How Miners & Validators Choose Transactions
How Miners & Validators Choose Transactions
Intent: Explain how fee markets work, how miners and validators prioritize transactions, and introduce the basics of MEV (Maximal Extractable Value).
Introduction – Not All Transactions Are Equal
When a new block is created, thousands of transactions may be waiting in the mempool – but only a limited number can be included.
So how does a miner or validator decide:
- Which transactions get in?
- Which ones wait?
- Which ones are ignored?
The answer lies in economic incentives.
The Goal of Block Producers
Miners (PoW) and validators (PoS) are rational actors.
Their primary goals:
- Maximize rewards
- Minimize risk
- Follow protocol rules
They do not choose transactions randomly.
What Block Producers Earn
A block producer’s income comes from:
- Block rewards (newly issued coins, if applicable)
- Transaction fees
- Tips / priority fees
- MEV (in some cases)
Together, these define transaction selection behavior.
Fee Markets – The Primary Filter
How Fees Signal Priority
Every transaction includes a fee.
Higher fees:
- Increase inclusion probability
- Reduce waiting time
- Signal urgency
Block producers typically:
- Sort mempool transactions by profitability
- Pack the most valuable set into the block
This creates a fee auction.
Different Chains, Same Logic
Bitcoin
- Fee = satoshis per byte
- Higher fee density = higher priority
Ethereum
- Base fee (burned)
- Priority fee (tip to validator)
- Validator selects transactions with higher tips
Different mechanics, same incentive:
maximize earnings per block.
Block Size & Capacity Constraints
Blocks have limits:
- Maximum size
- Maximum gas
Block producers must:
- Fit transactions efficiently
- Optimize fee per unit of block space
Large transactions with low fees are less attractive.
Transaction Ordering Inside a Block
Even after selection:
- Transactions are ordered strategically
- Ordering can affect execution outcomes
- Especially important in DeFi
This leads us to MEV.
MEV – Maximal Extractable Value (Basics)
MEV is the extra value a block producer can extract by:
- Reordering transactions
- Inserting their own transactions
- Excluding others
It’s not about fees – it’s about position.
Simple MEV Example
A user submits a large swap on a DEX.
A validator sees it and:
- Buys before the swap
- Lets the swap execute
- Sells after
This is called sandwiching.
The validator earns profit without changing protocol rules.
Why MEV Exists
MEV exists because:
- Transactions are public before confirmation
- Ordering affects outcomes
- Block producers control ordering
MEV is a structural consequence, not a bug.
MEV Tradeoffs
Pros
- Incentivizes block production
- Improves market efficiency (sometimes)
Cons
- Higher fees for users
- Front-running
- Fairness concerns
Many networks are actively working on MEV mitigation.
MEV Mitigation Techniques (High-Level)
- Private transaction pools
- Encrypted mempools
- Fair ordering rules
- PBS (Proposer-Builder Separation)
These aim to reduce harmful MEV without breaking incentives.
Validators vs Miners – Same Game, Different Setup
| Aspect | Miners (PoW) | Validators (PoS) |
|---|---|---|
| Selection role | Choose transactions | Choose transactions |
| Reward source | Block + fees | Fees + issuance |
| Risk | Hardware & energy | Slashing & stake |
| Incentives | Maximize revenue | Maximize yield |
Different mechanics, same economic logic.
Why This Matters to Users
Transaction selection affects:
- Fees you pay
- Confirmation time
- Execution price
- DeFi outcomes
Understanding this helps you:
- Choose better fee strategies
- Avoid MEV-heavy moments
- Trade more efficiently
Common Myths
“Validators pick randomly”
They optimize economically
“Higher gas guarantees profit”
Only if execution still makes sense
“MEV is hacking”
MEV operates within protocol rules
Key Takeaway
Miners and validators choose transactions based on:
- Fees
- Block constraints
- Profitability
- MEV opportunities
Block production is not neutral-it’s incentive-driven.
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👉 Longest Chain, Finality & Reorgs
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