Mempools and MEV have always been a pain in traditional blockchains. In IOTA 2.0 the mempool is integrated within the Tangle to make them a part of a single transaction block. This results in the elimination of intermediaries and market manipulation by minimizing MEV in the DAG infrastructure.
Concepts of Mempool and MEV
Before we dive into how IOTA 2.0 has eliminated the mempool and mitigated Maximal/Miner Extractable Value (MEV), let’s take a quick examination of their respective roles in a network.
The Role of the Mempool
The memory pool or mempool is generally the waiting stage for unverified transactions in a conventional blockchain. Different blockchains have varying rules on the processing of transactions within mempools, but these are often manipulated by miners in prioritizing higher-fee transactions to maximize profits. This leaves users in a “bidding war” to get their transactions infused in the next block, and those who are incapable of paying more get “priced out” as their transactions are left in limbo within the mempool.
The MEV Effect
MEV is an offshoot of the mempool, which is utilized by miners or validators to peek into the potential earnings they can get out of a user’s transaction that’s in a mempool. These are rampant in Proof-of-Work models where miners have the freedom to exercise their biases toward each type of transaction. Additionally, miners can also decide on the order of transactions or cut the line to insert their transactions for leverage.
On the other hand, users of blockchains with Proof-of-Stake mechanisms also fall prey to this kind of market manipulation. This time, they are hounded by validators taking preference to transactions with higher gas fees. Again, this becomes another bidding war to ensure the faster incorporation of a transaction into a block.
The IOTA 2.0 Solution Against Mempool and MEV
Take note that the new version of the IOTA direct acrylic graph (DAG) still has a mempool, but not in a traditional sense. Instead of going through a waiting area, transactions are directed to the mempool merged within the Tangle after passing through IOTA 2.0’s congestion control.
From there, the leaderless consensus of the system where the users also the validators can directly act on each transaction and write them into the DAG without reliance on intermediaries. The Validator Committee effectively safeguards conflicts of interest because of MEV elimination, or mitigation to say the least.
As shown in the illustration above, purging the waiting area simplifies transaction flow in IOTA 2.0. It allows a transaction to be immediately packaged into the block and spread all over the network nodes where it’s executed upon arrival and approved.
Overall, skipping the mempool makes the new IOTA protocol more efficient than traditional blockchains, and guarantees the autonomy of its growing community.