Faster Transactions by Blockchain Technology, Challenges, and Opportunities

Last Modified:12 May 2020 11:36:03
Faster Transactions by Blockchain Technology, Challenges, and Opportunities

It is usual in transaction processing to have an intermediary undertaking the responsibility of investigating and authorizing payments. In spite of being a necessary step in proving the appropriateness of financial procedures, it entails taking some time which can be much more, about five days, when it comes to international transactions.

Blockchain technology, however, can help remove some of the problems the businessmen and investors suffer from. The main features of Blockchain technology like owning a decentralized, digital distributed ledger technology remove the necessity of any intermediary which results in quicker transaction processing and lower fees.

Its multi-dimensional aspect intrigues other businesses such as insurance companies to utilize it too. The major reason is giving more transparency to the transactions no matter what they are. On the other hand, what has been pointed out about the uses of cryptocurrency doesn’t mean total removal of institutions like banks.

According to LBX, a cryptocurrency exchange in the UK, Visa had the highest record of the number of transactions per second by 24000 (considering the fact that it has had about 6 decades to improve its infrastructures in the field of cryptocurrencies) and the second place was for Ripple with a very sharp gap compared to the first; with the number of transactions amounting to one-sixteenth of what Visa shows. The lowest level, however, is for Bitcoin with 7 transactions per second.

Regarding Blockchain-based cryptocurrency networks, Ripple has the highest speed. Some other cryptocurrencies placed below Ripple are: Bitcoin Cash, with 60 transactions per second and showing a performance about one-third of the second rank cryptocurrency in this hierarchy; i.e. PayPal; Litecoin, having less significant difference with its upper-level rival (56 transactions per second), Dash and Ethereum with fewer numbers of transactions and lower ranks respectively.

In case the number of transactions increases there will not be any difference in the speed; it might be balanced through raising the fees. What can influence the speed of a transaction is again related to the fees. Transactions which are paid for more by the user will become the priority of the miners, so they will be the fastest ones accordingly. The other would be the cryptocurrency popularity; the more popular the currency is, the more time is needed for each transaction due to pressures on the network.

On the other hand, to be competitive enough in order to sustain in this volatile market needs reaching acceptable speed. One method used to speed up the transaction is applying a soft fork to make more room for processing the transaction. The other is Lightning network which allows the simultaneous occurrence of macro- and microtransactions thanks to handling transaction affairs offline. The second alternative started in January 2018, and some other new methods might be created to accelerate the speed of transactions on Blockchain platform from now on.