Transactions Per Second (TPS) Meaning

What is Transactions Per Second in Crypto?

In crypto, TPS represents the maximum number of transactions that a blockchain can carry out in a second. It is used to measure a network’s speed and scalability. 

Centralized systems like Paypal and Visa typically have a higher TPS than most decentralized networks. Paypal’s TPS is 193, while Visa has a TPS of 1,700. On the other hand, Bitcoin has a TPS of 7.

To calculate a blockchain’s TPS, you need three pieces of data: block time, block size, and average transaction size. 

• Block time: the average time needed to confirm a transaction on a network 
• Block size: the amount of transaction data one block can store. 
• Transaction size varies between 226 bytes and 500 bytes. 

TPS = (block size/ transaction size) / block time. 

Why is TPS Important?

The TPS of a network is important because it measures the network’s capacity to process transactions in real-time, and its potential to scale to accommodate new use cases and new users in future. Scalabilitytends to have an inverse relationship with the other two essential features of a blockchain network, which are decentralization and security. Achieving all three is a difficult balance, and this challenge is something that drives much of the innovation in the blockchain ecosystem.

Blockchain trilemma is the idea that it is difficult to create a blockchain that achieves optimal levels of scalability, security, and decentralization simultaneously. One of the properties is usually compromised to strengthen the others. For example, Bitcoin has low scalability but is highly secure and decentralized.

Some blockchains have higher TPS than others, although this can sometimes come at the expense of other essential properties, such as security or decentralization. Scalability, however, often has more appeal because it is vital to larger adoption. 

Blockchains with the High TPS 

TPS and scalability should be considered in the context of a blockchain’s other attributes, security and decentralization. 

For example, Bitcoin has a TPS of  just 7, but it is one of the most secure and decentralized blockchains. Ethereum currently has a TPS of 27, while Polygon can process 7,000 TPS. Solana is currently the most scalable blockchain with a throughput of 50,000, while Avalanche has a TPS of 4,500.

Ethereum’s TPS is estimated to increase significantly to around 100,000 once it completes its sharding upgrade.