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See Six cryptocurrencies that offer the fastest transaction time - WEF

Thompson Nsisongabasi

Jun 17, 2021

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The World Economic Forum (WEF) published the June 2021 edition of its community paper titled "Cryptocurrencies: A Guide to Getting Started." As the title stated, the paper is a beginner's guide into the world of cryptocurrencies and it educates potential investors on the basics of cryptocurrencies. It covers how to buy and sell cryptocurrencies, transferring from one person to another, introduction to blockchain technology, the programmability of cryptocurrency by doing a deep dive into the Ethereum network, and notably, throughput and scalability.

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In this article, we will be looking at the throughput and scalability aspect of the community paper. Six cryptocurrencies were highlighted that are believed to offer the most throughput and scalability.

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Scalability is one of the most important problems in blockchain and has been the focus of both industry practitioners and academic researchers since Bitcoin was created. Scalability is a comparative term within blockchain technology, most notable for assessing throughput. Throughput approximates the number of transactions that can be processed per second on the blockchain network of a cryptocurrency.

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Scalability is an important aspect of cryptocurrencies an investor must look at before investing in the asset class. It determines how valuable a blockchain network is by gauging the level of transactions and smart contracts that the network can launch. Today, Bitcoin network can process up to 7 transactions per second (TPS) if the block time is ten minutes. Ethereum processes about 15 TPS.

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Compared to traditional payment vendors, such as VISA or PayPal, the transaction capacities of cryptocurrencies such as Bitcoin and Ethereum are very low. The world's leader in digital payments, VISA, claims that it can handle more than 65,000 transaction messages a second and handles an average of 150 million transactions every day.

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In contrast, the payment network PayPal "only" handles 193 transactions per second, or about 5 million transactions a day. The only thing that makes Bitcoin and Ethereum seemingly more valuable is the use case of instant cross-border facilitation without the need for middlemen and the ability to launch smart contracts through codes on the blockchain network.

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Having mentioned this, there are 2 types of scaling:

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Vertical scaling involves adding processing power and memory to each node, thus creating more powerful nodes. Consequently, the efficiency of individual transactions is improved while Horizontal scaling, on the other hand, entails adding more machines to a system and improving overall throughput capacity. In summary, fewer nodes and thus higher centralisation of a network (such as EOS) generally increase network speed, while transparency and overall immutability are lower than in a highly decentralised network such as Bitcoin.

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It is currently unlikely that, in terms of technology, one single scaling solution will manage to take into consideration all factors to provide the optimal solution for the Bitcoin network. However, many other coins have proposals they are working on to provide different solutions to this predicament as technology is making headway.

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— Thompson Nsisongabasi

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