Transactions Per Second (TPS) refers to the number of transactions that a blockchain can process and finalize in a second.
Low TPS Was A Major Challenge
TPS had been a bottleneck to blockchain scalability for a very long time. This was mostly because the blockchains which were truly decentralized had to go through an arduous transaction verification process that took a lot of time. Bitcoin which still follows this process can only finalize 6 to 7 transactions per second.
However, the number of people willing to transact on these “safe and secure” top blockchains has always been increasing. This caused the transaction costs to skyrocket as transactions are auctioned to the highest gas payers on most blockchains.
Why Do Some Blockchains Have Very High TPS?
However, layer-2 chains and many chains claim TPS of even 100k transactions per second. They are able to do so by reducing the number of validators to a handful. These chains are scalable but have a very large risk of security breaches. One such incident in the Ronin chain led to a loss of $625 million. Ronin had just 6 to 7 validators.
However large blockchains cannot do this as it will expose them to various threats.
The Blockchain Trilemma
The Blockchain Trilemma was a challenge that prevented large blockchains like Ethereum from having a high TPS.
It was considered to be a trade-off where you could only choose two among the three: SCALABILITY, SECURITY, and DECENTRALIZATION.
- If the blockchain was secure, then it had to be decentralized and have a high number of independent nodes. This reduced scalability since it took a long time to verify transactions by passing them through a majority of nodes.
- If the blockchain was highly scalable and yet secure, it had to compromise on decentralization because such a vast network would hinder speed.
- If it was scalable as well as decentralized, then it had to simplify its transaction verification process which then made it less secure.
The Solution
Both Bitcoin and Ethereum which were the most affected by low TPS speeds used the following methods to increase their network speeds.
Layer-2
The following are the Layer-2 solutions from Bitcoin (Lightning Network) and Ethereum (ZK and OP Rollups).
Lightning Network
The lightning network is a Bitcoin scaling solution that provides a cheap and efficient way to transact on Bitcoin.
Zero Knowledge Rollups
ZK Rollups or Zero Knowledge rollups are blockchain scaling solutions that process transactions in batches (and not individually) and only retain the summary of these batches. As a result, they are faster as well as cheaper.
To make them secure, these rollups rely on Ethereum to execute and finalize the transactions.
Optimistic Rollups
Optimistic Rollups or OP Rollups too generate transactions in batches. However, unlike ZK rollups, Optimistic rollups use blank spaces in Ethereum blocks called “Call Data” to store these individual transactions. These are typically faster than ZK Rollups.
A drawback of these rollups is that they are a bit more expensive to process than ZK Rollups.
The Dencun Upgrade and The Surge
Dencun Upgrade
The Dencun Upgrade was an important step in Ethereum to process blockchain transactions faster, cheaper, yet more securely.
The upgrade introduced the concept of “blobs” in Ethereum which were temporary spaces that stored individual transactions from large transaction generators such as rollups and DeFi protocols.
Earlier, these protocols were used to process the summary of transactions as a single ordinary transaction. However, with the introduction of blobs, they got an even cheaper way to add summaries to Ethereum.
As a result, there was more gas available for ordinary users and this caused the gas prices to cool down by as much as 99%.
The Surge
The Surge is a series of upgrades that seeks to increase Ethereum’s speed from 15 TPS to 100k TPS though a process called Sharding.
Sharding refers to the plan of dividing Ethereum’s consensus mechanism (the entire 1 million odd validators) into smaller teams and making each of them able to add blocks to the blockchain independently. As a result, the number of blocks created per second would go up by a factor equal to the number of teams. These smaller units would be called “Shards“.
The Dencun Upgrade is a temporary solution that would help Ethereum scale till the Sharding Upgrade is implemented. It is therefore known as Proto-Dank Sharding after two researchers Protolambda and Dankrad Feist developed this solution.
