- >News
- >Does Blockchain Speed Matter? Making Sense of TPS, Finality and Scalability
Does Blockchain Speed Matter? Making Sense of TPS, Finality and Scalability
Blockchain speed is often touted as the killer feature of many new cryptocurrency projects. That’s because any given blockchain protocol acts as a foundation upon which an ecosystem of technology services can be offered. If a protocol is efficient, then it can theoretically offer a more robust suite of services to serve society.
Being able to identify the most efficient blockchain protocol translates into a better return for investors, and long-term viability for those who want to build on any given blockchain. Therefore, there is ongoing competition among blockchain projects to be the most efficient so that their protocol can go mainstream.
It is common to see a protocol’s speed expressed in the form of TPS (transactions per second), finality, and scalability. What do these terms mean, and how relevant are they? Read on to simplify your understanding of these terms, and clarify their relevance in light of the “blockchain trilemma”.
The Blockchain Trilemma
The blockchain trilemma is an observation made by Ethereum’s Vitalik Buterin that illustrates how difficult it is to simultaneously optimize the decentralization, scalability, and security of a blockchain protocol.
The challenge is that, in order to optimize any one of these traits, the quality of one or more of the other two will need to suffer. To illustrate the trade-offs of the blockchain trilemma, we will look at TPS, scalability, and finality with reference to Bitcoin, Ethereum, and Solana.
TPS, Scalability, and Finality
The amount of transactions a blockchain can handle per second (TPS) is a straightforward concept. If you need to make a transaction on any given blockchain, it is preferable that it happens quickly. If the TPS limit is reached, then excess traffic will bottleneck the network’s speed.
A common comparison asks how many transactions a blockchain can handle compared to how many the Visa network can handle. These numbers are rough estimates, but the Visa network handles about 2,000 transactions per second, and can theoretically process much more. On the other hand, Bitcoin only handles about four per second, Etherum about 20, and Solana about 2,000. Solana boasts the ability to theoretically handle up to 65,000 transactions per second.
The idea of scalability can be deceiving in that it seems to fit closely with that of TPS. The thinking goes, if the protocol can handle more transactions, then more users can use the chain simultaneously, which implies scalability. The problem is that there are sacrifices given what we know about the blockchain trilemma.
Solana, for example, is prone to outages, making it a less reliable platform. Ethereum does not have the same uptime issues as Solana, but suffers a lower TPS rate and high gas fees. Bitcoin is the slowest of the all, but is much more reliable and maintains reasonable transaction fees. So when you are thinking about scalability, you should consider the risk you are taking on by participating in a less reliable platform.
Finality refers to the time it takes a blockchain to confirm a transaction with other nodes on the network, and how reliably those transactions cannot be changed after their completion. The rate of finality is related to the TPS of a blockchain (ie. Bitcoin has slower finality), and is commonly referred to as the “immutability” of a network. Finality is less consequential in our discussion here, but remains important as a security feature of any cryptocurrency.
What About Layer 2’s?
“Layer 2” refers to secondary frameworks that are built on top of existing blockchain networks to address speed and scalability issues. Ethereum has many layer 2’s, such as Polygon, which are blockchain protocols that serve to reduce the workload on the main Ethereum blockchain (and avoid gas fees).
Bitcoin also has a layer 2 known as the lightning network. The lightning network is different in that it is not a blockchain technology, but is a clever secondary software layer that optimizes Bitcoin’s direct usability. In fact, Bitcoin’s lightning network is capable of handling many more transactions than even Solana! Have a look at this tweet from Blockstream’s Adam Black in March that illustrates just how efficient the lightning network is.
Layer 2’s eliminate the need to augment the foundation (main) chain of a blockchain network. This preserves the security of the main chain which, like building a house, can ensure the integrity of the entire network remains on solid footing.
Solana currently does not have an evident layer 2 ecosystem, because they have mostly addressed how to optimize the speed of their network. However, they have done so at the cost of having a less reliable foundation relative to Bitcoin and Ethereum, and are risking their overall scalability as a result. This is not to say that Solana is not scalable, but that they will likely be limited by a foundation that no layer 2 can improve upon.
The Tradeoff
Bitcoin, Ethereum, and Solana serve different purposes in the world of cryptocurrencies. Bitcoin aims to upgrade the global monetary standard, which requires a more decentralized and secure network.
Ethereum and Solana serve more commercialized purposes, which have more flexibility for addressing issues of decentralization or network reliability. Just because Bitcoin has the most secure foundation does not mean the lightning network is better suited to build out web3 infrastructure over the long-run.
Ethereum’s Polygon layer 2 is well-suited for developing crypto video games, but Solana’s high TPS may prove superior for handling games that require thousands of transactions in a given session.
No matter which cryptocurrency you highlight, the matter of their speed is ultimately a concern that is relative to the need they are addressing.
Bitcoin has almost zero competition in addressing a new monetary standard, and Ethereum remains dominant as a protocol to apply blockchain technology to a wide variety of problems. Solana may not be an “Ethereum killer”, but can achieve long-term scalability by filling in where Ethereum cannot.
If the speed of a blockchain is of concern to you, then remember to keep in mind the big picture and clarify what your personalized needs are.
