Reef

WTF is mempool sniping? Here is everything you need to know: This morning Ordinals entered a new era of PvP warfare in the mempool (otherwise known as MEV on Ethereum) when a group of sophisticated botters picked off many of the OrdiBots mints from the people who thought they had minted them. Let's break down what happened and what this means going forward. Ordinals inscriptions are traded using PSBT swaps (partially signed Bitcoin transactions). The way it works is the seller signs an off-chain PSBT that states that anybody can complete the swap as long as X amount of BTC is sent to the seller's address. A marketplace guards this off-chain PSBT until a buyer comes along and signs the other half at which point the transaction is broadcasted to the Bitcoin network. The swap transaction now sits in the mempool waiting for a miner to confirm it but because Bitcoin blocks are mined ~10 minutes apart it will likely sit there for a long time. During this waiting period, anybody can retrieve a PSBT from the mempool, sign it themselves, and submit their version back into the mempool but with a higher fee so that it will be confirmed first. This front-running technique is known as "mempool sniping" and it is how many of the PSBT mints for OrdiBots were picked off this morning. The OrdiBots mint was likely the tip of the iceberg. I expect tooling to come online in the next several weeks that will allow anyone to go to a website and with a few clicks snipe inscription purchases from the mempool. This means that if you purchase an inscription on an Ordinals marketplace or are minting a hot Ordinals drop, you aren't guaranteed to receive it. If somebody snipes your purchase from the mempool you will be refunded the BTC you paid but you also won't receive the inscription. But let's take things a step further. It is also likely that these tools will allow you to front-run the actual inscribing part as well which could be very profitable in first-is-first style metaprotocols. For example, you could front-run someone who is deploying a BRC-20 token by registering the ticker first, or in a first-is-first byte-perfect collection mint you could inscribe the same image as someone else but pay just a 1 sat higher fee in order to be first. Lastly, if you throw into the mix that in certain high-value situations a miner could theoretically kick everyone else's transactions out of the block and insert their own, you could see how things could get messy very quickly. The is called selfish mining. Just as there will be tools for sniping other people's transactions I expect there to be tools for protecting your own transactions as well. Other chains like Ethereum have dealt with MEV/frontrunning for years, but it is a new concept on Bitcoin, so we will need to wake up to this reality and get much more sophisticated very quickly. The best outcome here is that we create easy to use mempool sniping and monitoring tools that everyone has access to in order to prevent a scenario where a select few are able to prey on the masses.