How Transactions Per Day Metric is Flawed

Ethereum recently surpassed bitcoin in processing amount of transactions in a single day but it still is a mystery how Ethereum which is currently popular in only a few countries has surpassed Bitcoin which is far more popular than Ethereum and has way more users than Ethereum.

Transactions Per Day Metric is Flawed

The formula used to calculate transactions processed per day is calculating the sum of the total number of transactions from every block in the last 24 hours. Currently, Bitcoin does an average of around 2000-2200 transactions per block in 10 mins and Ethereum does an average of 100-120 transactions per block in 30 sec which is almost same as bitcoin if we calculate the total number of transactions in 10 mins. So how does something like Ethereum which is around 2 years old is competing with Bitcoin which is 8 years old and has far more users than Ethereum in usability of the blockchain.

The answer is that the metric is flawed due to batched transactions.

Batched transactions are those transactions that are grouped together to form a single large transaction in order to reduce the total amount of size of individual transactions which results in lower fees. When people use a business that allows them to withdraw a cryptocurrency, the business groups up the requests of a few users in a single transaction which reduces the fee for the business. All major crypto exchanges make use of the batched transactions feature to reduce the amount of fees that they pay to send user withdrawals.

Ethereum also has the capability of batching up the transactions but due to lower block times, businesses might opt for speed instead of the batching efficiency. Also since Ethereum has far less users than bitcoin, the businesses might not receive the amount of withdrawal requests needed to build up a batch in a particular time. So it might be possible that they might send transactions individually for each request.

Another reason for not trusting the transactions per day metric is Spam Attacks. Anyone can make a script that can send transactions back and forth between addresses just to increase the amount of transactions. Bitcoin cash recently suffered from a spam attack in which thousands of 29 kb transactions per produced in a short amount of time which had no relation to the actual use than just to bloat up the blockchain.

Conclusion

While it might appear that transactions per day represent the amount of users actually using a blockchain, the real amount of users can be way more due to batched transactions or far less due to scripts run by malicious actors. The metric transactions per day should not be used to calculate the adoption of a cryptocurrency as it is way too easy to game.

Let us know what you think about the websites using transactions per day as metric.

 

 

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Shivam Chawla

Following CryptoCurrencies since 2013. Investor in Bitcoin, Ethereum and Litecoin. If you like my articles, follow me at http://twitter.com/shivamchawla243 or donate Bitcoin at : 3E1vJTdKqBPewSepnVNjsoy7MPQonwy8X4

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