Transactions are the basic unit of activity of any blockchain. The speed at which they are processed is very important. The faster the network, the more users it can serve simultaneously and the better equipped it is to handle congestion.
Network speeds are measured in transactions per second (TPS). This parameter is also called network bandwidth, and represents the number of transactions that the blockchain is able to verify per second, demonstrating how fast and scalable it is.
Blockchains have an average TPS, which gives an indicator of the speed at which the network is able to process regular demand, and a maximum TPS that the network may require for various reasons. For example, when there are sharp fluctuations in a cryptocurrency’s price, many more users may attempt to conduct transactions at the same time. If the blockchain is unable to meet this demand, the network may become congested.
TPS isn’t the only metric that determines the speed of a blockchain. Equally important is block time, which refers to the time it takes for a network to confirm the validity of the transactions in a block.
Calculating a blockchain’s TPS
To calculate the number of transactions per second you need to know the following:
- time interval between blocks (average time to create a new block, or block time);
- block size;
- average transaction size.
An approximate TPS can be calculated using the following formula:
TPS = (block size / average transaction size) / block time
For example, if the block size is 2 MB, the transaction size is 1 kB, and the block time is 40 seconds, then the blockchain’s TPS will be 50 (2 MB * 1 kB / 40 seconds).
Transaction processing speeds very significantly between blockchains. The Bitcoin network is only capable of processing 7 transactions/second, while Ethereum has an average of 15 transactions/second. There are much faster blockchains today, such as Ripple, which has a TPS of 1,500.
How TPS affects other network parameters
A high TPS is very important to the successful functioning of a blockchain, especially at a time when the crypto industry is reaching more and more users. The more people that use crypto, the more transactions need to be processed. If the network isn’t able to do this quickly, it is guaranteed to be overloaded. This means people conducting transactions will have to wait a very long time for them to be processed. What is the end result of this?
When making transactions, users pay a network commission, which is usually fairly reasonable. By the way, this makes blockchains a much more profitable tool for transferring funds than traditional payment systems.
If a blockchain cannot process many transactions per second, however, users will have to pay a higher fee so that transactions are more attractive to the miners who process them. This brings up the average network commission so much that many people simply cannot afford to pay for it. A high TPS is therefore very important.
Ensuring good network scalability is also an important endeavour in terms of facilitating the mass adoption of blockchain technologies. As mentioned earlier, crypto is gaining in popularity, and networks have to process an increasing number of transactions. This requires a higher TPS.
It’s also worth remembering the blockchain trilemma, which is the theoretical impossibility of simultaneously maintaining the same high levels of performance, security and decentralization on blockchain networks.
Because a network’s efficiency depends directly on its scalability, many blockchain project developers place such high value on increasing bandwidth that they prioritize speed over security and decentralization. Nevertheless, many projects are quite good at achieving a balance between these three key aspects of the blockchain.
The fastest cryptocurrencies
On each blockchain, developers attempt to come up with their own solutions for achieving a high TPS. For example, Solana uses a hybrid PoH (proof-of-history)/PoS (proof-of-stake) consensus mechanism, while Fantom uses directed acyclic graph (DAG) technology, which creates and confirm blocks in parallel. Polygon supports a large number of scaling solutions, including L2 and sidechains.
Ethereum 2.0, which is based on the proof-of-stake consensus algorithm, is set to become one of the fastest cryptocurrencies in the world, with a TPS of 100,000 transactions/second.
The transition of Ethereum to PoS began in 2020. The Beacon Chain (phase zero) launched on 1 December that year, while the Merge hard fork took place on 15 September 2022, when the main network participants switched to PoS. The final stage will be the network’s sharding, when it will split into 64 segments, significantly improving network performance, reducing congestion and increasing the number of transactions processed.
Cryptocurrencies are growing in popularity every day, and we don’t know what level of TPS will be required in order to meet user demand in the very near future. Blockchain developers are therefore working tirelessly to improve network scalability and increase transaction speeds.
A high TPS is essential for the mass adoption of blockchain technology, and achieving this without sacrificing security or decentralization is the number one task for creators of modern decentralized networks.