Glossary

Transactions Per Second (TPS)

Easy

Transactions per second (TPS) is a measure of a computer system's (or network's) capacity to perform transactions or calculations in a second.

What Are Transactions Per Second (TPS)?

Transactions per second (TPS) refers to the maximum number of transactions that can be processed by a computer system within a certain amount of time. For example, PayPal's TPS is around 193 transactions per second and VISA is capable of processing up to 1,700 transactions per second. 

When it comes to TPS of blockchain networks, the maximum transactions per second that is done in the world of crypto is 50,000 (by Solana network). 

This measurement can be useful when evaluating blockchains for their ability to process real-world transactions. However, there are several factors that complicate this simple comparison:

Block Time

The block time defines how quickly the blockchain confirms transactions. For bitcoin, the block time averages 10 minutes, which means that the network processes about seven transactions per second. 

Transaction Size

Different blockchains vary significantly in terms of the data transmitted with each transaction. A simple Bitcoin transaction can be as small as 226 bytes or as large as 500 bytes. Higher transaction sizes lead to higher processing times on the blockchain.

Block Size 

It is the amount of data about transactions a block can carry in blockchain. The bigger the block, the more people are needed to run a full node.  

If you have the information about the above factors, it’s easy to calculate TPS. 

Let’s say a blockchain has a block size of 1MB, the average transaction size of 1kb, and a block time of 30 seconds: its TPS would be 33. Anyone who has the information about these factors can calculate the TPS using the following formula:

(Block size/Transaction size) / Block time = Transactions Per Second

Some blockchains out there have staggering TPS but that doesn’t guarantee them to succeed at the top level or even compete with the likes of Ethereum and Bitcoin. It’s important to look into the performance, security, and other critical aspects of such blockchains because they might be compromised to have a high TPS rate.

The scalability issue has already been identified as a problem by many blockchain projects. 

Popular blockchain technologies have come under a lot of scrutinies due to the transaction rates that are achievable at the moment. Many people have compared current blockchain technology to early internet systems which did not have much capacity either. However, they were able to scale up rapidly after a period. Given the attention this issue has received, it’s fair to assume that the popular blockchain technologies can sidestep traditional payment processors’ TSP at some point.