Mempool & Fee Selection

The mempool is each node's local queue of transactions that are valid but not yet in a block. When a miner builds a candidate block, they pick the highest-paying transactions from their mempool.

Fee market

Block space is scarce (1 MB / 4 Mweight in Bitcoin). Demand spikes drive up fees. Miners are profit-maximisers — they pick transactions by fee-rate (satoshis per byte), not by absolute fee.

A 200-byte tx paying 2000 sats has a fee-rate of 10 sat/byte. A 1000-byte tx paying 5000 sats has a fee-rate of 5 sat/byte.

The miner prefers the small high-rate one even though the big one pays more.

Selection algorithm (greedy)

ranked = sorted(mempool, key=lambda t: t.fee/t.size, reverse=True)
picked = []
remaining = block_capacity_bytes
for t in ranked:
    if t.size <= remaining:
        picked.append(t)
        remaining -= t.size

This greedy strategy is not optimal (it's the knapsack problem) but it's fast and works fine for typical fee distributions.

Real implementations also handle:

• CPFP (Child Pays For Parent): a high-fee child justifies including its low-fee parent.
• RBF (Replace By Fee, BIP-125): a tx flagged as RBF can be replaced by a conflicting tx paying higher fee.
• Package relay: propagate parent+child as a unit.
• Min-relay-fee filtering: drop dust below ~1 sat/vbyte.

Eviction

Mempool is bounded (Bitcoin Core default ≈ 300 MB). When full, evict the lowest fee-rate transactions to make room for higher-paying ones.

This exercise builds a mempool with greedy fee-rate selection and lowest-rate eviction.