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Transactions Per Second (TPS)

Transactions Per Second (TPS) in the context of cryptocurrency and blockchain technology refers to the maximum number of transactions a particular blockchain network can process each second. This metric is key to understanding a network’s capability in handling transaction load and is a crucial factor in evaluating the scalability and efficiency of a blockchain. TPS is determined by several factors including the block time (the time required to create a new block in the blockchain), block size (the amount of transaction data a block can store), and average transaction size.

For instance, Bitcoin, with a block time of 10 minutes and a block size of 1 MB, has a TPS of around 5 to 7, while Ethereum, with faster block times and a slightly larger block size, handles about double that number. Higher TPS rates are often found in centralized systems such as PayPal and Visa, but achieving high TPS in decentralized blockchain networks poses unique challenges. This is because increasing TPS in a decentralized network often requires a trade-off with other critical features like security and decentralization.

A blockchain with a high TPS might have achieved this by sacrificing decentralization, which is a fundamental characteristic of blockchain technology. Therefore, while TPS is an important measure of a blockchain’s performance, it should be considered alongside other factors such as decentralization and security to fully assess the effectiveness and reliability of a blockchain network.

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