The rapid growth of blockchain and cryptocurrency is showing no signs of slowing down as it continues to gradually establish its footprint in major industries such as healthcare, food supply, artificial intelligence, insurance etc. The revolution going on in the decentralized economy has changed how individuals and organizations see online network security as transparency and immutability becomes the order of the day.
However, in the blockchain and cryptocurrency economy, speed is everything. Transactions per second (TPS) is being leveraged as one of many important yardsticks to measure how efficient a blockchain is (i.e., the faster a transaction can be completed, the more efficient the blockchain). A blockchain’s transaction speed varies based on the transaction finality which is the process involved in validating the transaction. For instance, to validate a transaction, some blockchains may require at least eight blocks to be created.
In this article, we will be looking at what transactions per second means, why transaction speed is important and of course, different cryptocurrencies in the blockchain economy with fast transaction speed.
What is Transactions Per Second (TPS)?
Transactions per second (TPS) is the number of transactions that a network can process in a second and how fast the network can validate a transaction. The transaction per second is used as a determinant to show a network's capacity to process transactions. This means that the faster a network is, the more efficient it will be when it comes to managing congestion.
Also, how fast a transaction can be validated will determine how useful a cryptocurrency may turn out to be in the future because if the network is slow, users may decide to abandon it for a faster and more efficient network hence, this gives it a higher payment efficiency and a higher chance of adoption by both institutions and individuals.
This shows that the TPS plays a significant role in determining a blockchain’s speed. In the traditional finance sector, , no one is willing to engage any system with slow transaction speed and the crypto space is no exception. As a result, speed is an essential yardstick for determining the potential of a crypto project because it creates a more satisfying user experience.
Why does transaction speed matter?
Transaction speed is one of the most important factors when building a project. The higher the transaction speed, the more efficient a cryptocurrency project will be in terms of transferring data from one party to the other and validating transactions.
To allow various accounts to exchange data between each other as fast as possible, irrespective of network congestion, there is a level of scalability that is required of that network. Although many factors influence the transaction speed of any network, the block time, block size, transaction fees, and network traffic are predominant ones to consider. Let’s take a look at each of these:
1. Block time
Block time is the time it takes for a blockchain to create a new block or the fixed time interval between the creation of each new block in a blockchain. On the Bitcoin blockchain, a new block is created every 10 minutes while the time it takes to create a new block for Ethereum is currently 10 to 15 seconds.
Also, individual blocks in a blockchain have certain storage capacities dictating the amount of data a single block can contain. When a block reaches its capacity, it closes and being linked to the previous block. All data that arrives after a block reaches its capacity is compiled into a new block and it goes on and on.
2. Block size
Block size is the amount of data a single block can hold and this is determined by the blockchain creator. For instance, on the Bitcoin blockchain, one block of data is equivalent to 1 MB, and with the implementation of SegWit and Lightning Network (scaling solutions to help decongest the Bitcoin network), this parameter can reach 2-4 MB.
In the original design of the Bitcoin blockchain, security concerns enforced this limitation in order to cut any chances of overwhelming the blockchain hence, preventing possible DDoS attacks because it was designed to work with blocks of up to 36 MB in size.
In a situation where nodes cannot cope with a large number of pending transactions because of the limited size of blocks, users may suffer from very slow processing speeds, or even canceled transfers. If blockchain technology is ever to replace existing financial systems, this is unacceptable which is why numerous experiments are trying to solve the block size dilemma. As most blockchains are looking for ways to optimize the use of blocks without compromising on the security of their networks, there is no consensus yet on what the best approach to solving the block size problem might be.
3. Transaction fee
A transaction fee is the fee charged to users when transferring a crypto asset from one account to another. They are also called processing fees, built into the networks that maintain bitcoin and other cryptocurrencies, similar to third-party services in existing financial systems that charge their fees like exchanges, trading apps, and ATMs.
These fees vary from coin to coin and the purpose of a transaction fee is to ensure that a transaction is validated to keep the corresponding platform running and developing.
4. Network traffic
Network traffic is the number of active nodes exchanging transactions at a certain period. The higher the number of active users, the higher the network traffic. Unfortunately, it affects the transaction speed in a negative way, consequently driving up mining fees as demand outweighs the supply.
As mentioned above, all these are the factors that influence the transaction speed of any blockchain. However, we cannot completely judge a project based on its transaction speed considering the achievements of the Bitcoin network despite its slow network.
Examples of cryptocurrencies with high TPS blockchains
Cardano (ADA) is the eighth-largest cryptocurrencies by current market capitalization.It is a dApp development platform and its blockchain is bringing more investors and users alike. One of the primary focuses of Cardano in reshaping how businesses are conducted is transaction speed.
Cardano currently processes approximately 250 transactions per second (TPS), leveraging its natively-developed scalability solution known as Hydra. This blockchain aspires to be faster than its current TPS. Cardano is actively building systems for individuals and businesses to rely on with a stern aim to differentiate itself from the thousands of other cryptocurrency projects..
Solana network is one of the viable alternatives to Ethereum. When it comes to the fastest blockchain network, most people will agree that Solana is one of the fastest blockchains.
The network is gaining traction in the NFT and DeFi ecosystems giving its cheaper and faster usability compared to Ethereum. According to reports on its website, Solana's blockchain processes up to 50,000 transactions per second, and its average cost per transaction is $0.00025, describing itself as a decentralized blockchain for user-friendly apps across the world.
Ethereum is considered the second-most popular cryptocurrency in the blockchain industry but currently, Ethereum's TPS is 30. In the near future with the development of ETH 2.0, investors and industry experts expect Ethereum to process 100,000 transactions per second as promised without any delay which it aims to achieve through the implementation of sharding technology. This will help boost projects' capability on Ethereum for both centralized and DeFi projects, as well as gaming, non-fungible tokens (NFTs), metaverses, and any other project that may come up in the future.
Fantom, a layer-1 platform built on a permissionless aBFT consensus protocol ensuring the network has the greatest possible decentralization, scalability, and security. It is also a smart-chain-capable network that uses a directed acyclic graph (DAG) – a distributed ledger technology made up of a computer network that executes transactions in parallel. This system is responsible for the Fantom network's throughput being highly scalable.
Fantom's blockchain provides a high-performance solution, enabling faster transaction speed and lower transaction fees. Its TPS is 25,000 and the protocol has a block finality time of about 1 second.
It also leverages the Ethereum virtual machine (EVM) hence, making it compatible with Ethereum. Ethereum developers can deploy DApps to the Fantom network, and its blazing-fast speed with several incentive programs is targeted at developers.
Ripple (XRP) is built in such a way that it's fast, less costly, and has more scalable alternatives in comparison with other digital assets and existing traditional monetary payment platforms (like SWIFT). As a global open-source public blockchain whose focus is on payments, XRP's TPS is 1,500 at an average of $0.0003 per transaction and confirms transactions in 3 seconds.
As XRP continues to improve its network, It can scale to manage the same level of throughput as Visa in the future.
Cosmos, “the Internet of blockchains” as it popularly calls itself, is a fully open-source platform for crypto investors with the innovative token ATOM to build a crypto ecosystem of independent parallel blockchains that can scale to interoperate with one another. The goal of Cosmos is to break the barriers between blockchains by allowing them to transact with each other hence, making it easier for developers to build apps that utilize tokens from a variety of independent blockchains.
Cosmos transaction per second is 10,000 with the confirmation time of crypto transactions being 7 seconds.
Polkadot is a fast and scalable protocol that connects blockchains — allowing value and data to be sent across previously incompatible networks e.g Bitcoin and Ethereum — and it leverages the Nominated Proof-of-Stake (NPoS) for securing the network for its investors.
As one of the top cryptocurrencies, Polkadot offers 1,000 transactions per second and a confirmation time of 4-5 seconds for crypto transactions.
We can attest that blockchain is currently shaping the various industries and the entire world through its enormous potential. To boost widespread use and adoption, transaction speed will play a significant role as long as decentralization and security are not compromised. All the blockchains listed above and many others not mentioned in this article have shown that scalability, high transaction speed, transparency, immutability, security, and privacy will become an important requirement for the future of blockchains and cryptocurrencies.
Once this is set in place, the blockchain industry will certainly be better positioned in attaining mainstream adoption, and so will cryptocurrencies