiting area for transactions that have been broadcasted but have not yet been included in a block.

Miners, who are nodes with specialized hardware and software dedicated to securing the network, select transactions from the mempool and include them in the blocks they mine. Transactions in the mempool compete for limited space in each block, as blocks have a maximum size limit (currently set at 1 MB for Bitcoin, though this can vary with the adoption of technologies like Segregated Witness or SegWit).

The priority of transactions in the mempool is determined by several factors, including the transaction fee attached to each transaction, the size of the transaction (in bytes), and the urgency of the transaction (e.g., whether it includes time-sensitive payments or RBF - Replace-By-Fee flag for transactions that allow the sender to increase the fee later).

During times of network congestion or high demand, the mempool can become filled with pending transactions, leading to delays in transaction confirmations and higher transaction fees as users compete to have their transactions included in blocks. Conversely, during periods of low network activity, the mempool may be relatively empty, and transactions with lower fees may still be confirmed relatively quickly.

Overall, the Bitcoin mempool plays a crucial role in the transaction process by temporarily storing pending transactions and facilitating their inclusion in blocks by miners, helping to maintain the security, efficiency, and reliability of the Bitcoin network.