Throughput

Throughput on Cardano refers to the number of transactions the network can process in a given time period, typically measured as transactions per second (TPS). It is a key performance metric that indicates how efficiently and quickly the blockchain can handle transactions. High throughput is essential for ensuring that the network can scale and accommodate a growing number of users and decentralized applications (dApps) without slowing down or becoming congested.

Factors Affecting Throughput on Cardano

1. Block Size:
   • Cardano’s throughput is directly related to the size of its blocks. Each block on the Cardano blockchain has a fixed capacity in terms of how many transactions it can include. Larger blocks allow more transactions to be processed in a single block, thus increasing the network’s throughput.
   • Cardano’s block size has been increased over time to improve throughput, allowing the network to handle more transactions as the ecosystem grows.
2. Ouroboros Proof-of-Stake (PoS) Consensus:
   • Cardano uses the Ouroboros Proof-of-Stake (PoS) consensus algorithm, which ensures secure and energy-efficient transaction processing. The consensus protocol is designed to optimize throughput while maintaining a decentralized and secure network.
   • Unlike Proof-of-Work (PoW) blockchains, where miners compete to solve cryptographic puzzles, Cardano’s PoS system allows stake pools to be selected to validate and produce blocks, making the process more efficient.
3. Slot and Epoch Timing:
   • In Cardano, time is divided into epochs (lasting approximately 5 days), and each epoch is further divided into slots (1-2 seconds each). During each slot, a slot leader (a stake pool) is responsible for producing a block.
   • The number of transactions that can be processed during each epoch is limited by the number of slots and the block size, both of which impact throughput. If block production is efficient, throughput increases.
4. Parallel Transaction Processing (eUTxO Model):
   • Cardano’s eUTXO (Extended Unspent Transaction Output) model allows for parallel transaction processing, meaning that multiple transactions can be processed at the same time as long as they do not spend the same UTxO.
   • This enhances Cardano’s throughput because it enables the network to process many transactions simultaneously without creating bottlenecks, unlike account-based models (such as Ethereum) where each transaction updates a global state.
5. Scalability Solutions:
   • Cardano is working on several scalability solutions to increase throughput further:
     • Hydra: A Layer-2 scaling solution designed to increase the number of transactions Cardano can process per second by enabling off-chain processing. Hydra creates heads or parallel channels that allow parties to conduct transactions off-chain while remaining securely connected to the main Cardano blockchain. Hydra has the potential to increase Cardano’s throughput to millions of TPS.
     • Block Size Adjustments: As the network grows, Cardano periodically adjusts its block size to accommodate more transactions, ensuring the network’s capacity can scale with demand.
6. Network Load and Congestion:
   • The current throughput is also affected by the network load. When demand on the network is high, such as during periods of heavy transaction activity (e.g., during major NFT drops or large dApp launches), the network may reach its capacity limits, and users may experience delays or higher transaction fees. As Cardano scales with solutions like Hydra, it aims to mitigate these effects and ensure smoother performance during peak periods.

Throughput in Relation to Other Blockchains

• Bitcoin: Bitcoin processes around 4-7 transactions per second (TPS), primarily due to its smaller block size and the nature of its Proof-of-Work (PoW) consensus mechanism.
• Ethereum: Ethereum, in its current state, handles around 15-30 TPS, although this number can fluctuate based on network activity and gas fees. However, its Ethereum 2.0 upgrade aims to increase throughput significantly through the introduction of Proof-of-Stake (PoS) and sharding.
• Cardano: Cardano’s current throughput is around 250-300 TPS but is designed to scale significantly higher through the implementation of Hydra and other optimizations. Cardano’s goal is to support thousands of TPS on-chain, with even greater numbers off-chain through Hydra.

Importance of Throughput for Cardano

1. dApp Growth:
   • As more decentralized applications (dApps), smart contracts, and users join the Cardano ecosystem, a high throughput ensures that the network can support these activities without becoming congested.
2. DeFi and NFTs:
   • Cardano’s growing ecosystem of Decentralized Finance (DeFi) applications and NFT platforms require fast, efficient transaction processing. High throughput ensures these applications can function smoothly even under heavy use.
3. Global Adoption:
   • For Cardano to achieve its vision of becoming a global financial operating system, capable of serving millions of users worldwide, high throughput is critical. By scaling up its transaction capacity, Cardano can handle increased demand from both developed and developing regions.

Summary

Throughput on Cardano refers to the number of transactions the network can process per second (TPS). It is influenced by factors such as block size, consensus mechanism, and the use of parallel transaction processing via the eUTXO model. With ongoing improvements, such as the Hydra Layer-2 solution and block size adjustments, Cardano aims to scale its throughput to support the growing demand for dApps, DeFi, and NFT platforms, as well as global adoption. Increasing throughput is essential for ensuring that the network remains efficient, decentralized, and capable of handling large-scale transactions in the future.