What Are Transactions Per Second (TPS)?

The quest for blockchain scalability, which primarily pertains to transaction speed, is considered both the holy grail and bottleneck of the cryptocurrency domain.

What Are Transactions Per Second (TPS)?

Transactions Per Second (TPS) is a crucial metric in the world of cryptocurrencies. It refers to the number of transactions that a blockchain can handle in one second. The TPS of a blockchain is directly related to its scalability, which is the ability to handle an increasing number of users and transactions without compromising its performance.

In the early days of cryptocurrencies, TPS was not a significant concern as the number of users and transactions was relatively low. However, with the growing popularity of cryptocurrencies and the emergence of new use cases, such as decentralized finance (DeFi) and non-fungible tokens (NFTs), the demand for higher TPS has increased.

Bitcoin, the first and most well-known cryptocurrency, has a TPS of around 7 transactions per second. This is due to the design of its blockchain, which prioritizes security over speed. In contrast, newer cryptocurrencies such as Ethereum and Binance Smart Chain have TPS of around 15 and 100 respectively, which is significantly higher than Bitcoin.

To achieve higher TPS, blockchain developers have explored various techniques, including sharding, layer-two solutions, and off-chain transactions. Sharding is a technique that involves dividing the blockchain into smaller, more manageable parts called shards, each of which can process transactions independently. Layer-two solutions, such as the Lightning Network, enable transactions to be conducted off-chain, reducing the burden on the main blockchain.

Despite the efforts to improve TPS, there are still challenges to achieving high scalability. One of the major challenges is the trade-off between scalability and decentralization. As TPS increases, it becomes more challenging to maintain a decentralized network, as the number of nodes required to verify transactions also increases. Another challenge is the risk of centralization, as a few large mining pools or validators could potentially control the network.

Factors That Determine a Network's Transactions Per Second (TPS)

The network's Transactions Per Second (TPS) is determined by several factors, including the Block Time, Transaction Size, and Block Size.

The Block Time is the average time required to mine a new block, and it varies between different blockchain networks. For instance, Bitcoin has a Block Time of 10 minutes, while Ethereum's Block Time ranges from 10 to 20 seconds.

Transaction Size refers to the amount of data transmitted with each transaction and differs depending on the blockchain network. Bitcoin transactions can range from under 300 bytes to 500 bytes, and the larger the transaction size, the longer it takes to execute the transaction.

The Block Size is the amount of transaction data that a block carries in a blockchain, and it influences the number of people required to run a full node. The Block Size in Bitcoin is limited to 1 MB, which can store over 2000 transactions. However, a larger Block Size means that more data can be processed at once, leading to higher TPS.

The Formula for Calculating the TPS

The formula for calculating the Transactions Per Second (TPS) of a network is straightforward. It involves dividing the number of transactions that occurred within a specific period by the duration of that period.

For instance, if a blockchain processed 1000 transactions in one second, then the TPS of that network is 1000. The TPS formula can be expressed as TPS = Number of Transactions / Duration. This formula is essential for blockchain developers and users alike as it helps to evaluate the performance and scalability of a blockchain network.

The Bottom Line

TPS is an essential metric for measuring the scalability of a blockchain. While there are various techniques to improve TPS, achieving high scalability without compromising decentralization and security remains a challenge for blockchain developers.

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