In the current modern financial system, customers are tired of long waiting and payment validation time. Usually, with traditional bank systems, and, depending on the country, it would take around 2–3 days or sometimes even more to process a request. Users have to bear excessive transaction costs everyday in order to fulfill their financial engagement or pay for the everyday necessities.
Therefore, the introduction of Blockchain technology, also known as distributed ledger technology is a major step forward to revolutionize the banking industry while solving underlying drawbacks of existing solutions.
As blockchain transactions can be validated 24/7 without the action of any 3rd party sites or services, customers don’t have to pay exorbitant transaction fees each time they wish to perform an operation. But despite all the innovative aspect of this technology, it still comes with defects inherent in the implementation of new banking systems.
In the case of crypto currencies, the speed and time of transactions are defined by the acronym ‘TPS’ (transactions per second) and are still factors to be greatly improved in this sector for the general adoption of these systems. Even though most of the blockchain transactions are processed from seconds to minutes or sometimes even hours (depending on the currency and network used as well as the network status at time T) ,most of existing projects can’t cope up with the speed associated with Visa, Master Card or even Paypal systems. However, these solutions are still faster than traditional bank transfer which can sometimes take up to 7 days before being processed.
For example, Paypal processes almost 193 transactions per second while Visa processes around 20,000+ transactions for the same timeframe. To understand the objectives associated with the improvement of transaction speed, we will refer to two well-known and globally used crypto currencies, namely Bitcoin and Ethereum, both of which offer fundamentally very different systems based on blockchain technology.
A majority of coins are claiming theoretical transactions per second (ttps) which doesn’t represent the reality. It is then essential to understand the fundamental differences between these different notions.
- Average transaction speed —> What the coin is currently handling on average.
- Actual transaction speed —> What the coin can handle per current mathematical calculations.
- Theoretical Transaction Speed —> What the coin will handle when the stars align.
- Claimed Actual Transaction Speed —> What the coin can handle as claimed by the development team without any evidence or network volume.
Bitcoin Scalability Problem
In a technical speech, the bitcoin scalability problem is a reference concerning the limits on the amount of transactions the bitcoin network can process. It is related to the fact that records (known as blocks) in the bitcoin blockchain are limited in size and frequency by the specifications defined at start. With an average block creation time of 10 minutes and a block size limit of 1 megabyte, the bitcoin network struggles to offer high transaction speed on its network to satisfy all the community.
The maximum transaction processing capacity estimated using an average or median transaction size is between 3.3 and 7 transactions per second and far from what traditional companies such as Visa can offer (Original theoretical amount was averaged to 27 transactions per second). Thus, the block size limit has created a bottleneck in Bitcoin, resulting in increasing transaction fees and delayed processing of transactions that cannot be fit into a block. Normally, when the network is stable, you can expect to pay a fee of around $1. But when the network gets very busy, the fees go up drastically. This problem has been largely encountered by the community in December 2017 when several sources shown an average transaction fee of $28 during this period.
This volatility in transaction time makes it difficult for Bitcoin to be used as a payment mechanism for general adoption. Alternative cryptocurrencies, like Ethereum and few others, have on average much quicker transaction times and lower fees with a better long-term scalability, a factor that wasn’t taken into consideration in the Bitcoin Whitepaper , introduced by Satoshi Nakamoto.
ZBUX Token on Ethereum vs Libra
As we previously introduced in our last article about blockchain types, there is a major difference between permissionless and permissioned in terms of scalability possibilities.
At the opposite of Libra, in Ethereum, everybody is more or less equal in the ecosystem. Nothing stops a user from buying a powerful machine and joining the network as a miner, earning mining fees and participating in the execution of the smart contracts. There are no parties which are more privileged than others and no permission system to control the entire network.
However, Ethereum does not scale with its current implementation. The arrival of decentralized applications (Dapps) congested the ETH network for few days (the best example is Cryptokitties ,a game built on Ethereum ecosystem) and brought the network to its knees in late 2017.
Ethereum still remains faster than Bitcoin in the execution of around 20 transactions per second. But this solution isn’t scalable for the long-run or to respond to global adoption. In order to solve that problem, the Ethereum team shared the “Sharding” feature . Traditionally, there has been a requirement for each node to carry all data on the blockchain. With Sharding they slip blockchain state into a number of group meaning that each node only has to carry a small amount of data in order to complete a transaction and each Sharding chain is a separate blockchain that contains separated accounts, state, transactions. Despite this limitation, ETH still remain a huge competitor for scalability solutions in the crypto field.
Zbux based on the Ethereum network benefits from the possibilities associated. In short, Zbux , in its current status , allows to send tokens easily through ETH network in a few seconds or minutes at maximum.
Libra, at least initially, will be quite different. There will be a selected group of about 100 founding members (validators) on the network. These members will have to be trusted, and only they will be allowed to confirm new transactions ( Permissioned System).
Libra system doesn’t fit with the decentralization vision. As the control over the network is spread among a hundred organizations (the chosen validators) and not a single one, we can define Libra as partially decentralized. With a permissioned and closed model, Libra doesn’t give full decentralization and openness like Ethereum, but on the other gives higher transaction throughput and lower fees (1000 TPS as announced by the firm).
One can then wonder what the best choice for the execution of transactions is:
A blockchain private and controlled by a group of individuals offering greater transaction capacity to the detriment of the fully decentralized aspect of the blockchain or an open blockchain, fully decentralized, offering less opportunities but still in perpetual development?
Do we, users and everyday customers of banking systems, have to leave our financial freedom in the hands of an entity like Facebook, totally neglecting what the blockchain was introduced for?
The evolution of banking systems towards the blockchain is an interesting long-term solution to put in place, offering lower costs and lower processing times for all parties compared to the modern banking system. But, blockchain, like any other technology, needs time to get established, improve and be adopted by the whole world and its implementation among the general public should not be controlled by a controversial entity like Facebook Corporation. , who sees only the financial interests and not the social and human interests in the long run.