diff --git a/go/config/defaults/0-base-config.yaml b/go/config/defaults/0-base-config.yaml
index 801a4bf5dc..e8dd4cbb2f 100644
--- a/go/config/defaults/0-base-config.yaml
+++ b/go/config/defaults/0-base-config.yaml
@@ -8,7 +8,7 @@ network:
   batch:
     interval: 1s
     maxInterval: 1s # if this is greater than batch.interval then we make batches more slowly when there are no transactions
-    maxSize: 131072 # 128kb - the size of the rollup
+    maxSize: 125952 # (128-5)kb - the size of the rollup minus overhead
   rollup:
     interval: 5s
     maxInterval: 10m # rollups will be produced after this time even if the data blob is not full
diff --git a/go/enclave/components/batch_executor.go b/go/enclave/components/batch_executor.go
index d21f30dcef..489dd5b82d 100644
--- a/go/enclave/components/batch_executor.go
+++ b/go/enclave/components/batch_executor.go
@@ -8,6 +8,8 @@ import (
 	"math/big"
 	"sync"
 
+	"github.com/ten-protocol/go-ten/go/common/compression"
+
 	gethcore "github.com/ethereum/go-ethereum/core"
 
 	"github.com/ethereum/go-ethereum/core/vm"
@@ -48,18 +50,19 @@ var ErrNoTransactionsToProcess = fmt.Errorf("no transactions to process")
 
 // batchExecutor - the component responsible for executing batches
 type batchExecutor struct {
-	storage              storage.Storage
-	batchRegistry        BatchRegistry
-	config               enclaveconfig.EnclaveConfig
-	gethEncodingService  gethencoding.EncodingService
-	crossChainProcessors *crosschain.Processors
-	genesis              *genesis.Genesis
-	logger               gethlog.Logger
-	gasOracle            gas.Oracle
-	chainConfig          *params.ChainConfig
-	systemContracts      system.SystemContractCallbacks
-	entropyService       *crypto.EvmEntropyService
-	mempool              *TxPool
+	storage                storage.Storage
+	batchRegistry          BatchRegistry
+	config                 enclaveconfig.EnclaveConfig
+	gethEncodingService    gethencoding.EncodingService
+	crossChainProcessors   *crosschain.Processors
+	dataCompressionService compression.DataCompressionService
+	genesis                *genesis.Genesis
+	logger                 gethlog.Logger
+	gasOracle              gas.Oracle
+	chainConfig            *params.ChainConfig
+	systemContracts        system.SystemContractCallbacks
+	entropyService         *crypto.EvmEntropyService
+	mempool                *TxPool
 	// stateDBMutex - used to protect calls to stateDB.Commit as it is not safe for async access.
 	stateDBMutex sync.Mutex
 
@@ -79,24 +82,26 @@ func NewBatchExecutor(
 	systemContracts system.SystemContractCallbacks,
 	entropyService *crypto.EvmEntropyService,
 	mempool *TxPool,
+	dataCompressionService compression.DataCompressionService,
 	logger gethlog.Logger,
 ) BatchExecutor {
 	return &batchExecutor{
-		storage:              storage,
-		batchRegistry:        batchRegistry,
-		config:               config,
-		gethEncodingService:  gethEncodingService,
-		crossChainProcessors: cc,
-		genesis:              genesis,
-		chainConfig:          chainConfig,
-		logger:               logger,
-		gasOracle:            gasOracle,
-		stateDBMutex:         sync.Mutex{},
-		batchGasLimit:        config.GasBatchExecutionLimit,
-		systemContracts:      systemContracts,
-		entropyService:       entropyService,
-		mempool:              mempool,
-		chainContext:         evm.NewTenChainContext(storage, gethEncodingService, config, logger),
+		storage:                storage,
+		batchRegistry:          batchRegistry,
+		config:                 config,
+		gethEncodingService:    gethEncodingService,
+		crossChainProcessors:   cc,
+		genesis:                genesis,
+		chainConfig:            chainConfig,
+		logger:                 logger,
+		gasOracle:              gasOracle,
+		stateDBMutex:           sync.Mutex{},
+		batchGasLimit:          config.GasBatchExecutionLimit,
+		systemContracts:        systemContracts,
+		entropyService:         entropyService,
+		mempool:                mempool,
+		dataCompressionService: dataCompressionService,
+		chainContext:           evm.NewTenChainContext(storage, gethEncodingService, config, logger),
 	}
 }
 
@@ -286,7 +291,7 @@ func (executor *batchExecutor) execBatchTransactions(ec *BatchExecutionContext)
 }
 
 func (executor *batchExecutor) execMempoolTransactions(ec *BatchExecutionContext) error {
-	sizeLimiter := limiters.NewBatchSizeLimiter(executor.config.MaxBatchSize)
+	sizeLimiter := limiters.NewBatchSizeLimiter(executor.config.MaxBatchSize, executor.dataCompressionService)
 	pendingTransactions := executor.mempool.PendingTransactions()
 
 	nrPending, nrQueued := executor.mempool.Stats()
@@ -319,10 +324,12 @@ func (executor *batchExecutor) execMempoolTransactions(ec *BatchExecutionContext
 		// check the size limiter
 		err := sizeLimiter.AcceptTransaction(tx)
 		if err != nil {
-			executor.logger.Info("Unable to accept transaction", log.TxKey, tx.Hash(), log.ErrKey, err)
 			if errors.Is(err, limiters.ErrInsufficientSpace) { // Batch ran out of space
-				break
+				executor.logger.Trace("Unable to accept transaction", log.TxKey, tx.Hash())
+				mempoolTxs.Pop()
+				continue
 			}
+			return fmt.Errorf("failed to apply the batch limiter. Cause: %w", err)
 		}
 
 		pTx, err := executor.toPricedTx(ec, tx)
diff --git a/go/enclave/components/txpool.go b/go/enclave/components/txpool.go
index 7aa81f6b68..bfc2a25980 100644
--- a/go/enclave/components/txpool.go
+++ b/go/enclave/components/txpool.go
@@ -1,17 +1,17 @@
 package components
 
-// unsafe package imported in order to link to a private function in go-ethereum.
-// This allows us to validate transactions against the tx pool rules.
 import (
 	"fmt"
 	"math/big"
+	"reflect"
 	"strings"
 	"sync"
 	"sync/atomic"
 	"time"
-	_ "unsafe"
+	"unsafe"
 
 	"github.com/ethereum/go-ethereum/core"
+	"github.com/ethereum/go-ethereum/params"
 	"github.com/ten-protocol/go-ten/go/common/log"
 
 	gethcommon "github.com/ethereum/go-ethereum/common"
@@ -24,12 +24,30 @@ import (
 	"github.com/ten-protocol/go-ten/go/common"
 )
 
+const (
+	// txSlotSize is used to calculate how many data slots a single transaction
+	// takes up based on its size. The slots are used as DoS protection, ensuring
+	// that validating a new transaction remains a constant operation (in reality
+	// O(maxslots), where max slots are 4 currently).
+	txSlotSize = 32 * 1024
+
+	// we assume that at the limit, a single "uncompressable" tx is in a batch which gets rolled-up, and must fit in a 128kb blob
+	rollupOverhead = 5 * 1024
+
+	// txMaxSize is the maximum size a single transaction can have. This field has
+	// non-trivial consequences: larger transactions are significantly harder and
+	// more expensive to propagate; larger transactions also take more resources
+	// to validate whether they fit into the pool or not.
+	txMaxSize = 4*txSlotSize - rollupOverhead // 128KB - overhead
+)
+
 // this is how long the node waits to receive the second batch
 var startMempoolTimeout = 90 * time.Second
 
 // TxPool is an obscuro wrapper around geths transaction pool
 type TxPool struct {
 	txPoolConfig legacypool.Config
+	chainconfig  *params.ChainConfig
 	legacyPool   *legacypool.LegacyPool
 	pool         *gethtxpool.TxPool
 	Chain        *EthChainAdapter
@@ -59,6 +77,7 @@ func NewTxPool(blockchain *EthChainAdapter, gasTip *big.Int, validateOnly bool,
 
 	txp := &TxPool{
 		Chain:        blockchain,
+		chainconfig:  blockchain.Config(),
 		txPoolConfig: txPoolConfig,
 		legacyPool:   legacyPool,
 		gasTip:       gasTip,
@@ -195,6 +214,12 @@ func (t *TxPool) Close() error {
 
 // Add adds a new transactions to the pool
 func (t *TxPool) add(transaction *common.L2Tx) error {
+	// validate against the consensus rules
+	err := t.validateTxBasics(transaction, false)
+	if err != nil {
+		return err
+	}
+
 	var strErrors []string
 	for _, err := range t.pool.Add([]*types.Transaction{transaction}, false, false) {
 		if err != nil {
@@ -208,16 +233,13 @@ func (t *TxPool) add(transaction *common.L2Tx) error {
 	return nil
 }
 
-//go:linkname validateTxBasics github.com/ethereum/go-ethereum/core/txpool/legacypool.(*LegacyPool).validateTxBasics
-func validateTxBasics(_ *legacypool.LegacyPool, _ *types.Transaction, _ bool) error
-
 //go:linkname validateTx github.com/ethereum/go-ethereum/core/txpool/legacypool.(*LegacyPool).validateTx
 func validateTx(_ *legacypool.LegacyPool, _ *types.Transaction, _ bool) error
 
 // Validate - run the underlying tx pool validation logic
 func (t *TxPool) validate(tx *common.L2Tx) error {
 	// validate against the consensus rules
-	err := validateTxBasics(t.legacyPool, tx, false)
+	err := t.validateTxBasics(tx, false)
 	if err != nil {
 		return err
 	}
@@ -231,3 +253,41 @@ func (t *TxPool) validate(tx *common.L2Tx) error {
 func (t *TxPool) Stats() (int, int) {
 	return t.legacyPool.Stats()
 }
+
+// validateTxBasics checks whether a transaction is valid according to the consensus
+// rules, but does not check state-dependent validation such as sufficient balance.
+// This check is meant as an early check which only needs to be performed once,
+// and does not require the pool mutex to be held.
+func (t *TxPool) validateTxBasics(tx *types.Transaction, local bool) error {
+	opts := &gethtxpool.ValidationOptions{
+		Config: t.chainconfig,
+		Accept: 0 |
+			1<<types.LegacyTxType |
+			1<<types.AccessListTxType |
+			1<<types.DynamicFeeTxType,
+		MaxSize: txMaxSize,
+		MinTip:  t.gasTip,
+	}
+
+	// we need to access some private variables from the legacy pool to run validation with our own consensus options
+	v := reflect.ValueOf(t.legacyPool).Elem()
+
+	chField := v.FieldByName("currentHead")
+	chFieldPtr := unsafe.Pointer(chField.UnsafeAddr())
+	ch, ok := reflect.NewAt(chField.Type(), chFieldPtr).Elem().Interface().(atomic.Pointer[types.Header])
+	if !ok {
+		t.logger.Crit("invalid mempool. should not happen")
+	}
+
+	sigField := v.FieldByName("signer")
+	sigFieldPtr := unsafe.Pointer(sigField.UnsafeAddr())
+	sig, ok1 := reflect.NewAt(sigField.Type(), sigFieldPtr).Elem().Interface().(types.Signer)
+	if !ok1 {
+		t.logger.Crit("invalid mempool. should not happen")
+	}
+
+	if err := gethtxpool.ValidateTransaction(tx, ch.Load(), sig, opts); err != nil {
+		return err
+	}
+	return nil
+}
diff --git a/go/enclave/enclave.go b/go/enclave/enclave.go
index 7851edd967..3664def898 100644
--- a/go/enclave/enclave.go
+++ b/go/enclave/enclave.go
@@ -7,6 +7,8 @@ import (
 	"fmt"
 	"math/big"
 
+	"github.com/ten-protocol/go-ten/go/common/compression"
+
 	"github.com/ten-protocol/go-ten/go/enclave/crypto"
 
 	enclaveconfig "github.com/ten-protocol/go-ten/go/enclave/config"
@@ -100,7 +102,8 @@ func NewEnclave(config *enclaveconfig.EnclaveConfig, genesis *genesis.Genesis, m
 
 	gasOracle := gas.NewGasOracle()
 	blockProcessor := components.NewBlockProcessor(storage, crossChainProcessors, gasOracle, logger)
-	batchExecutor := components.NewBatchExecutor(storage, batchRegistry, *config, gethEncodingService, crossChainProcessors, genesis, gasOracle, chainConfig, scb, evmEntropyService, mempool, logger)
+	dataCompressionService := compression.NewBrotliDataCompressionService()
+	batchExecutor := components.NewBatchExecutor(storage, batchRegistry, *config, gethEncodingService, crossChainProcessors, genesis, gasOracle, chainConfig, scb, evmEntropyService, mempool, dataCompressionService, logger)
 
 	// ensure cached chain state data is up-to-date using the persisted batch data
 	err = restoreStateDBCache(context.Background(), storage, batchRegistry, batchExecutor, genesis, logger)
diff --git a/go/enclave/limiters/batchlimiter.go b/go/enclave/limiters/batchlimiter.go
index 02b5414063..7bc84f823b 100644
--- a/go/enclave/limiters/batchlimiter.go
+++ b/go/enclave/limiters/batchlimiter.go
@@ -3,6 +3,7 @@ package limiters
 import (
 	"github.com/ethereum/go-ethereum/core/types"
 	"github.com/ethereum/go-ethereum/rlp"
+	"github.com/ten-protocol/go-ten/go/common/compression"
 )
 
 // BatchSizeLimiter - Acts as a limiter for batches based
@@ -10,20 +11,22 @@ import (
 // Acts as a calldata reservation system that accounts for both
 // transactions and cross chain messages.
 type batchSizeLimiter struct {
-	remainingSize uint64 // the available size in the limiter
+	compressionService compression.DataCompressionService
+	remainingSize      uint64 // the available size in the limiter
 }
 
 // NewBatchSizeLimiter - Size is the total space available per batch for calldata in a rollup.
-func NewBatchSizeLimiter(size uint64) BatchSizeLimiter {
+func NewBatchSizeLimiter(size uint64, compressionService compression.DataCompressionService) BatchSizeLimiter {
 	return &batchSizeLimiter{
-		remainingSize: size,
+		compressionService: compressionService,
+		remainingSize:      size,
 	}
 }
 
 // AcceptTransaction - transaction is rlp encoded as it normally would be when publishing a rollup and
 // its size is deducted from the remaining limit.
 func (l *batchSizeLimiter) AcceptTransaction(tx *types.Transaction) error {
-	rlpSize, err := getRlpSize(tx)
+	rlpSize, err := l.getCompressedSize(tx)
 	if err != nil {
 		return err
 	}
@@ -37,14 +40,20 @@ func (l *batchSizeLimiter) AcceptTransaction(tx *types.Transaction) error {
 }
 
 // todo (@stefan) figure out how to optimize the serialization out of the limiter
-func getRlpSize(val interface{}) (int, error) {
-	// todo (@stefan) - this should have a coefficient for compression
+func (l *batchSizeLimiter) getCompressedSize(val interface{}) (int, error) {
 	enc, err := rlp.EncodeToBytes(val)
 	if err != nil {
 		return 0, err
 	}
 
-	return len(enc), nil
+	// compress the transaction. This is useless for small transactions, but might be useful for larger transactions such as deploying contracts
+	// todo - keep a running compression of the current batch
+	compr, err := l.compressionService.CompressBatch(enc)
+	if err != nil {
+		return 0, err
+	}
+
+	return len(compr), nil
 }
 
 type unlimitedBatchSize struct{}