Transactions Per Second

November 21, 2023 - Around 2 mins mins to read

Understanding Transactions Per Second (TPS)

Transactions per second (TPS) is a metric that measures the maximum number of transactions a computer system can process within a specific time frame. For example, PayPal can handle around 193 transactions per second, while VISA has the capability to process up to 1,700 transactions per second.

In the world of cryptocurrency, the highest recorded TPS is 50,000, achieved by the Solana network.

TPS is an important measure when evaluating blockchains for their ability to handle real-world transactions. However, there are several factors that complicate this comparison:

Block Time

Block time refers to the time it takes for a blockchain to confirm transactions. In the case of bitcoin, the average block time is 10 minutes, resulting in a processing rate of approximately seven transactions per second.

Transaction Size

Different blockchains vary significantly in terms of the data transmitted with each transaction. A simple Bitcoin transaction can range from 226 bytes to 500 bytes. Larger transaction sizes lead to longer processing times on the blockchain.

Block Size

Block size refers to the amount of transaction data a block can accommodate in a blockchain. A larger block requires more individuals to run a full node.

By considering the aforementioned factors, it becomes possible to calculate TPS. For example, if a blockchain has a block size of 1MB, an average transaction size of 1kb, and a block time of 30 seconds, its TPS would be 33. The formula for calculating TPS is as follows:

(Block size/Transaction size) / Block time = Transactions Per Second

It’s important to note that high TPS alone does not guarantee the success or competitiveness of a blockchain against established players like Ethereum and Bitcoin. It is crucial to assess performance, security, and other critical aspects of such blockchains, as high TPS rates may come at the expense of compromised features.

The scalability issue has been identified as a challenge by many blockchain projects. While certain blockchains boast impressive TPS rates, it is important to remember that current blockchain technology is similar to early internet systems, which had limited capacity. However, with time, these systems rapidly scaled up. Given the attention this issue has garnered, it is reasonable to expect that popular blockchain technologies will eventually surpass traditional payment processors in terms of TPS.

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