TPS (Transactions Per Second) Definition
What is TPS?
Transactions per second (TPS) measure how many transactions occur in one second through an information system. In the crypto market, transactions per second are an important area of research, since high transaction rates can be difficult to maintain within a decentralized blockchain.
The Importance of Transactions Per Second (TPS)
As cryptocurrencies move toward instant payment methods similar to credit card processing, TPS speed is crucial to avoiding bottlenecks and system inefficiencies.
Comparisons between blockchain-based systems and traditional credit card payments are difficult since the system infrastructures are completely different. An additional element factoring into crypto TPS is that Bitcoin and other cryptocurrencies are decentralized, while Visa and other credit cards are centralized through a bank or other intermediaries.
It is difficult to pin down an accurate TPS for Bitcoin and other cryptocurrencies because different factors affect transaction speed. Although a cryptocurrency may have a high transaction speed, the TPS can vary depending on fees and network traffic at the time of the transaction. TPS can also be accelerated by the use of the Lightning Network or other additions, like Ethereum’s Raiden.
Popular cryptocurrencies like Bitcoin and Ethereum tend to lag in their TPS, as the number of transactions often exceeds the capabilities of the existing network. Visa claims it can handle 24,000 transactions per second, while Bitcoin’s TPS limit is 7 and Litecoin’s is 56. Most blockchain networks struggle with scalability, which led to the creation of Bitcoin Cash. Greater block size leads to greater transaction speed, allowing the network to scale better. Bitcoin Cash’s increased block size has helped it lead most cryptocurrencies at around 60 TPS. Ripple, however, leads the curve with 1,500 TPS. Blockchain networks have a myriad of opportunities to improve TPS and adjust to an ever-expanding demand for crypto speed and efficiency.