The time transactions take to complete can make or ruin your experience with a cryptocurrency. More than mere convenience, it influences the reliability and functionality of a digital asset. After all, not many are comfortable waiting hours or even days for a transaction to be confirmed.
Today, a simple transaction like converting .03 ETH to USD on a crypto exchange can take anywhere from seconds to minutes. Other digital coins can have longer wait times. But why the discrepancy?
Below, we look at the key elements that affect the transaction speed in cryptocurrency.
Block Time
Simply put, this is how long it takes miners to verify transactions in one block in a crypto blockchain. Different cryptocurrencies have different block times. Bitcoin operates on a target block time of 10 minutes, while Ethereum is much faster, with a block time of around 15 seconds. Ethereum’s shorter block time translates to faster transaction speeds, making it the better choice if you’re looking for efficiency.
Block Size
While block time sets the pace for transaction speed, block size determines how many transactions can be handled within a single block. If the block size is large, more transactions can be processed simultaneously, improving speed. It lowers the risk of pending transactions piling up, which can further add to the frustration of users waiting for their transfers to go through.
But large isn’t always better. While large blocks may handle more transactions, they consume more network bandwidth, risking the blockchain’s performance.
Network Traffic
When many transactions are happening at the same time, users can experience slowed-down speeds. It causes the network to become congested, leading to your transfers taking longer than they would under normal circumstances. On the other hand, a low demand for transactions can result in everything getting done much quicker.
On top of causing a backlog and delays, high network traffic also leads to increased transaction costs. To avoid delays, users can offer higher fees to miners to have your transactions prioritized and moved up the pile. Slowed transaction speeds due to increased network traffic also affect DeFi platforms, negatively impacting user experience.
Newer crypto technologies like the Lightning Network have been developed to help fix congestion. Known as “Layer 2” blockchains, these protocols are designed to handle the excess transaction traffic, decongesting Bitcoin and allowing transfers to be completed faster.
Consensus Mechanism
Whenever you initiate a crypto transaction, it has to be verified and audited before being okayed. That’s the work of the consensus mechanism. As the name suggests, the program serves as the protocol through which the various parties involved in a Bitcoin or Ethereum transaction can reach an agreement.
One of the most common consensus algorithms is proof of work (PoW), which is used by Bitcoin, Litecoin, and several other digital coins. The other common option is Proof of stake (PoS), used by Ethereum.
While both carry similar functions, they do so differently, with PoS offering significantly faster transaction speeds. PoW uses a competitive validation that requires participants to show that their work qualifies them to add new transactions. This makes it slower than PoS, which uses randomly selected verifiers, with the participants with more tokens getting more responsibility.
Transaction Fees
Sometimes, if you want to speed up your cryptocurrency transactions, you may have to pay up. More often than not, transactions with higher fees are prioritized by miners and handled ahead of transactions with lower fees. Think of it as Amazon Prime but for crypto. It may cost you extra, but it can help you avoid prolonged delays during high demand.
