In the world of blockchain technology, there is a term known as throughput.

Throughput measures how many actions are completed in a given period.

So, to better understand the meaning of throughput in blockchain technology, see the full review below.

What Is Throughput?

You need to know that blockchain is a technology that allows sending and storing data in a decentralized and encrypted manner so that it is safe, transparent, and cannot be changed or manipulated.

This blockchain technology can be used in various applications, including in crypto assets such as Bitcoin, fundraising platforms such as ICO (Initial Coin Offering), and various types of distributed data management systems.

In general, a blockchain is a decentralized computer network consisting of many connected nodes or computers.

Every time a transaction occurs on the blockchain network, the transaction will be recorded in a block that is interconnected with the previous blocks, forming a chain (blockchain).

Strong cryptographic encryption protects each of these blocks, making it very difficult to manipulate or change.

Understanding throughput on the blockchain is important because it can help understand the performance limitations of blockchain networks.

On the blockchain, throughput is the network’s ability to process several transactions in a certain amount of time.

In this context, throughput can be measured as the number of transactions per second or minute.

Understanding throughput on the blockchain is important because it can help estimate the costs required to process transactions on the blockchain network.

Transaction fees on the blockchain are determined by supply and demand. That way, the higher the demand for transactions on the blockchain network, the higher the costs must be incurred to process the transaction.

Besides that, understanding the blockchain’s throughput can also help choose the right type of blockchain for certain needs.

For example, a blockchain with high throughput will be the right choice if an application requires the ability to process many transactions quickly.

Understanding throughput in the ever-evolving blockchain industry can also help develop and improve blockchain networks’ performance.

In this regard, developers can use the latest technology and improve the consensus process to increase throughput on the blockchain network.

Definition of Throughput on Blockchain

The definition of throughput on the blockchain is a transaction that refers to the level of how fast the blockchain processes transactions.

Typically, transaction speed is expressed in units of transaction time per second (TPS), although it can also be expressed in minutes (TPM) or hours (TPH).

The blockchain platform’s consensus mechanism determines the decentralized protocol’s transaction throughput.

For example, proof-of-work (PoW) blockchains like Bitcoin have lower throughput than proof-of-stake (PoS) networks like Cardano.

The difference in throughput on the blockchain with conventional systems lies in how transactions are processed and data validation.

In this case, transactions in conventional systems are carried out through a centralized process, which means that a central entity will be responsible for processing transactions and verifying their validity.

The number of transactions that can be processed at one time will be limited because this process is centralized.

On the other hand, transactions on the blockchain are decentralized, with each node on the blockchain network processing and verifying transactions.

Each node on the blockchain has a copy of the same database, called a “ledger.”

Every time there is a new transaction, each node must validate the transaction using a mutually agreed upon consensus algorithm.

The validation process requires time and costs, so the number of transactions that can be processed at one time on the blockchain will be limited.

Furthermore, the throughput of conventional systems has an advantage in process centralization, which allows for processing more transactions.

Meanwhile, on the blockchain, throughput has advantages in terms of security and reliability.

This is because the validation and verification processes are carried out decentralized, making it more difficult to manipulate data on the blockchain.

In addition, the blockchain is more open and transparent because every transaction is recorded in a ledger that anyone can access.

So, what are the factors that affect throughput on the blockchain? The following is an explanation:

1. Block Size

The block size on the blockchain will limit the number of transactions that can be processed at one time.

In this case, the bigger the block size, the more transactions can be processed in one block and the higher the throughput on the blockchain network.

2. Consensus Algorithm

Throughput can also be affected by the consensus algorithm used in the blockchain network.

Some consensus algorithms have higher transaction processing speeds than others.

It can also increase the throughput of the blockchain network.

3. Number of Nodes

In addition, throughput will also be affected by the number of nodes in the blockchain network.

In this case, the more nodes connected to the network, the more resources available to process transactions and the higher the throughput on the blockchain network.

4. Network Capacity

Throughput is also affected by network capacity on the blockchain.

In this case, the limited network capacity will also limit the network’s throughput.

5. Difficulty Level

Then, throughput is also affected by the degree of difficulty validating blocks on the blockchain.

In this case, the higher the difficulty level, the longer it takes to validate the block and the lower the throughput on the blockchain network.

6. Blockchain Types

Throughput will also be affected by the type of blockchain used.

For example, Bitcoin-based blockchains have lower throughput than Ethereum-based blockchains due to smaller block sizes and differences in their consensus algorithms.

7. Scale of Use

Lastly, throughput can also be affected by the number of users on the blockchain network.

In this case, the more users that use the network, the more transactions must be processed and the lower the throughput on the blockchain network.

Blockchain Working Mechanism

Blockchain is a transaction recording system that utilizes encryption technology to protect data and maintain security in the transaction process.

In practice, blockchain is used in various applications, ranging from finance, manufacturing, and logistics to digital identity.

The use of blockchain aims to ensure that transactions are carried out safely, reliably, and decentralized.

The working mechanism of the blockchain ensures that every transaction on this network will be verified and approved by multiple parties before being permanently added to the blockchain.

In addition, this system is decentralized and complicated to manipulate/change.

This is because each block in the blockchain is linked to the previous block, and the entire network must approve any changes to the blockchain.

In general, here are the working mechanisms of the blockchain that you need to know, namely:

1. Transaction is made

First, a transaction is created by the user/application, then sent to the blockchain network for further processing.

2. Transaction verification

The second stage is transaction verification. In this case, each node on the blockchain network will verify transactions using the public and private keys of the users involved.

3. Block Making

If the transaction has been verified, then the nodes on the blockchain network will collect the verified transactions in a new block.

4. Consensus

Next, a consensus algorithm will be implemented in the blockchain network to ensure that the transactions in the new block are valid and do not conflict with other transactions in the blockchain.

5. Added blocks

Once a new block is verified and approved by most nodes on the network, it will be permanently added to the blockchain.

6. Synchronization

As for each node on the blockchain network, it will update its copy of the blockchain to reflect the addition of that new block.

7. Rewards

In some types of blockchain, nodes that successfully add new blocks will get rewards in the form of certain cryptos/tokens.

This reward is an incentive because the node has maintained network security.

The role of throughput in the mechanism of blockchain work is very important because it determines the number of transactions that can be processed at one time on the blockchain network.

As is well known, every transaction on the blockchain requires time and resources to be verified and processed by nodes on the network.

In this case, the more transactions are made, the more resources are needed to process them.

If the number of transactions made is within the network processing capacity, there will be delays in completing transactions, and even backlogs can occur.

Therefore, throughput on the blockchain is crucial to ensure adequate availability and transaction speed.

The higher the throughput on the blockchain, the more transactions can be processed once and the smoother and faster the network can process transactions.

Therefore, in the overall working mechanism of the blockchain, throughput is very important to ensure the smoothness and speed of processing transactions on the network.

Related to that, a good increase in throughput will make the blockchain more efficient and able to process more transactions quickly and safely.

Solutions to Increase Throughput on Blockchain

The following are several throughput constraints on the blockchain that need to be known, namely:

1. Network Capacity

The first obstacle lies in the network capacity. This happens because the blockchain has limited capacity regarding transaction processing on its network.

Related to that, the more transactions that are made, the more difficult it will be to process them quickly.

2. Consensus Algorithm

The consensus algorithm on the blockchain requires time and resources to verify transactions and add new blocks.

Here, the more complicated the consensus algorithm, the more difficult it is to process transactions quickly on the blockchain network.

3. Scalability

Scalability is the ability of a blockchain network to process transactions of increasing size over time.

Several blockchains are constrained by scalability, which can limit throughput on their network.

4. Transaction Fees

Throughput on the network is also constrained by transaction fees on the blockchain.

If transaction costs are too high, users may be reluctant to make network transactions, limiting the number of transactions and throughput on the network.

5. Block Size

The block size on the blockchain can also affect the number of transactions that can be processed at one time.

If the block size is smaller, the number of transactions that can be processed will be limited.

However, if the block size is too large, it will take longer to process a new block.

6. Availability of Nodes

The availability of nodes on the blockchain network will also affect throughput on the network.

The more nodes available, the more transactions that can be processed and the faster the network can process transactions.

Meanwhile, to increase throughput on the blockchain, solutions that can be implemented so that the blockchain network can process more transactions quickly and efficiently are as follows:

• Sharding

The sharding technology allows a blockchain network to be divided into several functionally independent shards.

Thus, transactions can be processed separately on each shard.

With sharding technology, blockchain networks are able to increase transaction processing capacity significantly.

• Layer 2 Solutions

Layer 2 solutions will help make transactions able to be processed outside the main blockchain network by using side networks that are connected to the main network.

For example, Lightning Network on the Bitcoin blockchain or Plasma on the Ethereum network.

The technology can increase network capacity and reduce transaction costs on the main network.

• Proof-of-Stake (PoS)

PoS is an alternative to the proof-of-work (PoW) consensus algorithm commonly used in today’s blockchains.

In Proof of Stake (PoS), transaction validation is carried out by validators who are randomly selected according to the number of coins they have, not through solving mathematical problems as in PoW.

Using PoS, the time and resources needed to process transactions can be reduced to increase throughput on the network.

• Consensus Algorithm Optimization

Consensus algorithms that are too complex/take a long time to process transactions have constrained throughput for several blockchains.

Related to that, the blockchain network can increase its processing capacity and throughput significantly if the consensus algorithm is optimized.

• Block Size Adjustment

Adjusting the block size according to the needs and capacity of the network will allow the blockchain network to increase throughput and process more transactions at once.

• Availability of Nodes

Another solution is to increase the number of nodes and ensure the availability of sufficient nodes.

Thus, the blockchain network will be able to increase throughput and process more transactions at one time.

Following are some examples of solutions implemented to increase throughput on the blockchain, namely:

• Ethereum 2.0

Ethereum 2.0 is a renewal of the Ethereum network that is carried out by introducing the concepts of Proof-of-Stake (PoS), sharding, and eWASM.

Ethereum 2.0, which leverages PoS and sharding ing, can increase throughput and reduce transaction costs on the network.

• Lightning Network

Lightning Network is a layer two solution developed to increase throughput on the Bitcoin network.

The Lightning Network allows users to make transactions outside the main Bitcoin network, increasing throughput and reducing transaction costs.

• Binance Smart Chains

Binance Smart Chain (BSC) is a new blockchain developed by Binance.

The goal is to increase throughput and speed up transaction processing.

BSC utilizes a Proof-of-Stake (PoS) consensus algorithm and has a larger block size than other blockchains.

• Cosmos

Cosmos is a blockchain platform that enables interoperability between different blockchains.

Using Cosmos, transactions can be processed separately on each blockchain and integrated into the Cosmos network.

Thus, it can increase throughput and speed up the transaction process.

Comparison of Throughput between Blockchain and Conventional Systems

The comparison of throughput on the blockchain with conventional systems can be seen from the types of conventional systems being compared.

Blockchains generally have slower throughput than conventional systems such as online payments and credit card network systems.

The reason, among others, is the factor of the consensus mechanism used in the blockchain and security that takes precedence in the blockchain network.

Conventional systems generally have high transaction speeds and can process thousands of transactions per second.

Meanwhile, on a blockchain like Bitcoin, the system can only process 7 to 10 transactions per 1 second.

On the other hand, here are the advantages and disadvantages of blockchain in terms of throughput that need to be known, namely:

1. Advantages

• Transparency: Blockchain keeps all transactions on the network publicly accessible. Thus, all transactions made will be more transparent and can be tracked by anyone.
• Decentralization: Blockchain has no central authority/party that controls the network. That way, there is no risk of data fraud/manipulation. This is because all participants in the network have the same role in validating transactions.
• Security: Transactions on the blockchain are protected by complex cryptography and consensus mechanisms on the network. Thus, transactions on the blockchain are more secure than with conventional systems.
• Cost Reduction: Minimizing the role of intermediaries such as banks/financial institutions results in reduced transaction costs on the blockchain.

2. Disadvantages

• Limited Capacity: This is due to the decentralized nature of the blockchain and its complex security. As a result, makes throughput on the blockchain network slower than conventional systems.
• High Transaction Fees: Transaction fees on a blockchain network can be high if there is an increase in transaction requests that exceed the capacity of the network.
• Complexity: Blockchain is a complex technology that requires special understanding to operate. This can make the process of using blockchain difficult and limit the adoption of the technology by the general public.

High Throughput Blockchain Use Cases

The use cases of high throughput blockchains can be seen in the following examples, namely:

1. Payment system

Several payment platforms, including Ripple and Stellar, use high-throughput blockchains.

Both of them utilize consensus technology that is more efficient, for example, consensus by vote and federated Byzantine agreement (FBA), which are able to process transactions quickly and minimize transaction costs.

2. Digital market

Blockchain is also used by digital marketplaces such as OpenBazaar, OpenSea, and SuperRare in order to provide a transparent and secure platform for users to transact buying and selling digital goods.

In addition, blockchain with high throughput has several advantages and disadvantages.

The advantages of using blockchain with high throughput are as follows:

• Increase the scale of use

Blockchain with high throughput can handle larger transactions to accommodate more users and applications.

• Reduce transaction costs

In blockchain systems with high throughput, transaction costs can be reduced by leveraging more efficient consensus technologies/by reducing network load.

• Increase transaction speed

In blockchain systems with high throughput, transactions can be processed much faster.

It also allows users to obtain faster transaction confirmations.

However, high-throughput blockchains also have several drawbacks, including:

• Technical challenges

Developing a high-throughput blockchain system requires more sophisticated consensus technology and higher costs.

Not only that, the use of new technology can provide a higher security risk.

• Scalability issues

Scalability issues still lurk, although sharding technology or state channels can help increase throughput.

This also needs to be addressed so that the blockchain can handle more transactions.

• Regulatory challenges

In many cases, the use of high-throughput blockchains can present challenges from a regulatory perspective, particularly regarding user security and privacy.

Conclusion

In conclusion, the notion of throughput is a transaction that refers to the rate at which the blockchain processes transactions.

Typically, transaction speed is expressed in units of transaction time per second (TPS), although it can also be expressed in minutes (TPM) or hours (TPH).

Understanding throughput on the blockchain is important because it can help understand the performance limitations of blockchain networks.

Then, understanding throughput on the blockchain is important because it can help estimate the costs required to process transactions on the blockchain network.

Besides that, understanding the blockchain’s throughput can also help choose the right type of blockchain for certain needs.

The implications of using throughput on blockchain in the future can be seen from the following, namely:

• Increasing blockchain adoption
• Increased efficiency and productivity
• Technological innovation
• Blockchain use in the public sector

The increase in throughput on the blockchain will enable the public sector to utilize blockchain technology for applications that require high capacity and throughput.

For example, for procuring goods and services, tracking public assets, and digital identity systems.