Bitcoin Ordinals marketplaces have evolved quickly and as the global user base grows and transaction traffic increases, users are looking for more – and newer – ways to make sure their Ordinals transactions go through.
This reality has resulted in some actors taking somewhat questionable approaches to getting their transactions over the finish line, like mempool sniping. Over time, certain users have realized they can exploit Bitcoin’s relatively slow block times to give themselves an advantage in the marketplace.
For a real world analogue, you can compare mempool sniping to housing markets in many parts of the world; a buyer and seller agree on a price and agent fees, and then another buyer swoops in with a bid well above asking price before the contracts are signed.
What is the Mempool?
The mempool is essentially a waiting room for Bitcoin transactions that have been verified by available node operators on the network, but have not been confirmed by miners through the proof of work (PoW) algorithm and imprinted on the blockchain.
As we know, miners don’t work for free. They allocate resources toward transactions that give them the chance to earn the maximum extractable value (MEV), meaning that a transaction with higher associated fees will be processed more quickly than a transaction with lower fees as miners compete for their block reward.
This often results in smaller transactions being stuck in the mempool waiting room for quite some time. Even though Bitcoin’s block time is around 10 minutes on average, small transactions can end up there for 72 hours when the network is particularly congested, at which point the transaction will be canceled and funds are returned to the transacting parties’ wallets.
The process works very similarly when it comes to Ordinals-based transactions. A user signs an off-chain partially signed Bitcoin transaction (PSBT) swap, which is held by a marketplace until the other party also signs, at which time the transaction is sent to the mempool.
While funds are never lost because of this mode of operation, the way the mempool functions in practice does pose potential risks to time-sensitive transactions.
In the Crosshairs
While mempool sniping can technically occur with any type of transaction, we’ll primarily focus on Ordinals marketplaces as they have seen the largest increase in mempool sniping as of late.
PSBTs are party-agnostic tools. Any counterparty can complete the PSBT once sent to the mempool as long as a given amount of Bitcoin is sent to the original party’s account. Even after it is signed by the original counterparty, any other user can retrieve PSBT information from the mempool, sign it themselves while also assigning a larger fee, and then send it back to the mempool knowing their version will be confirmed more quickly than the original.
They have just ‘sniped’ the transaction.
As we mentioned, there has been more attention paid to mempool sniping of late as users vie for coveted Bitcoin Ordinals collections. For example, in one case a sniper was able to snipe another user’s Quantum Cat purchase for an extra $180 in transaction fees. The Ordinal NFT was later listed for a handsome price of 1.9 BTC.
Finding Cover
Falling victim to mempool sniping isn’t fun. But mempool sniping likely isn't going away.
Just last month, a Bitcoin block on the Binance network raked in one third of its associated fees from only a few sniped transactions. The practice is fruitful for miners and is continuing to prove useful for users who are confident that deploying a small amount of capital on increasing a transaction fee will net them an even larger post-snipe profit.
Fortunately, many members of the Bitcoin community are aware that this is something that can have an outsized effect on marketplaces if left unchecked, potentially damaging user trust and driving newer community members away.
Due to the completely transparent nature of the Bitcoin blockchain and Ordinals tools, it’s not possible for users to hide transactions in the mempool. Bitcoin is a public ledger and this decentralized transparency is fundamental to the network’s security and immutability.
Generally, users might need to spend a little bit of extra time monitoring the mempool to track their transactions. Though this is, technically, a sure-fire way for users to make sure that their specific transactions are not sniped, it is cumbersome and time-consuming. Fortunately, a number of developers are already building solutions to help protect users.
Magisat has developed a mempool marketplace, which gives users direct access to pending PSBTs. It tracks every single Ordinals transaction and makes it available for bidding up until the exact moment the transaction is confirmed by the network’s miners. This solution takes away any advantage other than capital for prospective mempool snipers, drastically re-leveling the playing field for users who aren’t veterans of mempool navigation and tracking transactions through blocks.
For their part, MagicEden has announced that it will attempt to implement on-demand transaction signing. While this isn’t a perfect solution in its own right, it would provide more security through higher up-front fees that should help push transactions across the mempool finish line.
Educating Users About Bitcoin Transactions
Mempool sniping is a reality that users will have to contend with. As the Bitcoin collectibles market and user base grows, certain users will continue to push every advantage at their disposal to secure assets.
Fortunately, marketplaces and builders in the Bitcoin community are keenly aware of the practice and are taking steps to ensure fairness and transparency. Projects are already emerging to help users mitigate experiences that could hinder their Bitcoin network transactions. As more crypto users explore the Bitcoin ecosystem thanks to Ordinals and new developments on the blockchain, it’s important for them to understand how Bitcoin transactions work and how they can protect themselves while navigating the network.
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