Bitcoin Crypto Throughput

bitcoin-slide

You might have heard in news, websites, word of mouth or any other communication channel that the bitcoin transaction rate is somewhere between 3 to 7 transactions/sec.

 

If you are like me, you want to understand where this number come from or how it is calculated. So here it is. Before I get to the calculation, we need to define few terms and they are:

 

Transaction — is a transfer of bitcoin from one address to another. Example, Harinder transferring bitcoin to Jimmy inorder to buy bitcoin ebook.

 

Block — a group of transactions, marked with a timestamp and fingerprint of the previous block.

 

Block chain — is a list of validated blocks, each linked to its predecessor all the way to the genesis block.

 

If you want to remember them easily, just think of them as train, carriage & passengers.

Transactions is your passengers, carriage contain passengers (in this case it is block) and train consists of series of connected carriages (in this case it is blockchain). As shown below.

 

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Bitcoin

From the above graph we can see that the block size is getting towards 1MB and average transaction size is hovering around 505bytes. So…

 

How many transactions/block?

Formula: Transactions/block = Block size/average transaction size.

Average transactions/block = 1000000 Bytes/505 Bytes => 1980

 

What is the bitcoin throughput?

Formula: Transactions/sec = Transactions per block/ block time (in seconds)

Note: A new bitcoin block is on average discovered every 10 minutes. Therefore,

Transactions/sec = 1980/(10*60) = 1980/600 = 3.3

 

There you have it, now you know how bitcoin cryptocurrency throughput is calculated.