Speed And Practicality Of Cryptocurrencies Compared To Traditional Payment Systems
When it comes to comparing cryptocurrencies, many people use the amount of transactions per second as a rating criterion. And very regularly, comparisons are made to the VISA network. After all, transactions per second are something universal, at first glance.
Depending on the days and moods, we therefore mention “56,000 transactions per second”, “24,000 transactions per second”… That is to say, respectively, 4,838,400,000 transactions per day and 2,073,600,000 transactions per day. Yes, you read correctly: more than two billion transactions a day in one case, and just under five billion in the other. These figures are not impossible since there are about 7 billion 800 million people on the planet; however, the VISA network is not the only existing payment network on Earth, and many people use other means of payment.
The consequence is that in practice, since the number of people who use the VISA network is not 7 billion, there are not 56,000 transactions per second, or even 24,000. According to VISA’s own website, the actual number of transactions validated per day is 150 million (source), giving a total of 1,736 transactions per second on average.
1736 transactions per second, it is still much more than what the majority of cryptocurrencies (here is urus price) are capable of.
That being said, the VISA network is a centralized system whose fees are fixed for users (minimum amount + percentage of the transaction in general), regardless of whether there are 1000 or 4000 transactions per second. As for the transaction confirmation speed, it remains substantially the same and is fast enough for daily use.
Is the comparison based solely on transactions per second, which are often seen on the internet, smart?
Theory and practice of transaction speed
When we talk about cryptocurrencies and the amount of transactions per second, what exactly does it mean? In fact, it is a stupid calculation of the mass of transactions processed in one day, divided by the number of seconds in the day. That is, for Bitcoin in recent days, about 300,000 transactions per day, divided by 86,400 (which is the number of seconds in a day), and we get 3.47 transactions per second. So that’s the current speed of the Bitcoin network, in practice.
When talking about theoretical maximums, you have to operate a little differently, and calculate the maximum amount of data absorbed by the network, the size of each transaction, the number of blocks processed per day, etc. The result, for Bitcoin, is a theoretical maximum of about 8 transactions per second. This article only deals with transactions made on the Bitcoin main layer and does not deal with solutions like Lightning Network.
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The first observation that can be made is that the Bitcoin network does not work to the maximum of its capacity. Just like the VISA network, by the way. And fortunately. However, it is already close to 50%, in a period that is not especially a period of attendance. What does this mean for Bitcoin?
To understand this, we must first think about what this maximum number of transactions per second represents.
Imagine for a moment that you need to travel from point A to point B, and that you have the choice between two road systems: one is composed of 32-lane highways, and the other, a one-way country road. On the highway system, a large number of people can travel at the same time on different lanes, while on the country road, it is only one by one that people will be able to move forward.
Payment systems work similarly: when the maximum number of transactions per second is high, it means that many people can use the network at the same time. And when the maximum number of transactions per second is quite low, the number of simultaneous users on the network is reduced. Each transaction in the payment network would actually correspond to a vehicle in the road system.
Now let’s go back to Bitcoin. The latter therefore has a maximum capacity of 8 transactions per second, and we are already close to half of this figure on average. Like a two-lane road, one of which would already be full, Bitcoin is a network that is not able to support many more users than it has today. And unfortunately, current Bitcoin users do not represent half of the world’s population.
This means that the Bitcoin network (the main layer) is (for the moment) incompatible with widespread use worldwide.