How Does a Miner Select Which Transactions to Include in a Block?
Miners primarily select transactions based on the fee rate, which is the fee paid per unit of transaction size (sat/vB). They aim to maximize the total fees collected within the block's size limit.
The highest fee-rate transactions are usually prioritized. Miners may also consider transaction age or use specific proprietary selection strategies.
Ultimately, it is a profit-driven optimization problem.
Glossar
Sharpe Ratio
Risk ⎊ This metric quantifies the excess return generated by a strategy relative to its total volatility, providing a standardized measure of risk-adjusted performance for derivatives positions.
Transaction Selection
Criterion ⎊ Transaction selection is the critical process where a block producer, such as a miner or validator, chooses a subset of pending transactions from the mempool to include in the next canonical block.
Transaction Age
Metric ⎊ Transaction Age is a time-based metric quantifying the duration a pending transaction has resided in the network's mempool, awaiting inclusion and finalization within a confirmed block.
Transaction Size
Scale ⎊ Transaction size, within cryptocurrency, options, and derivatives, fundamentally dictates participation thresholds and systemic risk exposure; it represents the nominal value of an executed trade or a portfolio’s aggregated holdings, influencing liquidity provision and market impact.