Erlay

Erlay is a bandwidth-saving transaction relay protocol for Bitcoin, proposed in 2019 by Gleb Naumenko with co-authors including Pieter Wuille and Gregory Maxwell. Instead of every node announcing every transaction to every peer, Erlay uses set reconciliation, letting peers efficiently compare and sync their transaction lists. The design cuts transaction announcement bandwidth by roughly 84 percent.

Why it matters

Transaction announcements are surprisingly expensive: under the legacy flooding protocol they consume a large share of a listening node's bandwidth, and the cost grows with each additional connection. That penalizes exactly the behavior Bitcoin wants to encourage, since more connections per node make the network harder to partition and harder to eclipse.

By making extra connections nearly free in bandwidth terms, Erlay lowers the cost of running a well-connected full node, especially on metered or slow links. Cheaper nodes mean more nodes, and more independent validators is the practical measure of Bitcoin's decentralization. Support for Erlay has been developed for Bitcoin Core, with deployment proceeding gradually through the usual review process.

How it works

Each node still floods transactions to a small set of outbound peers, preserving fast propagation. For remaining connections, peers periodically exchange compact sketches of their recent transaction IDs, built with a technique called minisketch. Comparing sketches reveals exactly which transactions each side is missing, so only the differences cross the wire, rather than millions of redundant announcements.