Transactions Per Second (TPS): Cryptocurrency And Blockchain Importance Examined


Transactions Per Second (TPS) is a commonly used term in cryptocurrency. It is defined as the number of transactions completed per second by an information system.

It’s used to determine how fast a platform or network is in executing transactions. The higher the number of transactions per second, the faster transactions will be executed, validated and confirmed on the same platform.

This is a vastly important part of the crypto industry and can often play a significant role in the adoption of a cryptocurrency or blockchain project.

For instance, ethereum, the world’s second biggest cryptocurrency and blockchain project, is currently working on scaling its platform to processing 1 million transactions per second from the current maximum of 15,000 transactions per second.

To help you understand how huge this is, bitcoin’s recently released Lightning Protocol has a 60,000 transactions per second limit, VISA currently processes 2,000 transactions per second, and stock exchanges execute about 80,000 transactions per second.

Why Is TPS Important?

Many crypto projects are currently targeting the financial sector, with most trying to increase the speed of transactions while making their costs cheaper.

With cryptos like this focusing on instant payments and the like, they would want to beat the current speed at which debit/credit cards process their transactions. A faster TPS means that the system will be able to efficiently handle all transactions without any lags or delays.

While it’s currently difficult to compare blockchain projects’ TPS with that of conventional payment processors, it is hoped that the differences between the both of them will be rectified in the near future. Besides, their modes of operations differ somewhat.

For starters, crypto platforms and regular payment platforms have different infrastructures. Secondly, crypto platforms are largely decentralized while orthodox payment processors have a centralized network.

This makes it increasingly difficult to do a side by side comparison. This is probably why ethereum’s rapidly scaling TPS protocols will be used for other problems like smart contracts execution on IoT networks.

Can Transactions Per Second Vary?

Of course it can. In fact, it is not unusual to find that TPS for cryptos can vary wildly depending on multiple factors like network traffic and associated transaction fees.

For instance, transactions including a fee are processed faster on the bitcoin network than those without the fees. Combine that with transaction volume at the time, and you can easily see why TPS can quickly fluctuate.

There’s also the role of external infrastructure that can influence the transaction per second rate. For instance, bitcoin can improve its own by routing transactions through the Lightning Network or Ethereum’s Raiden.

What Determines TPS?

The current strength of the network and transactions in queue. For instance, it is a known fact that transactions on both the ethereum and bitcoin platforms tend to lag.

This is not surprising seeing as the transaction volume on the network can often surpass its handling capacity. Currently, bitcoin has a TPS of 7, Litecoin 56, Ripple 1500, and Bitcoin Cash 60.

The one thing that cryptos with higher transactions per second have is their block size. A bigger block size means increased capacity to process transactions, faster transactions speeds, and easier scalability.

This implies that blockchains still have the potential and capability for huge growth and scaling and increasing their transactions speeds.

So, smart blockchain project founders and their teams are working on increasing their block size, eliminating scalability issues and increasing their capacity to handle huge transaction volumes, whilst maintaining high TPS value.

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