Visa Scale Blockchain

Dispelling some myths around blockchain scalability

Light speed is finite and this is a bummer but we’ll get to that in a moment.

But let’s start with Visa, every blockchain scaling discussion these days starts with Visa’s 2000 TPS myth. More precisely, what this statement means is that at peak usage 2000 Visa cards are swiped every second around the world and somehow most transactions are processed correctly and without cheating. The discussion then continues as to how we can scale a blockchain to the same levels as Visa. I say you are barking at the wrong tree.

Disclaimer, I never worked for Visa and I’m not familiar with how the global Visa network really works, however, I do poses one of these credit card terminals used by my wife’s aesthetic clinic.

Let me describe how the process really works in Israel. When a credit card is swiped, two things happen (1) the total amount of the deal is validated against a central database of credit card balances. I’m quite sure this database is not even managed by Visa itself (2) the transaction is stored in the memory of the credit card terminal.

Then, sometime overnight, the terminal wakes up and broadcasts all the daily transactions of all credit card types to a central clearing house, in Israel this clearing house is managed by a company named Shva. Shva sorts all the transactions submitted by all local terminals and redirects the Visa deals to the Visa database, Mastercard to Mastercard and so on. On the other direction each credit card company updates Shva with an up to date balances of the cards and in addition, with a list of black listed cards, this list is also uploaded to the terminal. The next day validation works against this central database managed by Shva, the credit card terminal never connects directly to Visa.

Shva is one of these monopolistic dinosaurs that blockchain aims to replace, the whole process is arcane, unbelievably, the communication between the terminals and Shva still uses a 14,400 baud dial up modem and if the terminal itself loses it’s memory during the day, the deals will never get credited to the merchant.

You might say, Israel is not the most advanced country with regards to communication infrastructure, but also not the most retard, so I assume this process is give or take typical to other countries. I assume in some countries this works more efficiently but surely in others it works less. What I’m saying is that there is no reason to compare blockchain scale to Visa scale since Visa does not have any central database that processes 2000 TPS. I assume the Visa network is separate into multiple hubs dealing with their own local databases.

I assume that if I swipe my Israeli credit card in say, New Zealand, the local merchant has a way to validate my eligibility to buy, perhaps using a global database or a redirect to the Israeli local database (I don’t know). But Visa New Zealand surely does not store and does not care about all the transactions I made while in Israel.

Now that we cleared this out, lets get back to the speed of light, internet communication is not faster than the speed of light of 300,000 KM/Second and the perimeter of the earth is 40,000 KM. Therefore the fastest theoretical speed of sending a transaction between two sides of the world, say, US and China, is longer than (40000 / 2) / 300000 = 0.0667 Seconds.

In practice however, internet communication is much slower since every TCP/IP packet has to be routed through multiple hoops, first it needs to reach the local ISP then the national cyber optic line then the internet backbone routers, possibly in the US, then its destination through the destination ISP. You can run a “tracert” command on your Windows workstation to see how it works. It is fare to assume that over 20% of the transactions will take more than a second to propagate between nodes at different sides of the world.

Now let’s look at the claims about 2000 TPS or even 100,000 TPS blockchain. Recall that in a blockchain network, every node has to process every transaction and every block in order to reach the same state independently. We call this consensus, it is the main promise of the blockchain.

So what would happen in practice to a 1000 TPS blockchain? For the sake of discussion, assume that transactions are distributed uniformly 1 every millisecond. This is of course not the case, what would happen in practice is huge peaks in transaction generation of perhaps 10K TPS and then low periods which will make things even worse.

Now assume that a node in China and a node in the US solves a hash of a block at roughly the same time. At this moment there are surely transactions which are either unknown to the Chinese node or unknown to the US node. So these blocks do not contain the same transactions and will therefore cause the blockchain to fork. These will be massive blocks, so it will take several seconds until the Chinese node receives the US block and vice versa. During this time 1000’s of new transactions are spawned. One of this nodes will have to switch to the other’s fork, which means it will need to undo a massive number of transactions from its own block and load a massive number of transactions from the other node’s block. During this time yet more transactions are spawned and perhaps more blocks generated. Its hard to see how this type of network will ever reach consensus.

DAG users, your case is different but not necessarily better since on each node transactions will build upon other transactions for several levels, this would be transactions which remote nodes did not yet see, and when they see it, they’ll possibly receive it in a different order. This will create massive differences between the graphs that each node maintains that I don’t see any way to settle without some kind of central management.

Furthermore a 1000 TPS blockchain will generate huge bloat. Assuming 200 bytes per transaction (multiply by 8 for a DAG), 200K of data are generated every second, 12MB per minute. If we consider Bitcoin’s 10 minutes block time this means block average size of 120MB, about 100 times more than current blocks. And this accumulates to over 17GB of data per day or 6.3TB a year. Clearly unsustainable.

To summarize, the “Visa network” processing is not comparable to a blockchain and a blockchain as we know it will never reach sustainable 1000 TPS in a real global blockchain deployment (Some teams claim to reach it under lab conditions for a short period of time)

But most applications don’t need 1000 TPS, in essence the problem is that today’s blockchains are Jack of all trades, if you are interested in blockchain voting, your node will still process and store forever all the identity management, asset exchange, ico transactions, iot sensor data, social network messages and every other transaction ever submitted to the blockchain even if you don’t care about them. And this is the main problem that the industry needs to solve.

The Ardor platform aims to solve these problems, our unique parent child chain architecture allows us to separate each application into it’s own child chain and only store the few transactions which are important to the POS consensus algorithm in the blockchain forever. All other transactions can be removed (pruned) and nodes will only track the recent state created by them.

Furthermore, in the future this architecture will allow nodes to focus on specific child chains. This way, we no longer have the requirement that each node process all transactions. Then like the Visa network does today, we can scale to global scale.

See our web site for more information.

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