Finance
Trending

Fastest Cryptocurrencies

The Speed of Blockchain 101

Fastest Cryptocurrencies – In the era of cryptocurrencies, transaction per second has become one of the most influential factors, alongside fast-growing internet speeds and technology.

Fastest Cryptocurrencies

The blockchain trilemma isn’t exactly new to anyone who’s familiar with cryptocurrencies. Vitalik Buterin, the Ethereum creator, created the blockchain trilemma in 2016 and states that cryptocurrency must be secure, decentralized, and scalable.

Scalability 

Regardless of the number of users and transactions, a cryptocurrency will maintain its performance. As described above, scalability means speed for our purposes here.

Decentralization 

In this process, your cryptocurrency transactions are verified or processed by many unrelated computers around the globe. This headline from 2018, showing how EOS’ 21 validators froze 7 wallets on its blockchain, provides an explanation of why decentralization is important.

Security 

It kind of goes without saying. Things like the consensus mechanism of a cryptocurrency and its encryption are included here.

If you have a cryptocurrency that is able to handle a thousand transactions per second, then I understand why you can’t have them all! Scalability is now checked off the list.

We also assume this cryptocurrency will have 1,000 independent running computers connected to the network that will process transactions, so this guarantees decentralization, and for strong security, we assume it will use a proof-of-stake consensus mechanism that requires the agreement of at least half the computers on the network.

Thus, theoretically, you’ve beaten the blockchain trilemma, and that’s what many cryptocurrencies claim. When the rubber meets the road, things can change very quickly.

We have 1,000 computers connected to our cryptocurrency network. In order for a transaction to be valid, 501 of them must confirm it.

During low-volume times, this is not a problem. When user numbers and transactions begin to increase, it can’t handle the traffic that could be efficiently checked by 501 computers.

To keep our fictional cryptocurrency network running, we would need to cut the number of transactions it can handle per second. We need fewer computers to confirm each transaction, so we should reduce the number of computers on the network.

We lose scalability if we choose option 1. The second option sacrifices decentralization, while the third option sacrifices security. Satoshi Nakamoto, the creator of Bitcoin, consciously sacrificed scalability to ensure decentralization and security.

Ether 2.0’s light decentralization trade-off will benefit both Vitalik and the other Ethereum founders. Later, we’ll explain. Using Layer-2 solutions, such as the Lightning Network, Bitcoin can scale at a much higher rate, while maintaining its security and decentralization.

Like Polygon (MATIC), Ethereum-based solutions, such as Layer-2 solutions, do the same.

The high-performance cryptocurrencies I just mentioned have sacrificed decentralization in order to be scalable, and this is also true of layer-2s.

For example, Polkadot (DOT) has about 300 validators at the moment. Initially, this may sound decentralized, but each Polkadot blockchain will only use 10 validators.

As a result, Polygons technically has 100 validators at the plasma chain, but Polygon only has seven to ten nodes that run the decentralized applications.

What Is Cryptocurrency Speed?

Here’s another important point that isn’t often brought up when examining cryptocurrency transaction speeds: not all transactions are created equally.

Using your wallet to transfer a coin or token is not the same as executing an application like AAVE flash loan, which is a decentralized application.

Few cryptocurrencies compatible with smart contracts distinguish between smart contracts and other transactions when indicating their transaction speeds.

You’ll probably discover that smart contract transactions are slower than regular ones if you carefully examine their documentation.

Many of these so-called Ethereum killers utilize a version of the Ethereum Virtual Machine (EVM), which has a limit of 300 transactions per second, even when a single computer is used.

Two of Cardano’s top software engineers presented a paper last year entitled, quote Lies, Damned Lies, and TPS Benchmarks.

The cryptographers explained bitcoin transactions as packets of data, not blips inside the digital system. Blockchains are basically databases that process and store cryptocurrency transactions.

A Bitcoin block can, for example, contain 1 million bytes of data, or one megabyte. According to the math, each Bitcoin block can hold anywhere from 2,500 to 2700 transactions. Since 1 Bitcoin block is generated every 10 minutes, this amounts to about 5 transactions per second.

Decentralization and security play a role in Bitcoin’s small block size and long block times. In the Bitcoin blockchain, no matter how many transactions are in a block, its creation adds one megabyte of data. You don’t have to ask why right? That’s the way blockchain works.

Bitcoin’s blockchain grows in size over time. There are currently 337 gigabytes of data on the Bitcoin blockchain. Each Bitcoin machine must download this transaction history so it can keep track of the transactions and process them properly. If you increase the block size of the coin, you’ll be able to fit more transactions. A greater number of Bitcoin transactions would also occur.

Taking an extreme example, one bitcoin block would contain 5,000 transactions per second if it were 1 GB in size. Nonetheless, there are only so many data centers in the world that can store the transaction history of the blockchain. The Blockchain blockchain can only be connected to a few computers.

Additionally, the fastest fiber internet on the planet is needed just to keep up with each new block being built in each of these data centers. A six-second block time for Bitcoin would increase transactions per second to 500.

It’s impossible to check the validity of transactions in such a block in six seconds, but there are way more than enough computers to do so. As a result, Bitcoin’s blockchain would split into multiple chains with conflicting histories, resulting in major network failures.

Calculating Cryptocurrency Speeds

It is possible to determine a cryptocurrency’s true transaction speed by utilizing its processing and storage capabilities.

The essentials are;

How big are the blocks?

How often are blocks made?

Which cryptocurrency’s blockchain tends to have a large average transaction size?

Because some cryptocurrencies adapt their block size according to transaction demands, calculating this calculation is sometimes harder than it is to do.

One of these cryptocurrencies is Monero (XMR), which has an elastic block technology, allowing TPS scores to range from four to 2,000.

Ethereum 

Since Ethereum generates a new block every 13 seconds and the average Ethereum transaction as of late is around 2,500 bytes, the TPS of Ethereum has gone from 15 to 17. Each Ethereum block consists of 51,00 bytes, and Ethereum generates a new block every 13 seconds.

Cardano’s 

According to Cardano, where blocks are two megabytes each, blocks take 20 seconds to populate, and transactions are roughly 500 bytes each, the chain can handle around 200 transactions per second.

Since Ethereum has smart contracts, whereas Cardano does not, you can see why transactions on Ethereum are so much larger than those on Cardano.

Thanks to Cardano’s dual chain architecture, smart contracts shouldn’t clog up the blockchain due to its separation of smart contracts from transactions.

As the blockchain size of Cardano’s blockchain increases, the size could become an issue for decentralization in a few years.

Basically, this calculation means that the theoretical limit of how fast a cryptocurrency can be is determined by the speed of the internet worldwide.

A speedtest.net report shows that the average upload speed is 50 megabytes per second and the average download speed is 100 megabytes per second.

By comparison, Ethereum only uses two kilobits per second and Cardano uses 10 kilobits per second, so we can see that there is plenty of room for cryptocurrency speeds to rise. Then, the question becomes, what speed is fast enough?

Fastest Crypto: Transactions Per Second

A common benchmark for crypto speed is Visa. Visa’s payment network can serve as a good model for future crypto adoption because it has an estimated four billion cardholders. As Visa reports 65,000 transactions per second, its daily transaction rate is only 2,000 per second.

There is only one cryptocurrency that can handle up to 65k transactions per second at the moment, and that is Solana (SOL). Sam Bankman-Fried, the founder of FTX and Alameda Research, has personally tested Solana’s scalability.

Solana has been chosen as the platform to host FTX Serum DEX, specifically because it is the fastest smart contract cryptocurrency.

Additionally, Solana has struggled with network issues as well. As a consequence of this, it was not possible to run off a single computer with such fast speeds.

Since Solana transactions can be up to 500 bytes in size, the Solana blockchain is also very large, creating enormous transaction histories every day.

Despite only being online for a few months, Solana’s blockchain already contains 2 terabytes of data.

A blockchain with that size is larger than all cryptocurrencies put together.

Decentralization is seriously threatened by this, as I mentioned earlier. The decentralized cryptocurrency storage project Arweave (AR) has been selected for the storage of Solana’s data.

Data from Solana validators are only retained for the last two days.

Fastest Crypto: Transaction Finality

Crypto speed isn’t closed with Solana, as you might think. There are two distinct things in transaction execution and transaction confirmation.

As you probably know, there is a certain number of confirmations you need to wait for before you are credited with your cryptocurrency. Based on your transaction, you are confirmed if you have created a certain number of blocks. Usually, the first confirmation of your transaction is the first block. Also, cryptocurrencies all have different block times.

The majority of exchanges credit your crypto shortly after their confirmation unless you send Ethereum Classic (ETC) to Kraken, where you will need to wait for about a week.

Due to previous 51% attacks, Ethereum Classic has been able to credit cryptocurrency to user accounts in the past.

In order to credit your account, cryptocurrency exchanges require that the transaction is final, which becomes more likely with each confirmation.

Approximately 99.9% of transactions in Bitcoin are final after six confirmations. Obviously. A less secure blockchain such as Ethereum Classic will need much longer.

Despite Solana’s 400 millisecond block time, its transaction finality time is somewhat longer. Thus, the elaborate consensus mechanism outlined by Solana is at work.

Cryptocurrencies, where the transaction is completed instantly, are in contrast. In addition, Algorand (ALGO), Ripple (XRP), Stellar (XLM), Cosmos (ATOM), and any blockchain that uses tender mint consensus are also listed.

In spite of the fact that these cryptocurrencies are slower than Solana in terms of TPS, exchanges will be able to guarantee the finality of the transactions as soon as they generate a block.

As a result, the deposits on Kraken are near-instant, but the deposit on Binance can take as long as two minutes, and it is not surprising given that all cryptocurrencies are centralized.

They only have about a dozen validator nodes. Wallets and DApps don’t always need finality thresholds to conduct transactions, but a number of crypto merchants may do so future cryptocurrency exchanges will use finality benchmarks like today.

Disclaimer:

I‘m not a financial advisor and this article is simply for educational purposes. It should not be used to make any decisions regarding your finances. If you need investment advice, please contact a qualified financial advisor.

Previous Post: Ethereum ETH 2.0

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also
Close
Back to top button