The Fastest Cryptocurrency: Blockchain Speed 101

When combining data access with faster Internet speeds, blockchains are actually scalable, decentralized and secure. This seems to be the future we’re headed toward, but now it’s common to see things that make you wonder if we’re moving in the opposite direction.

The Fastest Cryptocurrency: Blockchain Speed 101

The end game for cryptocurrencies is to replace the financial system we have today. So far, we’ve seen amazing progress toward that goal. Decentralized payments, savings, lending, and even stock investments can be done directly peer-to-peer, with no middleman and no KYC documents required.

In total, decentralized applications offering these services hold over $100 billion in cryptocurrency, and their TVL (total locked-in value) continues to grow every day.

There is only one thing holding back true mainstream adoption of cryptocurrencies, and that is speed. Most cryptocurrencies are too slow to support the billions of transactions made by billions of people every day.

While many cryptocurrency projects have a habit of bragging about how many transactions they can process per second, the numbers they provide rarely stand up to scrutiny. That’s why today, this piece will reveal which cryptocurrencies are truly the fastest and why.

The Fastest Cryptocurrencies
Unless one is new to cryptocurrencies, then one has probably heard of the blockchain trilemma. The blockchain trilemma was introduced in 2016 by Vitalik Buterim, the founder of Ether, and it states that a cryptocurrency can only be two of three things : scalable, decentralized, and secure.

The Fastest Cryptocurrency: Blockchain Speed 101

Scalability is the ability of a cryptocurrency to maintain its performance despite having millions of users and transactions. For the purposes of this article, we equate scalability with speed.

The Fastest Cryptocurrency: Blockchain Speed 101

Decentralization is when users have hundreds, if not millions, of unrelated computers around the world to verify and process cryptocurrency transactions. To see why decentralization is important, check out this headline from 2018, when 21 verifiers on EOS froze 7 wallets on the blockchain.

The Fastest Cryptocurrency: Blockchain Speed 101

The security is self-explanatory. This includes the cryptocurrency consensus mechanism and the encryption of its code.

Assuming that there is a cryptocurrency that has 1000 independently running computers connected to its network to process transactions, this counts as checking the decentralization checkbox, and finally, let’s assume that this cryptocurrency is a super-secure proof-of-interest consensus mechanism because it requires more than half of the computers on the network to sign each transaction.

So, in theory, this has overcome the blockchain trilemma, which is what many cryptocurrencies claim to have done. However, when it comes to actually running it, things change quickly.

Recall that our cryptocurrency has 1000 computers connected to its network all over the world. According to the consensus mechanism, 501 of them must confirm transactions in order for them to be valid.

When the number of users and transactions is small, this is not a problem. But as the number of users and transactions starts to grow, it is no longer possible for the 501 computers to check every transaction.

In order to keep our virtual cryptocurrency network running, we have to reduce the number of transactions that the system can process per second. Reduce the number of computers connected to the network, or change the consensus mechanism so that each transaction requires fewer computers to confirm.

The Fastest Cryptocurrency: Blockchain Speed 101

If we check the first option, we sacrifice scalability. If we choose the second, we sacrifice decentralization, and if we choose the third, we sacrifice security.

The Fastest Cryptocurrency: Blockchain Speed 101

In the case of Bitcoin creator Satoshi Nakamoto, he made a conscious decision to sacrifice scalability for security and decentralization. vitalik and the other ethereum founders made the same trade-off at the outset, and ethereum 2.0 will slightly sacrifice decentralization for the speed needed to support its ecosystem.

The Fastest Cryptocurrency: Blockchain Speed 101

Bitcoin’s layer 2 solutions, such as Lightning Network, are designed to enhance Bitcoin’s scalability while leveraging the security and decentralization of the Bitcoin blockchain.

The Fastest Cryptocurrency: Blockchain Speed 101

The same approach is used for layer2 solutions for Ether like Polygon (MATIC) for the Ether blockchain.

Most high-performance cryptocurrencies have chosen to sacrifice decentralization for scalability, which can also be applied to the layer2 mentioned earlier.

The Fastest Cryptocurrency: Blockchain Speed 101

To take two simple examples, Polkadot (DOT) currently has about 300 validators. This sounds decentralized until one realizes that each parallel chain running a Polkadot smart contract will only use 10 validators.

Similarly, Polygon technically has 100 validators on Plasma, and there are actually only 7-10 nodes running decentralized applications on Polygon.

The Fastest Cryptocurrency: Blockchain Speed 101

What is the speed of cryptocurrencies ?
Now, this brings me to a very important point, which is almost never mentioned when examining the speed of cryptocurrency transactions, not all transactions are created equal.

Moving coin or tokens from one wallet to another is different from executing complex smart contracts in a decentralized application such as AAVE Flash.

Few smart contract-compatible cryptocurrencies advertise the speed of their transactions with a distinction between smart contract transactions and regular transactions.

The Fastest Cryptocurrency: Blockchain Speed 101

When delving into their documentation, it often turns out that smart contract transactions are much slower than regular transactions, assuming they list the numbers at all.

The Fastest Cryptocurrency: Blockchain Speed 101

In addition, many so-called ethereum killers actually utilize a version of the ethereum virtual machine (EVM) that is essentially limited to 300 transactions per second, even when running on a single computer.

The Fastest Cryptocurrency: Blockchain Speed 101

That’s why two of Cardano’s top software engineers gave a presentation last year titled “Citing Lies, Damn Lies, and TPS Benchmarks”.

The Fastest Cryptocurrency: Blockchain Speed 101

In it, they explain that cryptocurrency transactions are more like packets of data than points of light in a digital system. The cryptocurrency blockchain is basically like a database for processing and storing transaction data.

The Fastest Cryptocurrency: Blockchain Speed 101

For example, each block on the Bitcoin blockchain can hold 1 megabyte of data, or 1 million bytes. The average bitcoin transaction is less than 400 bytes in size, which means that each bitcoin block can hold between 2,500 and 2,700 transactions. Since a bitcoin block is created every 10 minutes, this translates to 5 transactions per second.

The Fastest Cryptocurrency: Blockchain Speed 101

The reason Bitcoin has such a small block size, but such a long block time, has to do with security and decentralization. Every time a new block is created, 1 megabyte of data is added to the Bitcoin blockchain, regardless of how many transactions are in the block. This is how the blockchain works.

The Fastest Cryptocurrency: Blockchain Speed 101

This means that over time, the Bitcoin blockchain grows in size. Today, the size of the Bitcoin blockchain is about 337GB.

The Fastest Cryptocurrency: Blockchain Speed 101

Every computer that joins the bitcoin network needs to download this transaction history so that it knows what’s going on and processes the transactions correctly. And increasing the block size of the coin means that each block can hold more transactions. This will also allow bitcoin’s transaction history to grow much faster.

As an extreme example, if each bitcoin block is 1GB in size, then 5,000 transactions can be processed per second. However, the blockchain is growing so fast that only large data centers can store its transaction history.

Not only that, but each data center would need to have the world’s fastest fiber network to keep up with each new block being created. If the block time for Bitcoin were to be sped up to 6 seconds, this would increase the number of Bitcoin transactions per second to 500.

The problem here is that for enough computers, 6 seconds is not enough time to check if the transactions in that block are valid. This would cause the Bitcoin blockchain to split into multiple different blockchains with conflicting transaction histories, which would effectively break the network.

Speed of Computing Cryptocurrency
The speed of a cryptocurrency is its ability to process and store data, and there are a number of metrics that can be used to calculate the actual transaction speed of any cryptocurrency.

The Fastest Cryptocurrency: Blockchain Speed 101

Just need to know the following.

How often is a block created?

How often is a block generated ?

What is the average transaction size of that cryptocurrency blockchain ?

This calculation is sometimes easier said than done, as some cryptocurrencies actually adjust their block size to fit the transaction demand.

Monero (XMR) is one such cryptocurrency that can have a TPS as low as 4 and as high as 2000 thanks to its elastic block technology.

For the same reason, Ether has been gradually increasing its block size over the years, with a TPS of 15 to 17, due to the fact that each Ether blog is 51,000 bytes, generating a new block every 13 seconds, and the average Ether transaction is about 2,500 bytes.

The Fastest Cryptocurrency: Blockchain Speed 101
The Fastest Cryptocurrency: Blockchain Speed 101

Cardano’s blockchain can process about 200 transactions per second, which can be mapped from Cardano’s 2MB block size, 20-second block time, and Cardano’s average transaction size of 500 bytes.

The Fastest Cryptocurrency: Blockchain Speed 101

Obviously, the reason why there are more transactions on Ether than Cardano is because Ether has smart contracts and Cardano does not yet.

Fortunately for Cardano, smart contracts don’t block the blockchain because its dual-chain architecture separates smart contract data from transaction data.

The Fastest Cryptocurrency: Blockchain Speed 101

Unfortunately for Cardano, a block size of 2 megabytes running at 20 seconds means that the size of its blockchain is growing rapidly, and this could become a problem for decentralization in a few years. In any case, the coolest part of this calculation is that it means that the theoretical limits of cryptocurrencies fundamentally depend on the speed of the Internet around the world.

The Fastest Cryptocurrency: Blockchain Speed 101

According to speedtest.com, the average download speed is 100 megabytes per second and the average upload speed is 50 megabytes per second. When comparing this to Ether’s 2 kilobytes per second and Cardano’s 10 kilobytes per second, it is clear that cryptocurrencies have a lot of room to improve their speed. This begs the question, how fast is fast enough?

The Fastest Cryptocurrency: Blockchain Speed 101

Fastest cryptocurrency: number of transactions per second

The Fastest Cryptocurrency: Blockchain Speed 101

In fact, the speed benchmark in the crypto space is Visa, and that’s because there are currently about 4 billion Visa cardholders, making Visa’s payment network a good template for future cryptocurrency applications.

The Fastest Cryptocurrency: Blockchain Speed 101

While Visa self-reports 65,000 transactions per second, Visa only processes about 2,000 transactions per second on any given day.

The only cryptocurrency currently approaching this level of throughput is Solana (SOL), which can process between 50 and 65,000 transactions per second, even for smart contract transactions.

The Fastest Cryptocurrency: Blockchain Speed 101

Sam Bankman-Fried, founder of FTX and Alameda Research, has done a stress test of Solana’s scalability.

The Fastest Cryptocurrency: Blockchain Speed 101

Sam chose Solana to host FTX’s project Serum DEX.

The Fastest Cryptocurrency: Blockchain Speed 101

As you can imagine, Solana has had its fair share of network problems. This is because it had to compromise on security to have such fast speeds without running a single computer.

The Fastest Cryptocurrency: Blockchain Speed 101

When considering the fact that Solana transactions can reach 500 bytes, this also means that the Solana blockchain generates a large amount of transaction history data on a daily basis.

The Fastest Cryptocurrency: Blockchain Speed 101

Although the Solana blockchain has only existed for a little over a year, the blockchain is already over 2 TB.

The Fastest Cryptocurrency: Blockchain Speed 101

Specifically, that’s more than twice as many as the top 10 cryptocurrency blockchains combined.

The Fastest Cryptocurrency: Blockchain Speed 101

As I mentioned earlier, this is a serious threat to its decentralization. Now, Solana’s solution to this exponential growth is to outsource its data storage to a decentralized storage cryptocurrency project called Arweave (AR).

The Fastest Cryptocurrency: Blockchain Speed 101

Solana Validator keeps only the last two days of transaction data.

Fastest Cryptocurrency : Transaction Termination

The Fastest Cryptocurrency: Blockchain Speed 101

If you think Solana solves the encryption speed problem, you’re wrong. This is because transaction execution and transaction confirmation are two completely different things.

Those of you who are careful may have noticed that when a user sends cryptocurrency to an exchange, they need to wait for a certain number of confirmations before they can credit their coin or token to their account.

The Fastest Cryptocurrency: Blockchain Speed 101

A confirmation is basically the number of blocks that have been created since the user made the transaction. The first block contained in a user’s transaction is usually the first confirmation, but of course, each cryptocurrency has a different block time.

The Fastest Cryptocurrency: Blockchain Speed 101

For most exchanges, one confirmation is enough for them to credit the user’s cryptocurrency, unless the user sends ETC to Kraken, in which case the user would have to wait for 40,000 confirmations, which would take about a week.

The Fastest Cryptocurrency: Blockchain Speed 101

This is because ETC has suffered several 51% attacks in the past, essentially when the network was manipulated by miners to credit cryptocurrencies to their accounts.

The Fastest Cryptocurrency: Blockchain Speed 101

Cryptocurrency exchanges always want to make sure a transaction is final before granting credit to a user’s account, and the likelihood that a transaction is final usually increases with each confirmation.

For Bitcoin, the probability of a transaction being final after six confirmations is over 99.9%. Naturally. For less secure blockchains like ETC, this takes much longer.

The Fastest Cryptocurrency: Blockchain Speed 101

Interestingly, even though Solana’s block time is 400 milliseconds, it actually takes a little longer for transactions to end. This has to do with Solana’s carefully designed consensus mechanism.

In contrast, there are a variety of cryptocurrencies that offer instant transaction certainty. These include Algorand (ALGO), Ripple (XRP), Stellar (XLM), Cosmos (ATOM), and any blockchain that uses the Tendermint consensus mechanism.

The Fastest Cryptocurrency: Blockchain Speed 101

While all of these cryptocurrencies are slower than Solana in terms of TPS, exchanges can know with certainty that transactions from them are final at the moment they generate a block.

The Fastest Cryptocurrency: Blockchain Speed 101

This is why deposit times for all cryptocurrencies on Kraken are considered near-instantaneous, while on Coin On Solana deposits can take up to two minutes, which is not surprising since all of the cryptocurrencies just mentioned are very centralized. They only have about a dozen validator nodes to process transactions.

The Fastest Cryptocurrency: Blockchain Speed 101

While wallet-to-wallet or dApp transactions don’t always require these finality thresholds, future cryptocurrency merchants will likely use finality benchmarks similar to those used by today’s cryptocurrency exchanges.

When Speed Doesn’t Matter
There is only one category left in this crypto speed race, and that is whether transaction speed has any impact on the end user. Whether a cryptocurrency encapsulates a 10K TPS engine or a 65K TPS engine is irrelevant, and there is science to support that claim.

Decades of human factors engineering research has shown that any feedback a person receives within 0.1 seconds of interacting with a computer is considered instantaneous. If the feedback occurs within 1 second of the interaction, it is very obvious, but would not be interpreted as a delay.

The Fastest Cryptocurrency: Blockchain Speed 101

Anything longer than 10 seconds is enough to make people impatient and start doing other things while they wait.

Users may have noticed that when a user pays with a debit or credit card, it typically takes between 5 and 10 seconds to complete, even if the payment is made online.

Many cryptocurrencies have block times in this range, which would put their transaction sources on par with the average user of traditional payment systems.

The Fastest Cryptocurrency: Blockchain Speed 101

Most wallet-to-wallet cryptocurrency transactions, assuming it is not Bitcoin, Ether or ERC-20 tokens, take roughly the same amount of time.

At first glance, this may seem like a good thing, but it reveals how many cryptocurrency projects are centralized and may lack security. Bitcoin and ethereum are slow, but they are secure and decentralized.

The Fastest Cryptocurrency: Blockchain Speed 101

I think that’s why people are willing to pay such high gas fees to move their money to these networks. While Ether 2.0 will obviously increase its TPS to 100,000, what we’ve explored in this article suggests that to do so, decentralization and security will need to be sacrificed.

The Fastest Cryptocurrency: Blockchain Speed 101

As a quick recap, Ether 2.0 will offer sharding, where transaction history and balances are split between multiple blockchains called shards. For their security, these slice chains will be connected to a central blockchain called a relay chain.

The Fastest Cryptocurrency: Blockchain Speed 101

As far as I know, there are only about 128 validators per slice on Ether 2.0 at any given time. These will be chosen pseudo-randomly based on the amount of ETH they pledge.

The Fastest Cryptocurrency: Blockchain Speed 101

This is fairly decentralized compared to other high-performance blockchains, but nowhere near as decentralized as Ether in its current form.

More importantly, communication and transactions between these fractions may be limited or even non-existent to begin with.

We would end up in a scenario where Ether 2.0 essentially consists of 64 isolated blockchains that are poorly secured. This is the same problem that Kusama (KSM) and Polkadot (DOT) currently face with their parallel chain slot auctions

Conclusion
In the last year, we are seeing an increase in institutional adoption of cryptocurrencies, putting scalability in the spotlight but leaving decentralization and security in the shadows.

Cardano has the right approach in addressing scalability. Accepting the notion that cryptocurrencies are simply distributed computing systems similar to the Internet helps determine what the scalability problem really is, which makes solutions easier to find.

Anatoly Yakovenko, the founder of Solana, seems to know this very well, as evidenced by Solana’s decision to delegate its data storage. the only bottleneck for Solana seems to be data storage, a problem that can be easily solved as data storage becomes easier and more cost effective both inside and outside of cryptocurrencies.

The Fastest Cryptocurrency: Blockchain Speed 101

When combining data access with faster Internet speeds, blockchain is actually scalable, decentralized and secure. This seems to be the future we’re headed toward, but now it’s common to see things that make you wonder if we’re moving in the opposite direction.

Many of these centralized, high-performance blockchains have become prime candidates for central bank digital currencies (CBDCs), namely Algorand (ALGO) and Stellar (XLM). It appears that governments are using the same end-user approach in developing CBDC’s health passports and other edge anti-utopia technologies.

These technologies may not be very secure, and they certainly won’t be decentralized, but because they are scalable, end users may not care as long as it works for them. It’s a scary thought, but the upside is that most cryptocurrencies already have throughput comparable to the existing systems used by the average person.

What’s really missing is awareness education and a user interface for applications that don’t look like they came from inside the SpaceX shuttle. At this point, this triple problem presents a bigger problem than the triple dilemma of scalability.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-fastest-cryptocurrency-blockchain-speed-101/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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