Inside the Mysterious World of Ethereum’s Mempool

Correction: This article previously focused on Bitcoin's blockchain but the explorer only covers Ethereum's blockchain. The article has been updated to reflect this.

Blockchain infrastructure firm Blocknative launched a Blockchain Mempool Explorer yesterday, enabling users to access data more easily from the mempool. 

But what is the mempool? It’s the gateway to Ethereum's blockchain and many others. Before any transaction is written on a blockchain, the information first enters the mempool. There it sits, almost in purgatory, waiting for a Godly miner to select it and inscribe it into a block—or discard it forever. But the very nature of this in-between world, which differs for each miner, has always made it challenging to analyse. And it is often exploited by bad actors with the expertise to see things the rest of us can’t.

“At a minimum, our platform represents sunrise in the Dark Forest. The alpha predators are still operating, but now everyone can monitor their actions,” Matt Cutler, CEO and co-founder of Blocknative, told Decrypt. 

The main problem is that the Ethereum mempool is built upon the shifting sands of pending Ethereum transactions. As there is no one central source of mempool data—each miner has their own version of events—it is difficult to gather and utilize this data. This, in turn, makes it hard to take a reliable snapshot of events, and present them to developers. 

“It is pre-consensus by definition. It is constantly changing—literally at a sub-second level,” said Cutler. 

How the Mempool Explorer works

The Mempool Explorer tries to make sense of the pre-consensus data found in the mempool, making it accessible and easy to analyze. 

In the mempool, pending transactions are ordered, fees are prioritized, and new blocks are sent to the blockchain. The Mempool Explorer examines this data and makes it available to developers. Using the Mempool Explorer, users can track pending transactions, monitor exchanges, and share mempool data with others. In other words, it is a purpose-built environment for crunching data before it hits the blockchain. 

The Mempool Explorer works as a global network of nodes, all enabling the Explorer to detect and record data on the mempool in real time. The Mempool Explorer can record more than 7 billion Ethereum mempool events in just one month. That is over 2,000 events per second on a 24/7 basis. 

How mempool data fights frontrunning

While mempool data is tricky to get hold of, it’s very useful for several different purposes. 

One of its main, albeit shady, uses is for frontrunning. Frontrunning is a way of making trading decisions based on knowledge of future events, similar to insider trading. And traders use frontrunning to get ahead of people on decentralized exchanges, typically on the Ethereum blockchain.

Alex Svanevik, CEO at Nansen, told Decrypt, “There’s certainly demand for mempool data. Trading in traditional finance is often a latency game, and crypto is no different,”

Here’s how frontrunning works when blockchain is involved. Since blockchain data is public, someone watching the mempool can see a trade being made and then make the same trade, offering a higher transaction fee. Since miners tend to pick transactions from the mempool that have higher fees (so they make more money), this means the later transaction is more likely to get included in the block—and the person gets ahead of the trade.

Until now, only some individuals use such techniques. “Today, these techniques are the domain of a well-equipped, and well-financed, elite few. Everyone else is at best a spectator to their actions – at worse, unaware,” said Cutler. This means general people using decentralized exchanges are often subject to frontrunning—but may have no idea.

Now anyone who uses the Explorer will now be able to fight back. 

“Any adversarial action that goes on chain must—just like everything else—first traverse the mempool. So our platform can give concerned parties advanced warning that adversarial actions are underway,” Cutler added. 

It’s time to embrace the mempool.