Almost nobody paid attention to the speed of transactions, while the popularity of cryptocurrency did not grow to such an extent that networks of the oldest and most respected projects were no longer able to cope with the flow of operations. Users had waited for confirmation of transactions for several days, while the commission value increased to an indecent size.
There were talks about the problems with scaling of cryptocurrency market leaders: their technologies, algorithms, protocols, and software solutions were not designed for a massive influx of users and the significant number of transactions.
The developers were looking for a solution. They offered different options for remedying the situation, and disputes did not come to an end within the support communities. Indeed, competitors took advantage of the situation and offered the market their products, promising unprecedented speeds, low commissions, and other improvements.
The code for the first cryptocurrency has been changed: the Segregated Witness (SegWit) technology allowed to make room for the blocks, due to the fact that a part of the transaction data is now recorded in structures outside the main Bitcoin blockchain. They are also planning to introduce another technology: Lightning Network — it will repeatedly increase the speed of the network.
Ethereum community is going to meet updates that will add support for the POS algorithm and the new network structure — sharding. POS will decrease pressure on computing equipment, while sharding will lead to an increase in the speed of work.
The latest words of Vitalik Buterin make us think that both innovations will be implemented simultaneously and shortly. The Ethereum platform is experiencing difficulties in scaling while the competitors do not allow Ethereum to rest on laurels. So, updates is a timely demand.
The Bitcoin block size is 1 megabyte. At first, this was enough. But with the increase in the number of transactions, it became insufficient. Besides, the service information of the transactions occupied a considerable part of the block's volume. Some members of the developers’ team left the project and established a new one — Bitcoin Cash. In this project the problem was solved by increasing the size: first up to 8 megabytes, and then to 32 megabytes, which supposedly is not the limit.
POW is giving up
Another major obstacle to increasing the speed of transactions is the consensus algorithm: Bitcoin and all cryptocurrencies use its code — POW (Proof of Work). Protection, support of the network structure and generation of blocks (mining) are provided by participants' computers, which compute a complex mathematical task. The longer a cryptocurrency exists, the harder to mine it. The larger the volume of the blockchain and the more computational power is needed to continue the work.
Another protocol of consensus, POS (Proof of Stake) does not require network participants to calculate mathematical problems. Instead, the process of generating new blocks is performed by nodes whose owners hold a certain amount of funds in cryptocurrency. So, the more digital coins are on the balance sheet, the higher is the probability of effective mining. The pressure on user equipment is reduced, the generation of blocks becomes more comfortable, the network operates faster. Thus, there exists a kind of dependence between the fastest cryptocurrency mining and the fastest cryptocurrency transfer.
POS is used by most new cryptocurrency projects, such as NXT. This algorithm is considered more modern, flexible and perfect.
Multilevel network and master nodes
A standard confirmation mechanism requires verifying of each transaction by all network nodes and only after that, it can be recorded in a new block. A network structure was developed to accelerate this process: ordinary participants are at the first level and perform everyday tasks. Particular nodes of a higher level (master nodes) are engaged in confirming transactions. It dramatically increases the speed of work and scalability.
DASH is one of the most famous projects which uses a multi-level network and has many followers. In the DASH project, the master nodes are used to make anonymous and fast transactions.
Down with blockchain: the combination of POW with POS and other solutions
The blockchain is a reliable and safe structure of data storage in the network, but it does not produce the highest rates regarding speed. It’s not surprising that developers of some crypto projects use other solutions, for example, a directed acyclic graph (DAG) in IOTA or a distributed database with test servers in Ripple and Stellar.
Many modern cryptocurrency projects use a complex of different mechanisms, for example, a combination of POW with POS in DASH, Emercoin and $ PAC. Sometimes projects modify known protocols, offering solutions on their basis. Waves uses an improved version of POS-POLS (Proof of Leased Stake), where ordinary members of the system lease their shares of ownership to other users. NEM operates according to the POI (Proof of Importance), where the traditional POS is added to account for the activity of the node in the confirmation of transactions and the duration of its presence in the network.
The EOS project is a cryptocurrency working with POS: it uses a POS modification called DPOS (Delegated Proof of Stake) and, according to the developers' assurances, the future performance of the system will be up to a million transactions per second, which will ensure rapid transfers of cryptocurrency. A successful ICO and high capitalization of the cryptocurrency do not allow to treat such statements with defiance.
But only time will tell whether the plans of EOS engineers to make it the fastest cryptocurrency are realistic or not. The project network moves from Ethereum platform to its own one, and when stable work resumes, we will verify the promises.
Transaction speed is a clear and distinct characteristic. Almost all overviews of cryptocurrencies contain this parameter, but its measurement is a non-trivial task.
One way is to use the data on the number of transactions for a specified period from the browser service of the blocks and calculate the average value.
So, for Bitcoin, you can get the following figures in 2018: 3.5 transactions per second on January 1; 2.28 transactions per second on March 1; 2.3 transactions per second on May 1; 2.32 transactions per second on June 1.
For Ethereum and all fast tokens created on its platform, the data will be as follows: 10.5 — January 1; 7.9 — 1 March; 8.26 — 1 May; 8.7 — 1 June.
Another way to learn the speed of transactions is to calculate it, using the block parameters and the amount of data transmitted in the cryptocurrency network. The formula which is used to calculate the transaction speed of different cryptocurrencies, usually looks like this:
The number of transactions per second = Z / (Y / X), where Z is the average amount of transactions in kilobytes; Y is the block size in kilobytes; X is the block generation time in seconds.
But the value calculated this way will be far from reality; this calculation does not take into account many problems that an ordinary user faces when operating.
For Bitcoin and other cryptocurrencies using the UTXO system (Unspent Transaction Outputs), each transaction is a combination of inputs and outputs, parts from the total amount of the sent sum of digital coins. Each specific case is a different number of parts, a different amount of data and different time for the transaction.
Network nodes must verify the authenticity of the transaction. It is recorded in a new block created by miners. There also exist some unmeasurable parameters for this process:
Usually, these parameters are the only ones to calculate the speed of transactions, but there is one more thing — the number of blocks created after the one where the transaction is recorded. This value can be established by the participants of the transaction independently, but as a rule, this figure is equal to six. It is not included in the calculations, but in real life, the transaction confirmation time increases.
Despite the difficulty in determining the real speed of transactions and identifying the fastest cryptocurrency, this parameter is significant to make cryptocurrency a full-fledged payment instrument and enter it in daily life of people. The problems faced by the pioneers of the blockchain industry may become an obstacle to the evolution of the crypto industry. Still, they will likely be another factor which will help technologies and reach new peaks.
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