What is “Transactions per second” (TPS) and why does it matter?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, let's look into one the most fundamental requirement any blockchain will have to meet: That it can process enough transactions to handle the intended use cases.

Transactions per Second, or TPS in short, is a measure of that capability. Why does it matter?

Let's assume you create a new, amazing blockchain. Your goal is ambitious: It will be one global currency, poised to replace traditional payments entirely.

Now, that would be a lot of payments. VISA, for example, processes a few thousand transactions every second, and that is only one credit card company in a few countries. Just how many your blockchain would really need to support is hard to guess, but we can safely assume it's hundreds of thousands of TPS.

And guess what? Others have also tried and failed miserably. Bitcoin can handle only 7 TPS, a number that doesn't even support a single large supermarket. Ethereum does 14, so people pay to jump in front of the queue, and transaction fees become astronomical and impractical for smaller payments.

You see, it sounds easier than it is, and any blockchain that wants to have a real shot will need to support massive TPS, and they need to be cheap as well. When you evaluate a project, keep an eye on it.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.