Blockchain Academy
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TPS(Transaction Per Second)

TPS refers to a transaction rate of a blockchain. When buying any valuable goods, it usually takes only few seconds to one minute for a credit card company to approve the transaction; whereas in blcokchain, the approval might not be as fast as the use of a credit card, because the production rate of a block varies depending on the type of the consensus algorithm.

The reason of this is that blockchain doesn't have a central institution which intervenes and verifies the transactions such as a credit card company, but the users make decisions through consensus to verify the transactions.

Only valid transactions are being stored in the blocks, so when this creation of blocks complete, the approval of the transactions can be processed. (Yet this is not the end, because the confirmation time varies on the blockchains.)

TPS is calculated depending on the how many transactions can be stored in one block and when the block is created.

The following image helps understanding the blockchain

It is known that the size of one block in Bitcoin is 1MB and it has a capacity for approximately 4000 transactions and it takes about 10 minutes (600 seconds) to create one block.

Dividing 4,000 transactions by 600 seconds, the transaction per second in Bitcoin would be six to seven cases. To compare this to the credit cards, which TPS is about 2~30,000 cases, it is too slow to be practical. Also, in Bitcoin a block needs to have six creation cycles in order to make a transaction 'approved'. The sender can see the money being transferred after this approval. If a transaction were made in a drugstore with Bitcoin, it would take at least 60 minutes; the block creation time takes 10 minutes and it has to happen 6 times for approval.

Yet, it doesn't simply mean the higher TPS the faster approval. Even with TPS of 10,000, it could still have a low efficiency when the creation of a block takes long time.

The number of requisite blocks for approval varies on each blockchain and also affects the transaction time, because an unapproved transaction can't change the balance in the account. Many of the blockchain developers currently work on expanding the efficiency of the transaction process for more practical use.