Introduction
In the fast-paced world of cryptocurrency, blockchain speed is often touted as a critical factor for success. However, the focus on transactions per second (TPS) may be misleading investors and users alike. This analysis, based on multiple expert sources, examines why TPS isn’t the be-all and end-all of blockchain performance, and what metrics truly matter for the future of cryptocurrency.
Table of Contents
The Limitations of TPS
Transactions per second (TPS) has long been the go-to metric for measuring blockchain speed. However, this focus on TPS is often misguided and can create a false sense of performance. Let’s examine why:
TPS vs. Time-to-Finality (TTF)
While TPS measures the raw processing power of a blockchain, it fails to account for the crucial aspect of transaction finality. As highlighted by crypto analyst Paramonov: Time-to-Finality (TTF) is a more accurate measure of blockchain speed, as it quantifies the time from transaction initiation to its irreversible confirmation. This metric is crucial for real-world applications, especially in scenarios where instant confirmation is necessary.
The Soft Finality Concept
Layer 2 solutions have introduced the concept of soft finality, which allows for near-instant transaction confirmation. This development has significantly improved user experience in many blockchain applications, making TTF an increasingly important metric to consider.
Beyond TPS: What Really Matters
While high TPS numbers might look impressive on paper, they don’t always translate to better performance in practice. Here’s what we should be focusing on instead:
Scalability and Real-World Demand
The reality is that most blockchain networks are not operating at their maximum TPS capacity. For example:
Solana is able to process 50,000+ TPS, while the average TPS is around 2,000. Arbitrum is able to process 40,000+ TPS, while the average TPS is around 20 (not thousands, just 20).
This disparity between theoretical and actual TPS usage suggests that raw processing power is not the limiting factor for most current blockchain applications.
Block Times and Finality
Instead of fixating on TPS, the industry should pay more attention to block times and finality. These factors have a more direct impact on user experience and can influence important aspects like MEV (Miner Extractable Value) extraction.
Real-World Use Cases and TPS Requirements
To understand the true importance of TPS, we need to examine real-world use cases and their actual requirements:
Internet-Scale Applications
As pointed out by @0xshake from Polymer Labs:
Even though today’s blockchains are fast, scaling to Uber’s global operations on-chain would require thousands of MegaETH-equivalent rollups operating at maximum capacity.
This raises the question: do we really need every application to be fully on-chain? The answer isn’t straightforward and depends on the specific use case.
High-Frequency Trading (HFT)
HFT systems can execute thousands or even millions of trades per second. While bringing such systems on-chain could offer benefits in terms of transparency and fairness, current blockchain technology is not yet capable of handling this volume of transactions.
Gaming
Blockchain gaming presents an interesting use case for high TPS and low TTF networks. As noted by Paradigm, on-chain gaming could enable unique features like mods and open economies. However, current blockchain networks still face challenges in delivering the performance required for a seamless gaming experience without sacrificing decentralization.
The Pitfalls of TPS-Focused Marketing
Many blockchain projects make the mistake of emphasizing technical specifications like TPS in their marketing efforts. This approach can be counterproductive:
Alienating Non-Technical Users
By focusing on technical metrics, projects may inadvertently alienate potential users who are more interested in use cases and benefits rather than underlying technology. As Paramonov points out:
Unfortunately, lots of founders make the same mistake over and over again: wanting to onboard normies and sounding technical to them. That’s not welcoming at all. You should sell the use cases, not the technical features.
Misaligned Focus
The emphasis on TPS can distract from more important aspects of blockchain technology, such as security, decentralization, and real-world utility. A more balanced approach to marketing and development is needed to drive meaningful adoption.
Key Takeaways
- TPS is an imperfect measure of blockchain performance; Time-to-Finality (TTF) offers a more accurate picture.
- Current blockchain networks often have excess TPS capacity compared to actual usage.
- Real-world applications like internet-scale services and high-frequency trading present significant challenges for on-chain implementation.
- Marketing efforts focused on technical specifications like TPS can be counterproductive and alienate non-technical users.
- The industry should focus on developing and promoting use cases rather than raw performance metrics.
Conclusion
While TPS remains an important technical consideration in blockchain development, it shouldn’t be the primary focus for users, investors, or marketers. As the cryptocurrency industry matures, we need to shift our attention to more meaningful metrics like Time-to-Finality and real-world utility. By doing so, we can foster innovation that truly addresses user needs and drives mainstream adoption of blockchain technology. What do you think about the future of blockchain performance metrics? Should we move beyond TPS, or does it still hold value in certain contexts? Share your thoughts in the comments below!
