Latency and throughput in Blockchain

Latency in Blockchain
Latency is fundamentally common for embedded, computer, and distributed
systems with minor iterations. Latency in a blockchain typically means the total
turnaround time between submitting a valid transaction to the network and the
time network has committed to/confirmed the transaction. On Shardeum for
instance, both the latency and finality time will just a few seconds as a result
of its linear scalability through transaction level consensus and dynamic state
sharding.

Throughput in Blockchain
Throughput fundamentals and limitations are also common for embedded,
computer, and distributed systems/blockchains with few nuances which we will
take a look at here. Throughput in blockchains typically means transactions per
second (TPS) processed by a blockchain network. Transactions, here, refer to
those submitted by end users. Throughput ideally should not include failed
transactions or internal operational transactions processed by the network.
Unlike Web2 platforms, public blockchain platforms secure their network by
adding a couple of resource-intensive protocols – consensus mechanism and
block size/rate limit and hence TPS of blockchain networks vary depending on
how they use these protocols.

What Affects Throughput and Latency?

The throughput and latency of a network are its two key performance indicators.
Both throughput and latency can be affected by a number of external variables.

In Blockchain
 Self-imposed scaling limits: Public blockchains typically set maximum block
sizes and production rates to ensure platform security, limiting transaction
processing rates. Increasing block size limits would require more processing
power, leading to centralization as it becomes too expensive for average people
to run nodes which flies against the principle of Web3.
 Consensus mechanism: The most important factor to secure a public chain is
through consensus mechanisms they employ. Although lightweight consensus
algorithms like proof of stake are widely used today compared to more resource
and compute-intensive proof of work, this still is an additional process
blockchain networks have to go through to ensure transactions are verified and
 added to the network accurately to prevent data manipulation and corruption.
Consensus protocols inherently add to latency here and slow down the network
 TPS directly proportional to slowest performing node: In networks like Bitcoin,
where every node must process every transaction, the bottleneck is the
processing power of the slowest full nodes. If the bitcoin network were to
increase the self-imposed block size limit, it would run into a more natural
bottleneck of processing power i.e. scaling vertically. This is another factor that
affects TPS and latency of the vast majority of blockchain networks today.
 Bandwidth: A vertically scalable network or a network that performs block level
consensus will require a high amount of bandwidth to distribute and process
transactions. This is another reason why the slowest performing node factor
comes into play to negatively impact throughput and latency of a network.
 Network congestion: On blockchains, network congestion happens when there
are more transactions sent to the network than what it can handle. And
blockchains are increasingly vulnerable to it because of the aforementioned
points like vertical scaling, block level consensus, self imposed scaling limits.
This is another key factor why latency is high in many blockchains today
(latency often goes up to a few mins when it should be within a few seconds)
and throughput does not go beyond 400 TPS. This inevitably leads to the
industry’s infamous issues of rising transaction costs and front running.
 Network topology: Unless a blockchain network scales linearly, say
like Shardeum, adding more nodes may result in inefficiency and lower
throughput with bad user experience.

Throughput & Latency in a Nutshell

High throughput indicates better performance, as more data can be transmitted

in a shorter amount of time or more transactions processed per second in the
case of a blockchain. Low latency indicates better performance, as data can be
transmitted more quickly or in the case of blockchain, the time taken to validate
and confirm a transaction on the network is quick.

Throughput is considered important for applications that require high data

transfer rates, such as video streaming, file transfers, online gaming,
and blockchain dapps. Latency is important for applications that require real-
time communication, such as video conferencing, online gaming, voice over IP
(VoIP) calls and blockchain dapps.

Latency & Throughput Bottlenecks

Latency refers to the time one has to wait till their transaction is processed. With public decentralized distributed
ledgers, there is a huge number of nodes that need to reach a consensus for a transaction to be verified. And to
process the transaction so that consensus can be reached, each node requires access to the entire blockchain. This
would mean an enormous database over time. Providing access to the entire blockchain to hundreds of nodes also
increases the security threat.

The result is that there are thousands more transactions in the queue than are being verified every minute. Some
ecosystems have tried to address this issue by only partially decentralizing their distributed ledger, where only a
limited number of major nodes need to reach consensus.

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Throughput: the number of successful transactions per second. A workload can be Latency: the response time per
transaction i.e. time for one transaction to finish before starting another.

Blockchain network latency is the time between submitting a transaction to a network and
the first confirmation of acceptance by the network. After the first confirmation, the
transaction becomes more final as more blocks are added beyond the initial confirmation.
In a payments system that hopes to gain widespread adoption, low network latency is
paramount. The time between payment at a cashier and the confirmation of the payment is
a point of user friction if it grows too long.
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Transactions Per Second

Anyone familiar with the blockchain sector would consider Transactions per Second (TPS) to be one of the most
important metrics. It simply refers to how many transactions may be carried out in a second. TPS is used to
determine a blockchain’s capacity for processing data and its scalability needs. Here, for more clarity and better
results, the number of transactions submitted to the blockchain and those that were recorded in the ledger are
counted separately.

Also keep in mind that there are many other factors to take into account, therefore a blockchain with a high TPS
does not automatically make it better than other options. For instance, Bitcoin, one of the most sought-after
blockchains, has a low TPS, somewhere in the range of 5–10, but thousands of nodes throughout the world at any
given time.

Transaction Latency
The duration between a particular transaction being submitted and being accepted or rejected is known as
transaction latency. Once a transaction is authorized, its results are immediately visible on the network and
usable.

This parameter, which compares blockchains according to how rapidly they can reflect transactions, is important in
every way.

Transaction Throughput
The amount of time it takes to add valid records to blocks is known as transaction throughput. Only once a
record has been accepted is the elapsed time calculation begun; records that have been rejected are not taken into
account.
Simply divide the total number of records added to the blocks by the entire amount of time in seconds to determine
the Transaction Throughput.

Blockchains still have a long way from gaining mass adoption due to their complex
nature, scalability problems, and high latency in some cases. Blockchain latency is the time between
submitting a transaction to the network and its first confirmation. This measure can have various effects that
hinder the blockchain from competing with traditional financial systems as it creates a large gap in waiting
time for the end user.

Let’s take a deep dive into what blockchain latency is, its relationship to network throughput, and its effect on
the network.

BLOCKCHAIN CONFIRMATION TIME

Blockchains differ from other traditional payment methods by operating on distributed peer-to-peer systems.
That means, thousands of nodes confirm transactions instead of one centralized entity. By reaching a
consensus, the network confirms a batch of transactions (a block) and adds it to the blockchain.

The time recorded between the moment a blockchain transaction is submitted to the blockchain and the time
it becomes confirmed within a valid block is called confirmation time. This time frame can dictate the average
speed of a blockchain network. However, confirmation time can vary depending on various factors within a
network, which often would create latency issues.

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Blockchains still have a long way from gaining mass adoption due to their complex
nature, scalability problems, and high latency in some cases. Blockchain latency is the
time between submitting a transaction to the network and its first confirmation. This
measure can have various effects that hinder the blockchain from competing with
traditional financial systems as it creates a large gap in waiting time for the end user.
Let’s take a deep dive into what blockchain latency is, its relationship to network
throughput, and its effect on the network.
BLOCKCHAIN CONFIRMATION TIME
Blockchains differ from other traditional payment methods by operating on distributed peer-
to-peer systems. That means, thousands of nodes confirm transactions instead of one
centralized entity. By reaching a consensus, the network confirms a batch of transactions
(a block) and adds it to the blockchain.
The time recorded between the moment a blockchain transaction is submitted to the
blockchain and the time it becomes confirmed within a valid block is called confirmation
time. This time frame can dictate the average speed of a blockchain network. However,
confirmation time can vary depending on various factors within a network, which often
would create latency issues.

SO, WHAT IS BLOCKCHAIN LATENCY?

Blockchain latency in this sense refers to the time delay between issuing a transaction and
finalizing it. In general, latency in computing refers to the delay between input and output.
The input in cryptocurrencies would be the submittal of a certain transaction and the output
would be its confirmation.
Since the blockchain is decentral, the waiting time between transaction submittal and
confirmation is longer than other methods of payment. For instance, in classical payment
systems, transactions are final once the central system confirms them.
However, transactions on the blockchain are not confirmed immediately. In order for
transactions to be final, they have to go through more than one confirmation process. After
being added to the blockchain, users have to wait for other blocks to be written on top of
their block

This means users have to wait until a transaction goes through various consensus-related
steps and is x-blocks deep before finalization, which results in latency issues.
There are two types of blockchain latency within the crypto ecosystem:
 Network Latency: This is the time-delayed measurement of the confirmation time
within the blockchain.
 Exchange Latency: This is the measure of an exchange’s ability to process large
volumes of transactions. Exchanges that are efficient usually have low latency and
high throughput that can process transactions in a consistent time frame.
THE EFFECTS OF HIGH LATENCY
In an extremely volatile market, having high latency is very inefficient. Cryptocurrencies’
volatile prices can fluctuate within seconds, and thus, having a long confirmation time and
processing can affect traders by not taking advantage of real-time asset prices.
Consider the following example: You conducted a transaction with a certain currency. By
the time the currency is processed and confirmed, its value increased $100. You would be
paying extra cash you didn’t intend to.

However, some take advantage of the lack of conformity between low-latency and high-
latency exchanges to capitalize on the price differences as part of arbitrage trading.
Latency Vs. TPS
The throughput of a certain blockchain network is the rate at which many transactions can
be confirmed within a certain timeframe. This is typically measured in transactions per
second or TPS. Usually, a blockchain that “scales” at a high TPS rate is “efficient”.
However, users don’t generally care about the throughput of a network.
What users care about is latency and transaction fees. Traders expect their transactions to
be quickly finalized at the lowest fees possible. But doesn’t have a higher TPS rate
increase the confirmation speed? Not exactly. In the blockchain’s timeline, having a high
throughput can lead to network congestion, which again results in high latency.
Latency and throughput are a tradeoff that isn’t too smooth. When a network approaches
its maximum TPS, an inflection point can make latency increase sharply.