When the transactions are received, the nodes keep them in memory (the
MemPool) while the extraction software is trying to exploit a new block. A minor will try to place as many transactions as possible in a block, so as to earn more money if he succeeds in extracting a block.
If there are more transactions than the block can contain, the minor must filter them to include enough, while respecting the size limit of the block. The filtering method typically used is to classify transactions based on fees paid and to include transactions with the highest fees because the payment is the most important if they are successful in exploiting the block.
All transactions left in mempool will then be candidates to be added to the next block in the chain, but will be placed under the same filter while additional transactions also enter the network. This means that a transaction that pays only a small fee can stay in mempool for a long time because it takes precedence over transactions that pay more.
This creates a paying market for the placeholders. People who demand that their transactions be processed quickly – the following blocks will pay higher transaction fees, which will put them at the top of the queue, while people who do Urgency for their transactions to be processed pay a lower fee and be prepared to wait until the size of the mempool is reduced.
As the volume of transactions increases due to increased demand, users must either pay more fees or use new technologies to reduce the size of their transactions and pay less fees. Some techniques for doing this include grouping transactions, using payment channels (such as Lightning Network), using sidechains, and using future enhancements to bitcoin itself, which will allow for signature aggregation and deletion. untested branches of bitcoin script.
If I understand correctly, the network rejects the blocks of more than 1 MB and the difficulty of hashing block is defined after the creation of each block, so as to maintain the blocking time close to 10 minutes.
The difficulty is adjusted every block of 2016 (about 2 weeks) taking into account the blocks created during this period. Blocks are not necessarily every 10 minutes because it is a random process that searches for a valid hash that is less than the target value and can range from a few seconds to an hour or more. It lasts on average about 10 minutes over long periods of time due to the regular adjustment of the difficulty.