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What is Transactions Per Second (TPS)?
In today’s digital world, everything happens in the blink of an eye. From banking transactions and social media interactions to e-commerce purchases and online gaming, millions of data streams and processes are completed in mere seconds. So, how do we measure how fast a system is at handling all this massive data traffic smoothly? This is where the concept of Transactions Per Second (TPS) comes into play.
Simply put, TPS is a critical performance metric that shows how many “transactions” a system or network can process in one second. More than just a number, TPS reveals a system’s speed, efficiency, resilience, and most importantly, its potential for scalability.
In this guide, we’ll dive deep into what TPS is, how it’s calculated, why it’s so important, and its role in the systems of the future, especially blockchain technology.
What is Transactions Per Second (TPS)? A Detailed Definition
TPS is an acronym for “Transactions Per Second.” However, the term “transaction” here encompasses a much broader range than just a financial transfer. A new user registration on a website, writing data to a database, launching an application on a smartphone, a money transfer in a payment system, or a cryptocurrency transfer on a blockchain network can all be considered transactions.
Therefore, TPS is a performance metric that shows the number of successful transactions a system can complete within a specific time frame. This metric expresses the system’s throughput, or how heavy of a workload it can handle.
TPS in Traditional Systems
For traditional, centralized systems, TPS has been a standard metric for performance evaluation for decades. For example, global payment networks like Visa and MasterCard are designed to process thousands, even tens of thousands of transactions per second. Their high TPS values ensure that millions of card payments worldwide are approved and completed instantly and without a hitch.
Similarly, the databases of large tech companies, e-commerce platforms, and social media apps require high TPS capacity to manage the millions of concurrent transactions performed by users. For instance, on peak shopping days like Black Friday, e-commerce sites must be able to process thousands of orders per second.
TPS in the World of Blockchain and Cryptocurrencies
TPS has become a much more popular term, particularly with the emergence of blockchain technology and cryptocurrencies. Because of their decentralized nature, blockchains aren’t managed from a single central point like traditional systems. This is a fundamental factor that affects their transaction speed.
In its early years, Bitcoin’s network was known to handle only about 7 transactions per second. As Bitcoin’s popularity grew, this value led to network congestion and high transaction fees. This highlighted the scalability issue in the blockchain ecosystem, and developers began to search for new ways to achieve higher TPS values.
While newer blockchains like Ethereum have higher TPS values compared to Bitcoin, they still lag behind the transaction volume of centralized systems like Visa. However, with upgrades like Ethereum 2.0 (The Merge) and Layer-2 solutions, the goal is for this speed to reach thousands, or even hundreds of thousands.
This situation has also intensified the competition within the blockchain world. Next-generation blockchains like Solana, Avalanche, and Cardano are trying to stand out with their high TPS values. For example, Solana is claimed to be theoretically capable of reaching tens of thousands of TPS.
Why is TPS So Important?
TPS is a vital parameter that determines a system’s future and potential. Here are the main reasons why TPS is of critical importance:
1. Scalability
High TPS indicates that a system can smoothly manage increasing user demands and transaction volume. The more scalable a system is, the more users it can support simultaneously. This is crucial for platforms and applications that cater to a global audience. In the blockchain world, a high TPS is essential for a network to achieve widespread adoption.
2. User Experience
No one wants to use a slow system. Low TPS leads to long transaction wait times, failed transactions, and overall frustration. High TPS significantly improves the user experience by ensuring transactions are completed instantly or in a very short time.
3. Transaction Fees and Network Congestion
Particularly on blockchains, when a network’s transaction capacity is full, “network congestion” occurs. This congestion extends the time it takes for transactions to be confirmed and causes transaction fees to increase. Networks with high TPS can process more transactions simultaneously, making them less susceptible to such congestion, which in turn keeps transaction fees lower and more stable.
4. Suitability for Real-World Applications
Fast and low-cost transactions are the key to enabling blockchain technology to be widely used in real-world applications like payment systems, gaming, supply chain management, and finance. High TPS allows these systems to compete with their traditional counterparts.
How is TPS Calculated?
The calculation of TPS can vary depending on the type of system. In traditional centralized systems, this is typically done by directly measuring the number of transactions completed per unit of time. However, for blockchain networks, the calculation can be more complex, depending on the network’s architecture.
Here are the key factors affecting TPS for blockchain networks and the theoretical calculation formula:
- Block Size: Determines how much data (transactions) can be stored in a single block.
- Block Time: The average time it takes to create a new block.
- Average Transaction Size: The average data size of a single transaction.
Theoretical TPS Calculation Formula:
TPS=Average Transaction Size×Block TimeBlock Size
This formula gives the maximum theoretical TPS value a blockchain network can achieve. However, in real-world conditions, this value is often lower due to factors like network congestion, the number of nodes, and network latency.
TPS and the Blockchain Trilemma (Scalability Trilemma)
A concept frequently discussed in the blockchain world is the “Trilemma,” which suggests that it’s challenging for a blockchain to simultaneously achieve three main properties (Decentralization, Security, Scalability) at an optimal level.
- Decentralization: The network is not controlled by a single person or group and has a sufficient number of independent nodes.
- Security: The network is protected against cyberattacks, fraudulent transactions, and manipulation.
- Scalability: The capacity to support a high transaction volume and a large number of users.
High TPS (scalability) is typically part of this trilemma. Traditionally, achieving high TPS might have required sacrificing either decentralization or security. For example, some networks that reach very high TPS values may face criticism on the grounds of decentralization because they have a smaller number of validator nodes.
However, new-generation technologies and Layer-2 solutions being developed today are striving to overcome this trilemma and achieve high TPS without compromising decentralization and security.
Methods Used to Achieve High TPS
Blockchain developers are using various innovative methods to increase TPS and solve the scalability problem.
- Consensus Mechanism Changes: The Proof of Work mechanism used by Bitcoin is energy-intensive and slow. New consensus mechanisms like Proof of Stake and Delegated Proof of Stake provide faster and more efficient transaction confirmations, which increases TPS.
- Layer-2 Solutions: Designed to lighten the load on the main blockchain (Layer-1), these solutions perform transactions off-chain and then record them in batches on the main chain. Technologies like Lightning Network, Optimistic Rollups, and zk-Rollups fall into this category.
- Sharding: A technique that divides the blockchain into smaller parts (shards), allowing each part to process its own transactions independently. This horizontally expands the network’s transaction capacity.
- Directed Acyclic Graph (DAG)-Based Technologies: These don’t use a traditional chain structure; instead, transactions verify one another and occur in parallel. Projects like Hedera Hashgraph use this structure and can theoretically reach very high TPS values.
TPS is a Performance Indicator, Not Everything
Transactions Per Second (TPS) is undoubtedly a very valuable metric for evaluating a system’s speed and efficiency. It plays a vital role, especially for the future of blockchain technology. However, it’s crucial to remember that having the highest TPS value alone does not mean a system is the best.
When determining a system’s true value, other factors should also be considered, such as decentralization, security, transaction finality, ease of use, and ecosystem size.
The promise of high TPS is for blockchain technology to reach a maturity where it can compete with its traditional counterparts in every field, from banking to gaming. The continuous innovations in this field are opening the doors to faster, more secure, and more scalable systems every day, ultimately enabling a faster and more efficient future for the applications and systems everyone uses.
