Mempool Incentive Compatibility

Mempool Incentive Compatibility

Original Postby rustyrussell

Posted on: March 16, 2024 00:27 UTC

The discussion revolves around the challenges of conducting transactions on a blockchain network, particularly emphasizing the issue when a user wants to execute a transaction within a specific timeframe but encounters obstacles due to competing transactions.

The focus is not on the reasons behind these delays or which particular transaction gets processed first, but rather on the urgency and willingness to pay competitive rates for timely execution.

In certain scenarios, miners are motivated to address this issue, while in others, their incentives may not align with the transaction initiator's needs. However, the concept of a Schelling point is introduced as a potential solution. This is a situation where miners might collectively decide to prioritize such transactions if they believe it benefits the overall network, despite the lack of direct incentives. Three conditions are highlighted for this to occur: consensus among miners that prioritizing these transactions is beneficial for the network, recognition that the advantages of not doing so are marginal, and establishing such behavior as the default approach.

Furthermore, to mitigate the risk of denial-of-service (DoS) attacks, a practical solution is suggested. It involves allowing the replacement of transactions in the mempool (the pool of unconfirmed transactions) under specific conditions: if a transaction has been pending for more than 12 blocks, and a new transaction is proposed with a higher fee rate that would place it at the top of the mempool, and both transactions adhere to version 3 (v3) standards, then the replacement should be permitted without considering the total fee rule. This approach aims to streamline the process, ensuring timely transaction processing while maintaining network security and efficiency.