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Cryptocurrency and TPS

What is TPS?

  TPS (TPS) stands for Transaction per Second, and refers to the number of transactions that can be processed per second. 1 million TPS refers to the speed at which 1 million transactions can be processed per second. TPS can be increased through centralization, but in that case, the purpose of decentralization, the original purpose of the blockchain, is undermined. Joseph Lubin, founder of Consensys, created the concept of DTPS by multiplying TPS by the Decentralization Quotient (DQ). DTPS is a decentralized TPS index.

Like I said, TPS is an indicator of how many transactions a blockchain network can handle per second. Remittances of some coins are not processed immediately and take several minutes, which is all caused by a lack of TPS compared to the number of transactions. Therefore, coins that require fast transaction processing, such as payment services, continue to strive to increase TPS. 

TPS may vary depending on not only the design of blockchain software, but also network performance and the hardware performance that drives blockchain and creates and verifies blocks, and may vary depending on the type of transaction. For example, smart contract transactions require more operations than simple remittances, so they inevitably take longer. Even contracts that perform the same function require more operations depending on the actual code implementation form and may take longer.


TPS indicators include maximum TPS and current TPS. The maximum TPS shows how many transactions are processed and stored per second when they are excessively concentrated. Therefore, this indicator is a very good indicator for evaluating speed. Current transactions can be obtained by the 'number of transactions/block creation time contained in recent blocks', and to obtain a more average value, you can take a sample of recent N blocks and obtain them.

Currently, TPS may or may not reflect speed. Popular blockchains such as Bitcoin and Ethereum are already experiencing excessive transactions, so TPS is currently close to the maximum TPS. On the other hand, when calculating the current TPS of new blockchains that are faster than Bitcoin or Ethereum by design, it is often less than 1. That is, even if the maximum TPS is 100 million, if the transaction actually requested is low, the current TPS may be very low. In this case, the current TPS may be used as an index for evaluating the degree of activation of the corresponding blockchain.


Blockchain Trilema

  In the blockchain, trillema refers to three problems: scalability, decentralization, and security. Currently, first-generation cryptocurrency Bitcoin and second-generation cryptocurrency Ethereum are most widely used in cryptocurrency P2P transactions, but they are making users feel the limitations of the blockchain technology. A representative example of the technical limitations faced by Bitcoin and Ethereum is the scalability problem of slowing Transaction Per Second (TPS) as the network expands. Third-generation blockchain EOS, which has emerged as an alternative to solving this problem, is also not a sufficient solution.

Cryptocurrencies on the market can only solve one or two or more decentralized, security, and scalability of blockchain trilemas, and it should be considered physically impossible at the moment to satisfy three at the same time. In the case of Bitcoin and Ethereum, which focus on decentralization and stability, transaction processing is very slow now that the number of users is very large, which is a problem. The irony is that the two biggest obstacles for blockchain to solve the scalability problem are decentralization and stability. Therefore, these three concepts were grouped together and called the blockchain trilema. Referring to the Reserve Bank of Australia (RBA) expansion trilemas, he said, "Cryptocurrency will always lack some characteristics," adding, "Because of this, cryptocurrency is a less attractive asset."


* Scalability : The degree to which it can flexibly respond to the increase in the number of users. Blockchain refers to the ability to increase transmission processing capacity without difficulty even if the number of transactions increases as the number of users increases.

* Decentralization : It refers to autonomous operation in small units distributed beyond centralization. Blockchain operates in a P2P (P2P) manner by voluntary and autonomous connection of individual nodes, not by existing server-client relationships. As blockchain technology is introduced and widely spread socially, existing centralized organizations, companies, organizations, and organizations are changing to a decentralized structure.

* Security: Security means that data or programs in the blockchain cannot be used by unauthorized users.


Cryptocurrency and TPS

  TPS refers to the number of traffic processed per second in units expressed when calling the transaction processing speed. Currently, VISA, one of the world's largest trading card companies, is known to handle 24,000 TPS. On the other hand, Bitcoin, the beginning of cryptocurrency, has an average of 7 TPS per second, Ethereum 20 TPS, and EOS 3,000 TPS. As it is significantly lower than existing financial services, each project is carrying out various methods to improve this speed problem. In the case of Bitcoin, it takes 10 minutes for a single transaction to occur, and it theoretically takes an hour to confirm it as an irreversibly completely closed transaction. Accordingly, Bitcoin is trying to solve the speed problem by processing frequent transactions under the blockchain and recording only the result value at a specific point in time. Ethereum is also attempting to improve processing speed in various aspects.

However, as TPS is considered the key to determining the activation of blockchain, projects that put forward unusual TPS have recently emerged. In the case of some projects, there are many concerns as they are using unverified TPS for project marketing without completing technology verification.


* Bitcoin: In the case of Bitcoin, based on a block capacity limit of 1MB and a block generation of 10 minutes, calculating one transaction results in less than 7 TPS. Apart from networking capabilities, additional performance improvements are bound to reduce transaction size or speed up block creation because they initially set limits that can be handled on logic. In other words, it is a problem that is difficult to solve only with any trick or technology in computer science.

* Ethereum: In the case of Ethereum, the block creation cycle is about 12 seconds, and the TPS is about 10-30 seconds. First of all, Ethereum does not have a fixed block size and transaction size unlike Bitcoin, and the mining speed is dramatically faster than Bitcoin, but the reason why TPS processing is bad is that the gas that can be used per block is fixed. Gas is a substitute for handling coins on Ethereum more flexibly, which is used as a medium when processing transaction costs. The fact that the amount of gas is set brings a similar limitation to the fact that the size of the block is set.


Drawback

  TPS is an indicator of performance that can handle transactions occurring per second. Since it represents only the number of transactions that can be handled per second, it seems to be a consistent indicator. However, if you look closely, it does not. TPS is affected by hardware. When evaluated on higher specifications of hardware, the TPS is bound to be higher. Blockchain is a technology corresponding to software. Therefore, it is necessary to evaluate performance in hardware with consistent specifications. In other words, it is necessary to evaluate fairly under the same conditions. TPS is also affected by the size of the block. In a blockchain, blocks and TPS are inversely proportional to each other. A large block means that the size of the transaction to be sent is large. Therefore, the time exchanged is bound to increase as the block size increases. Of course, the TPS is bound to be lowered.

In summary, the blockchain TPS measurement method is inconsistent for two reasons. In fact, when examining blockchain TPS, the performance is different. Take Hyperledger as an example. Some places evaluate hyperledger as 100 TPS, while others evaluate thousands of TPS. Even though it is the same blockchain platform, its performance is different. Some blockchain companies also present the dominance of their platforms based on TPS. However, just because the TPS is faster than other places does not mean that it is reliable. This is because the evaluation methods are different. Of course, if an evaluation method is presented, it is somewhat reliable. However, there are few that suggest TPS while suggesting evaluation methods.

It is difficult to see TPS as an evaluation item representing the level of blockchain technology. TPS is one of the indicators of network processing speed, and blockchain provides 'transparency' as business value based on data sharing. It guarantees 'data integrity' through consensus algorithms. And these are matched to provide 'security'. Furthermore, it provides 'decentralized' business value. It is not desirable to present 'network processing speed' as a representative in blockchain technology that values trust.

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