What is Transactions Per Second (TPS)?

TPS (transactions per second) is a metric that indicates how quickly a network can execute transactions per second, as well as how fast it can confirm a trade on an exchange.

The metric is helpful for assessing the capacity of a blockchain to process real-world transactions. However, various things complicate it.

As an example, Bitcoin processes 7 transactions per second. Visa, on the other hand, is able to process approximately 24,000 TPS, while a Mastercard can handle around 5,000 TPS. Besides, unlike Visa and Mastercard, Bitcoin is not as widely accepted and must be used through a crypto exchange (like Binance or Bybit).

So, metrics like TPS can influence a lot whether you would choose crypto as your payment method, or stick to more conventional payment methods.

What Complicates the Ability to Process Transactions?

Firstly, it is the quantity of transaction information that a block is capable to hold in a blockchain. Or, in other words, a block size. Depending on the size of the block, the number of people that is necessary to operate a full node also increases.

The most well-known blockchain technologies have been facing a number of inspections as a result of the transaction rates that can be reached at this time. The majority of individuals have seen the differences between the current blockchain technology and the early internet systems.

Nonetheless, they were able to swiftly expand after a period of time. Considering the prominence this problem has gotten, it's reasonable to believe that, eventually, blockchain technology will be able to bypass the TPS of traditional payment processors.

Some blockchains have astounding TPS, but this does not ensure that they will flourish at the highest level or even match with Ethereum and Bitcoin. It is crucial to investigate the performance, safety, and other essential characteristics of such blockchains in order to achieve a high TPS rate.

Another thing that complicates the transactions is block time. The block time determines how fast transactions are confirmed by the blockchain. For instance, the typical block time for Bitcoin is 10 minutes, implying that the network handles around seven transactions per second.

Last but not least is the transaction size. Different blockchains have different sizes of information transmitted with each transaction.

Combining all these points, we have a formula for calculating the TPS:

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