When it comes to transactions per second (TPS), there is always a heated debate about what payment method is best. Bitcoin has one of the lowest TPS out of every payment method known to man, while Visa is touted as the best with a potential to scale up to around 40,000 TPS.
Due to the fact blockchain is peer-to-peer (P2P), it hinders the ability to process a large amount of TPS. However, it appears as if a team from Australia have come up with a competitor to Visa. Australia’s national science agency (CSIRO) has teamed up with Sydney University to create a blockchain payment system. During the testing phase using Amazon cloud, it has hit more than 30,000 TPS. This is a groundbreaking achievement, as it means there are methods of speeding up blockchain payment systems and competing with the likes of Visa.
It’s Not All About Speed – Think About Cost!
Sure, being able to process 1 million TPS would be amazing, but the power required to reach such levels arguably wouldn’t be cost effective. Visa can afford to run at its alleged 40,000 TPS due to the large fees it charges per transaction. While these fees aren’t advertised, they are charged to vendors for handling their payment. In fact, due to this, many vendors simply won’t accept payments under $10, because the margin would eat up most of their profits. Doing this is technically illegal, as it goes against stringent Visa and MasterCard rules.
Banks Are Just as Bad
Even if you’re not making a purchase with your Visa card and are simply sending money to your friend, banks still charge you a fortune to help pay for their ability to process a large volume of TPS. Banks frequently charge up to 10% of transaction value for international transfers, these transfers can often take weeks to clear. To put that into perspective, two weeks ago someone transferred $193 million worth of Bitcoin and it only cost them $0.65 – this would have cost around $3900 using a bank, almost 6000 times more expensive. Despite Bitcoin’s slow TPS volume, this transaction only took around 10 minutes to be processed and verified – which is still quicker than a $193 million transfer would have taken anyway due to fraud checks.
CSIRO and the University of Sydney have reported another project that managed to hit 600,000 TPS, but this was on a closed network from a single locality, meaning no latency or other barriers to speed. The group is continuing to improve its technology in a bid to make blockchain payments faster and cheaper than traditional fiat methods – so watch out Visa.