What is Transactions Per Second (TPS) in Crypto?

Transactions per second (TPS) is a critical performance metric in the cryptocurrency and blockchain industry that measures how many transactions a network can process within a one-second timeframe. As digital currencies continue to gain mainstream adoption, understanding TPS becomes essential for evaluating the efficiency and scalability of blockchain networks.

In the traditional banking system, transaction processing times are often unclear and can take days, especially for international payments. Cryptocurrency emerged as a solution to this inefficiency, offering faster and more transparent transaction processing. For instance, while conventional banks may require several days to complete a payment, Bitcoin can accomplish the same transaction in under an hour. This improvement in transaction speed has made TPS a key feature that both cryptocurrency users and developers monitor closely.

What is Transaction Per Second (TPS)?

Transactions per second refers to the number of transactions that a blockchain network can process within a single second. This metric varies significantly across different blockchain networks, reflecting their underlying architecture and design choices.

Blockchain networks operate with two distinct TPS measurements: average TPS and maximum TPS. The average TPS represents the network's performance under normal operating conditions with regular demand. However, during periods of high activity—such as significant price movements or market events—many users attempt to execute transactions simultaneously. In these scenarios, the maximum TPS becomes crucial, as the network must handle increased demand to prevent congestion.

Bitcoin, despite being the largest and most well-known cryptocurrency, has one of the lowest TPS counts in the industry. This limitation stems partly from the cryptocurrency community's commitment to decentralization. In contrast, centralized payment systems like VISA can reportedly process over 65,000 transactions per second, demonstrating significantly higher efficiency than Bitcoin and many other cryptocurrencies. This disparity highlights the ongoing challenge of balancing decentralization with transaction throughput.

What Does TPS Mean for Blockchain Network Speed?

The TPS count directly correlates with a blockchain network's overall speed and performance. Understanding what is transactions per second helps evaluate how blockchain network speed impacts user experience. While TPS indicates the quantity of transactions processed per second, it's not the sole determinant of network speed. Transaction finality time—the duration required to confirm and permanently record a transaction—is another crucial metric that complements TPS in assessing blockchain performance.

Bitcoin's performance serves as an illustrative example. The network maintains an average TPS of approximately five transactions per second, with the capability to reach up to seven TPS under certain conditions. Since Bitcoin's creation, various proposals have emerged to increase its TPS, including suggestions to expand block sizes and improve the consensus mechanism. However, the Bitcoin community has largely rejected these proposals, preferring to maintain the network's original design and structure.

This conservative approach has kept Bitcoin's TPS relatively low, especially when compared to modern blockchain networks capable of processing over 60,000 TPS. Ethereum provides an interesting contrast; initially, it could process up to 15 TPS. Following its major upgrade transitioning from Proof of Work to Proof of Stake consensus mechanism, this transformation significantly enhanced its capabilities, with experts estimating that Ethereum can now handle between 20,000 and 100,000 TPS.

Do Blockchain Transaction Speeds Matter?

In today's fast-paced digital economy, transaction speed has become increasingly important. Users expect quick and seamless transactions, making the adage "time is money" more relevant than ever. For blockchain networks, transaction speed directly impacts user experience and network viability.

As the cryptocurrency industry has grown to encompass millions of users, high TPS rates have become essential for network success. Increased user adoption translates to more transactions requiring processing. When a network cannot process transactions quickly enough, network congestion occurs, forcing transactions to wait extended periods for processing.

Transaction fees add another dimension to this issue. Cryptocurrency transactions typically incur relatively low fees, making them potentially more cost-effective than traditional banking solutions. However, when users desire faster processing times, some opt to pay higher transaction fees, making their transactions more attractive to miners. Unfortunately, as this practice becomes widespread, average fees increase to levels that become prohibitively expensive for many users. This dynamic demonstrates why understanding what is transactions per second is a critical consideration for any blockchain network.

Blockchain scalability represents another crucial consideration. As cryptocurrency usage continues expanding, networks must handle increasing demand by scaling their TPS capacity. This scalability ensures that blockchains can process more transactions during peak periods, such as during significant price movements when transaction volumes surge dramatically. The ability to scale effectively prevents network congestion and maintains user satisfaction.

Which Cryptocurrency Networks Are the Fastest?

Developers recognized Bitcoin's scalability limitations early on, prompting years of research and development aimed at creating faster, more scalable blockchain solutions. Today, several cryptocurrency networks have emerged with significantly improved TPS capabilities.

Solana stands out as one of the fastest and most scalable networks currently available. According to its whitepaper, Solana theoretically can achieve 710,000 TPS. While this represents the theoretical maximum, real-world testing has demonstrated the network easily reaching 65,000 TPS, with developers believing 400,000 TPS is achievable. According to industry data, the network has recorded impressive maximum daily average TPS performance. Additionally, Solana boasts a block finality time of between 21 to 46 seconds, dramatically faster than Bitcoin's minimum one-hour requirement.

SUI launched its mainnet as a permissionless Layer-1 blockchain, demonstrating strong transactions per second capabilities. Industry data indicates that SUI achieves substantial maximum daily average TPS, while the project claims capability of up to 125,000 TPS. The network employs parallel processing by validators to maximize throughput, reduce latency, and enhance scalability. Furthermore, optimized transaction handling improves efficiency through immediate completions and individual transaction validations.

BNB Smart Chain represents another high-performance network, recording competitive real TPS speeds according to industry metrics. This network offers smart contract functionality and maintains compatibility with the Ethereum Virtual Machine, providing users access to the extensive ecosystem of Ethereum decentralized applications (DApps) and development tools.

Other noteworthy high-performance networks include Ethereum, which following its major upgrade increased its maximum TPS from 12-15 to 100,000—a remarkable achievement given Ethereum's popularity and extensive use for smart contract-based DApps. XRP, created by Ripple, also deserves mention. While not using a traditional blockchain but rather RippleNet, the network can allegedly handle up to 50,000 TPS, significantly exceeding SWIFT's capabilities, though the project has faced scrutiny regarding centralization concerns.

Conclusion

Transactions per second represents a fundamental metric for evaluating blockchain network performance and scalability. Understanding what is transactions per second becomes crucial as cryptocurrency adoption continues accelerating globally. The importance of high TPS capabilities cannot be overstated. The significant advancements made in improving TPS across various blockchain networks demonstrate that viable solutions exist to meet growing demand.

The evolution from Bitcoin's modest 5-7 TPS to networks like Solana achieving over 65,000 TPS in testing illustrates the remarkable progress in blockchain technology. These improvements in transaction processing speed not only enhance user experience by reducing wait times and preventing network congestion but also enable blockchain networks to compete more effectively with traditional payment systems.

As the industry continues evolving, the pursuit of higher transactions per second will remain a priority, ensuring that blockchain networks can accommodate future demand while maintaining decentralization and security. The developments in this space bode well for the long-term success and sustainability of the cryptocurrency industry, paving the way for broader adoption and integration into mainstream financial systems.

FAQ

How do you calculate transactions per second?

TPS is calculated by dividing total transactions by the time period in seconds. For example, 8,370 daily transactions / 86,400 seconds = 0.097 TPS.

What is a high TPS?

A high TPS (Transactions Per Second) typically exceeds 1,000, indicating a blockchain's ability to process many transactions quickly, enabling faster speeds and lower fees.

What is TPS with an example?

TPS stands for Transactions Per Second. For example, a blockchain processing 1000 transactions in 10 seconds has a TPS of 100.