Ethereum scaling to a lot more transactions

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Vitalik Buterin created Ethereum. He projects that Ethereum will have Visa scale transaction per second in a couple of years.

Currently Bitcoin is processing a bit less than 3 transactions per second and Ethereum is doing five a second. Uber gives 12 rides a second.

VISA handles on average around 2,000 transactions per second (tps), so call it a daily peak rate of 4,000 tps. It has a peak capacity of around 56,000 transactions per second, however they never actually use more than about a third of this even during peak shopping periods.

PayPal, in contrast, handled around 10 million transactions per day for an average of 115 tps in late 2014.

Let’s take 4,000 tps as starting goal. Obviously if we want Bitcoin to scale to all economic transactions worldwide, including cash, it’d be a lot higher than that, perhaps more in the region of a few hundred thousand tps. And the need to be able to withstand DoS attacks (which VISA does not have to deal with) implies we would want to scale far beyond the standard peak rates. Still, picking a target let us do some basic calculations even if it’s a little arbitrary.

Today the Bitcoin network is restricted to a sustained rate of 7 tps due to the bitcoin protocol restricting block sizes to 1MB.

Ethereum can handle about 13 transactions per second, which cuts in half to about 7 transactions per second for tokens (4.7m gas limit, 21k avg gas price for standard txn = ~220 standard txns every block, current avg block time 17s = 13 txns/sec, gas requirement roughly doubles for token transactions). And this doesn’t include more expensive smart contract execution.

By this estimate Ethereum is roughly 250x off being able to run a 10 million user app and 25,000x off being able to run Facebook on chain. And since these systems are open rather than proprietary, we’ll see applications bigger than Facebook.

Fred Ehrsam described the scaling efforts for Ethereum. He also notes that there are few people working on the projects. He thinks scaling by 100 times is achievable by the end of 2018 and could do better with more effort and funding.