In the context of blockchains, transactions per second (TPS) refers to the number of transactions that a network is capable of processing each second. The approximate average TPS of the Bitcoin blockchain is about 5 – though this may vary at times. Ethereum in contrast, can handle roughly double that amount. The development of technologies that increase the transaction rate of blockchains has been an important area of research over the years. These decentralized networks pose completely new challenges in terms of their ability to scale for increased demand. This challenge isn’t purely about increasing TPS.
Centralized databases are already capable of handling thousands of transactions each second. VISA, for example, handles around 1,500-2000 transactions each second. So why not just use these solutions? Well, the main problem is that Bitcoin, Ethereum, and other blockchains aim to compete with that while still maintaining a high degree of decentralization. Decentralization comes at the cost of performance and security. So, these scalability solutions not only need to increase the performance of the network but, at the same time, also maintain all the other desirable properties of blockchain. Otherwise, blockchain isn’t really anything more than an inefficient database.
