Transactions per Second (TPS) Explained
Transaction speeds are one of many real world issues cryptocurrency looks to solve. When you need to send a payment, being aware of the transaction time is important. This tends to be vague within traditional banking systems. Even more so in international payments. However, this is an issue cryptocurrency can help solve.
While traditional banks sometimes required an entire week to complete a payment, Bitcoin was able to perform the same transaction in under an hour. This guide will explain what transactions per second, or TPS is and why it matters. The reason for this is that BTC is still one of the most used cryptocurrencies, despite being the slowest.
What Is Transaction Per Second (TPS)?
First, let’s discuss the definition of Transactions Per Second. For the most part, the concept is rather self-explanatory. As the name suggests, it refers to the number of transactions that the network can process per second. The number of transactions per second varies from one network to another. Each blockchain network has a maximum and average TPS count. Despite being the largest crypto, Bitcoin also has the one of the lowest TPS count.
It is worth noting that crypto’s decentralization ethos has affected their success when it comes to achieving low transactions per second. Centralized services, such as VISA, are capable of processing anywhere between 1500 and 2000 transactions per second. This makes them much more efficient than Bitcoin, as well as many other cryptocurrencies.
What Does TPS Mean for Blockchain Network Speed?
The TPS count is closely connected to the speed of a blockchain network. As mentioned, TPS shows how many transactions can be performed in one second. Of course, TPS is not the only parameter used to determine the speed of the blockchain network. Another important aspect is the Transaction Finality Time. This metric determines how much time is required to confirm a transaction.
How Many Transactions per Second Can Bitcoin Perform?
So far, we have mentioned multiple times that the Bitcoin transactions per second count is very low. In fact, Bitcoin’s average TPS is 5. While this figure varies, Bitcoin’s TPS can actually reach 7.
Since Bitcoin’s inception, there have been several proposals to increase the TPS. Some recommended increasing Bitcoin’s block size, while others had different ideas. However, none of these propositions have been passed, as it’s the Bitcoin community's desire to keep the ecosystem untouched.
However, the lack of innovation is what keeps bitcoin’s TPS low. Its average TPS remains at 5 even when there are blockchains that can achieve over 60,000 TPS comfortably. For example, since its inception, Ethereum was able to do up to 15 TPS. In September 2022, it received an upgrade that changed its consensus mechanism from PoW to PoS. As a result, it is believed that it can handle anywhere from 20,000 TPS to 100,000 TPS.
Does Blockchain Transaction Speed Matter?
We live in the age of information and speed. People expect transactions to be quick and seamless. The old saying of “time is money” has never been more relevant. With all that said, yes, transaction speed is extremely important for the success of a network.
Now that the crypto industry has millions of users, it is even more important that a blockchain has a high TPS rate. The more people use cryptocurrency, the more transactions there are to process. If a network cannot process them quickly, this leads to network congestion. Essentially, network congestion means that transactions will have to wait long periods of time to get processed.
Whenever users make transactions, they also have to pay transaction fees, which tend to be fairly low. This also makes cryptocurrencies much more cost-effective than any traditional banking solution. However, those who wanted their transactions processed quickly started paying higher fees. Their idea was that higher fees would make their transaction more attractive to the miners, which it did.
Unfortunately, as more people realized that higher transaction fees meant faster processing, they all started paying more. This raised the cost of an average fee to the point where many couldn’t afford it. This is only another example of why transactions per second is an important metric in any blockchain.
How Do Bitcoin Transactions per Second Impact Blockchain Scalability?
Another concept worth understanding in the crypto industry is blockchain scalability. Essentially, as the usage of cryptocurrency and blockchain continues to rise, the network needs to be able to handle it. That means increasing its TPS count in order to be able to process more when necessary.
We mentioned that blockchains have an average TPS and a maximum TPS. The average TPS is the time in which a blockchain takes to handle regular demand. However, at times of price surges or crashes, a lot more people are performing transactions at the same time. As a result, blockchain must be able to meet this demand in order to avoid network congestion.
Which Cryptocurrencies Are the Fastest?
Developers realized that Bitcoin would have scalability issues almost as soon as the asset first emerged. This is why many have started working on solutions that would improve the scalability of future cryptos. As years went by, thousands of new cryptocurrencies emerged, some of which created their own blockchains. Pretty much all of them are faster than Bitcoin.
The fastest and most scalable of all, by far, is believed to be Solana (SOL). According to its whitepaper, Solana should be able to achieve 710,000 TPS. However, this is only theoretical. During tests, the project easily reached 65,000 TPS and developers believe that it could go up to 400,000 TPS. Meanwhile, the project also has a block finality time that clocks in at 21-46 seconds. As mentioned before, Bitcoin requires a full hour, at the very least, to achieve the same.
Another asset that is more than worth mentioning as one of the fastest and most scalable now is Ethereum. Following its upgrade to Ethereum 2.0, the project increased its maximum TPS to 100,000. Since its previous TPS was 12-15, this is quite an achievement. However, Ethereum is a very popular and widely used blockchain. As such, it definitely has the need for a high TPS to handle traffic and micro-transactions from smart contract-based dApps.
Another asset worth mentioning is XRP, a cryptocurrency created by Ripple. It doesn’t use a traditional blockchain but rather its own version called RippleNet. Ripple and XRP have been criticized for the project’s centralization, however, it is still one of the fastest networks. RippleNet can allegedly handle up to 50,000 TPS, which is considerably higher than Visa or SWIFT.
The Pursuit of Speed in the Crypto Industry
The cryptocurrency industry has been pursuing speed and scalability for years as demand grew. As crypto adoption continues to rise, there is no telling how high TPS might need to go to accommodate future demand. With that said, the quest to achieve greater speed and TPS will likely continue in years to come.
For now, it is comforting to know that the crypto industry does have solutions that could accommodate the entire world. This shows that the industry is ready for everyone to start using it.
FAQs
How Many Transactions Can Bitcoin Perform per Second?
Bitcoin transactions per second are very low in comparison to other projects. It has an approximate average of 5 TPS, which can go up to 7. The exact figure varies at times.
How Fast Is a Bitcoin Transaction?
Bitcoin transactions are also very slow. In most cases, the transaction is confirmed within an hour. While this is still fast when it comes to international transactions, it is slow compared to other blockchains. A general rule is to consider transactions successful with a minimum of six confirmations, which takes an hour to do.
Which Crypto Has the Highest TPS?
As of 2023, Solana is the project that has the highest TPS. It can theoretically handle hundreds of thousands of TPS. Its whitepaper predicts reaching 710,000 TPS, although in testing, it peaked at 65,000.
