Understanding how blockchain speed contributes to the global fintech ecosystem

During the last few years, blockchain technology has experienced an increasing adoption by individuals, institutions, and companies as a financial tool. Among the main highlights impacting this are the recent approvals of Bitcoin and Ethereum ETFs. Various industries, such as ecommerce, SaaS, and even online gaming have begun to embrace cryptocurrencies as an alternative payment solution.

Despite these obvious tendencies, many companies are still hesitant to adopt crypto payments for their customers, following the common stereotype about the slow speed of blockchain compared to the popular bank-based payment systems like Visa or MasterCard. However, blockchain as technology has long evolved and grown its capabilities, while fintech companies have developed solutions that effectively ensure the same user experience as in the legacy payment systems.

In this article, we will explore these solutions and uncover all crucial technical aspects affecting the speed of crypto transactions.

Blockchain transaction speed compared to card payments

When you shop online and reach the checkout, you expect your card payment to be processed within seconds, and your order to be placed right after that. Similarly, crypto transactions must also be processed and confirmed, which is done by a blockchain network. However, the confirmation speed varies greatly depending on the network used. 

For example, Bitcoin, the first and the most well-known cryptocurrency, is considered slow nowadays, taking about 10 minutes for the first confirmation and up to 1-1.5 hours for full settlement. It goes in stark contrast with systems like Visa or Mastercard that handle thousands of card transactions every second.

However, blockchain technology has made a huge technological leap forward since the first blockchain and cryptocurrency (Bitcoin was launched in 2009). Modern blockchain networks have successfully addressed the issue of the slow speed, making them more competitive in comparison with traditional payment systems.

According to Coingecko, here are the top-5 blockchains in terms of real TPS, as recorded on May 15, 2024:

1. Solana: over 1,000 transactions per second (TPS);
2. Sui: 850 TPS; 
3. BNB Chain: 378 TPS;
4. Polygon: 190 TPS;
5. TON: 175 TPS.

These stats are for daily average TPS, i.e. they show the actual number of transactions processed, not the largest possible processing rate. For example, Solana has a projected speed of 65,000 TPS, which is several times higher than Visa. Thus, not only have blockchains managed to provide a decentralized alternative to centralized financial systems, they also resolved the “speed problem.”

Is TPS a fair metric for measuring the blockchain speed?

Historically, the processing rate of blockchains has been measured using a metric called Transactions per Second (TPS), calculated using the following formula:

(Block Size / Transaction Size) / Block Time = Transactions Per Second (TPS)

However, there is a growing concern within the professional crypto community about the accuracy and relevance of TPS as a measure of blockchain speed. The criticism can be summarized in two key points:

1. Complexity of on-chain transactions. One transaction in modern blockchains often may go beyond a simple transfer between two accounts. Instead, it can trigger multiple on-chain transactions. This is particularly true for networks with the use of smart contracts that allow to set a complex logic for applications and services that use blockchain, such as DeFi.
2. Incorrect perception. TPS does not reflect the actual speed at which a transaction is processed and settled. When you pay with a card, you don’t think about the underlying processes after you confirm the expense from your balance. Similarly, TPS might not cover the entire process after a blockchain transaction is submitted until it is finally recorded in the blockchain’s ledger.

One alternative metric to TPS that has gained traction is Time to Finality (TTF). TTF counts the time starting from initiating a transfer to its confirmation by the blockchain. This ensures a more practical and meaningful measure of the actual speed of crypto transactions with an emphasis on user experience.

Time to Finality (TTF): why blockchains are much faster than banks

Seasoned crypto users may be familiar with the concept of waiting for incoming funds to appear in their wallet only after a certain number of block confirmations. 

This happens because, after a user initiates a transaction by approving the deduction from his wallet address, this transaction is sent for a confirmation to a blockchain. In other words, it is added to a next block, a basic unit of data carrying encrypted information about all new transactions in blockchain networks, produced in relatively equal intervals. But even after that, a transaction needs to pass through several concurrent blocks to become irreversible and immutably written in the network’s database. In other words, it needs some time to be finalized. This is exactly what TTF tracks.

Let’s get back to the example of making an online purchase with a card. After entering your billing details and confirming the purchase, the transaction appears successful on your screen. However, this doesn’t mean the funds have been immediately transferred to the merchant’s bank account. In reality, the payment process involves several steps: the system checks your balance, places a hold on the required amount, and communicates with various intermediaries until it reaches the merchant’s bank. When all the checks are done, and all parties confirm a transaction, funds get transferred. The entire process can take 1-3 business days.

Although this happens behind the scenes, users perceive the payment as nearly instant. Similarly, cryptocurrency payments involve a complex series of checks before they are considered final. However, blockchains streamlined this process to become able to finalize transactions more rapidly than traditional payment systems. For example, while Visa payments take 1 to 3 days to “finalize,” Bitcoin transactions can be confirmed in only about 1 hour.  Newer blockchain networks are able to achieve finality in mere seconds. Turns out, blockchains are actually faster in settling payments than digital systems based on the bank infrastructure.  

A concept of finality is nothing new: financial companies that handle payments in fiat currencies also use a similar metric for their operations. Of course, finality is not the only aspect affecting the speed of crypto transactions. Other factors include the network’s workload, latency, and consensus algorithm used by the networks. Nevertheless, blockchain developers have been working on achieving the faster finality, as it is regarded as the primary metric for cryptocurrency transactions.

TTF varies from one network to another. For example, Bitcoin typically requires 6 block confirmations for finality, with each new block taking about 10 minutes to be generated. This means the TTF for Bitcoin is around 1 hour. In contrast, the BNB Chain, a popular modern blockchain, produces a new block every 3 seconds and typically requires 2-3 blocks for finality, resulting in a TTF of approximately 7.5 seconds.

How to speed up crypto payments

Even though most popular networks have proven secure and reliable, a business can’t make its customer wait until a crypto payment gets fully confirmed on-chain. Obviously, the user experience should be as swift and seamless as card purchase. This can be achieved by solutions developed by professional crypto payment providers, such as Cryptonix.

A platform operated by Cryptonix works on top of supported blockchains, making it possible to easily integrate an out-of-the-box gateway for paying with cryptocurrencies to any website. The resulting integration takes the form of a button, added to a list of existing payment methods, leading a customer to a page automatically generated on the Cryptonix’s server where he can complete the payment.

Among other things, this crypto payment link allows for choosing from a list of the most popular crypto assets per the customer’s preference. Because goods are sold for fiat currency (e.g. U.S. dollar or euro), the amount to be paid in a selected cryptocurrency is dynamically calculated on the payment page by Cryptonix using the market exchange rates based on price data from several major crypto trading platforms.

After a user connects his blockchain wallet and approves the deduction, Cryptonix checks the availability of funds. Once it is verified (which only takes a few seconds), the user receives a payment confirmation along with an order number from a store. In return, the merchant's balance managed by Cryptonix gets updated right after the first confirmation by the network, and the platform takes care of the finalization process. It means that, to use the proceedings, the merchant does not need to wait for days to have his bank confirm the settlement, nor does he need to wait for a crypto transaction to be finalized.

What about crypto deposits and invoices?

The advantages of blockchain technology become even more evident when we consider user deposits. Imagine you operate an online platform where a user needs to open an account and top it up to use the platform. In the case of legacy payment systems, onboarding of new users is often limited by geographical location or banks in a specific country. Cross-border payments, even if they are an option, typically get processed through SWIFT or other international bank communication systems that are much slower, regulated and prone to error than even bank transfers made inside a single country.

In contrast, cryptocurrency deposits offer the same functionality, but are a borderless solution that significantly enhances the user experience. Blockchain networks process transactions quickly regardless of the geographical location of either sender or recipient. 

To enable crypto deposits, Cryptonix can come in handy, serving as a single provider of custody, deposits and withdrawals for digital currencies, as well as the ultimate crypto invoice generator.

Here is how it works. When a user registers on the platform and chooses to top up his account with crypto, Cryptonix automatically generates a unique blockchain address for managing this user’s funds. This address is assigned to a wallet of a business owner, although its funds are stored separately to increase their safety. A company can manually set fees for deposits, withdrawals, and exchange operations made by their users.

Crypto invoices might be more suitable for B2B enterprises. When a customer selects this option, he instantly receives a unique link of a payment page within the website’s interface, or to his email. Once crypto is received, it is securely kept in the wallet on the Cryptonix platform. As an alternative, it is possible to generate crypto invoices manually.

Crypto payments: the new normal for businesses

As blockchains move closer to achieving the better scalability and wider adoption, we can see that even major financial institutions, such as Visa or MasterCard, are embracing cryptocurrency by inviting customers and businesses to settle transactions with stablecoins USD Coin (USDC) over the Ethereum blockchain. Blockchain extends the definition of speed beyond the network throughput, becoming a next-generation technology for businesses and consumers, leaving the centralized finances behind.

At the same time, crypto payment providers like Cryptonix make sure that users, customers and merchants enjoy the speed of card payments when paying for goods and services with cryptocurrencies that allow all parties to overcome borders and other obstacles of the past.