Bitcoin’s 7 transactions per second limit
The basic parameters of electronic payment systems are speed, transactional capacity, security and cost.
Bitcoin is strong in one out of four, weak in two and very weak in the remainder, the transactional capacity.
The Bitcoin blockchain, due to the architectural solution adopted (Proof of Work) which favors security, has a management capacity of approximately 7 transactions per second (TPS).
At a worldwide level. It means that on this planet no more than 7 Bitcoin transactions can be executed every second.
Negligible.
Just for comparison, the Visa circuit has a capacity of almost 50,000 TPS. Paypal managed peaks of 200,000 TPS during the last Christmas period (2023). In short, another planet.
So what? Values of this type clear the field of any hypothesis of Bitcoin as a means of payment on a day-to-day basis. The topic of Bitcoin as a hoarder of value remains open, which certainly requires a much more limited transactional capacity than retail trade. 7 TPS are however few if Bitcoin were to take on even the role of a widespread investment instrument, digital gold as defined by many.
So, does the much-discussed Bitcoin run the risk of simply running aground due to this original flaw?
Transactional is an intrinsic problem of blockchain technology. Even the cadet crypto, Ether (the crypto of the Ethereum blockchain), has a native capacity of no more than double that of Bitcoin, of approximately 15 TPS. Still light years away from any hypothesis of practical adoption.
Native capacity mentioned above suggests the existence of a way to approach the problem. There are in fact derivative solutions that aim to solve the problem. They are the so-called Layer-2 blockchains, i.e. second level. The possible technological solutions are different, but essentially they are side chains that synchronize in some way and times with the main chain to guarantee its consistency.
Of course, nothing comes for free. Here too it is a question of trade-offs. You gain on one side and lose on another.
This is the case of the Bitcoin lighting network, which effectively addresses the issue of transactional capacity at the expense of security issues that are struggling to be overcome and which are delaying its adoption.
Much more effective and advanced, however, are Ethereum’s layer 2 blockchains, on which a thriving ecosystem of technological solutions is based.
The related Generative Artificial Intelligence question is posted in the dedicated gallery: Is Bitcoin’s 21 million maximum supply immutable?