How Long Does an Ethereum Transaction Take? | Becoming a Crypto Expert
Ethereum is known as the second most popular cryptocurrency next to Bitcoin and the most valuable altcoin. Where Bitcoin is regarded as digital gold, Ethereum is digital oil.
Ethereum is known as the second most popular cryptocurrency next to Bitcoin and the most valuable altcoin. Where Bitcoin is regarded as a store of value or “digital gold,” Ethereum is a “digital oil” for creating a decentralized Internet economy.
Ethereum was created by Vitalik Buterin in 2015 as the first smart contract platform (SCP), digitizing the functions of a regular contract to the blockchain. This innovation made Ethereum into programmable money and the first base layer (L1) to develop decentralized apps (dApps) upon. With smart contracts, dApps operate with no intermediaries over ETH’s network. This decreases transaction times and increases accessibility to these services, setting the stage for the decentralized web.
Today, there are more uses for the ETH network than ever before. Each new use case brings more value to blockchain technology and grows the adoption and use of the Ethereum network — producing more utility for its users. As of this article’s writing, Ethereum’s market cap is $137 billion. Even with all this promise, Ethereum has a key weakness: increasing transaction times. Let’s dive in and learn how long does an Ethereum transaction take?
Key Takeaways
- Ethereum is a key protocol made for developers to build decentralized apps (dApps) on and to create Web3, the decentralized Internet.
- Ethereum transactions usually take from a few minutes to a few hours to process, but timing can vary depending on factors such as network capacity, fees, and network use.
- Using ETH gas trackers and blockchain explorers can help you see how much you need to pay and the details of each transaction, respectively.
- Emerging use cases such as DeFi, NFTs, and stablecoins drive the growth of ETH adoption, often leading to network congestion.
- Alternatives to ETH include using MATIC and SOL networks, or waiting for ETH 2.0 to release.
How Long Does An Ethereum Transaction Take…Really?
An Ethereum transaction time takes anywhere from:
10 seconds to 5 minutes or up to a few hours
The timing of your Ethereum transactions varies based on several factors, whether you are transferring Ether or interacting with a smart contract. Understanding what these factors are (network throughput, fees, and network usage) and how they operate within the Ethereum network will help you better use and invest in one of the primary technologies behind the development of Web 3.0, aka the decentralized Internet.
Let’s identify the overarching issue with Ethereum and blockchain technology — scalability.
A Blockchain’s Achille’s Heel — Scalability
If a blockchain cannot scale, it cannot the capacity to handle increased demand and process large numbers of transactions. The scalability issue plagues other blockchains such as Bitcoin. Currently, Ethereum has max limit of 15 transactions per second (tps) while Bitcoin does 7 tps — due to each network’s low throughput (rate it can process transactions).
In contrast, the centralized Visa credit card network claims its network maxes out at 65,000 tps. For perspective:
- Ethereum handles 1.3 million transactions per day
- Bitcoin processes 608,400 transactions per day
- Visa processes 5.62 billion transactions a day (at its theoretical upper limit)
- While ETH is 50% faster than BTC, Visa’s network is 4300x faster than ETH’s.
As an SCP, Ethereum was built for developers to create apps that would eventually form an ecosystem. The more services developed on it, the more demand for Ethereum grows. As Ethereum demand increases, the higher transaction fees and average transaction times will go. But as network throughput remains the same, network congestion ensues and users must pay higher fees and wait longer to receive or send Ethereum.
Let’s dive into how Ethereum works and how it processes transactions.
How Ethereum Transactions Work
Ethereum uses the Proof-of-Work (PoW) algorithm for its confirmation process, builds its blockchain, and reaches consensus. Each block has a unique hash and a miner must solve a very complex equation to create a hash that matches that of the block. To solve these equations, miners use cutting-edge computer processors and compete against each other. The first miner who gets the hash generates the block and earns the block reward, set at 2 ETH plus the transaction fees. This is worth about ~ bringing the total to over $2,800 in today’s money. Once the hash is solved, other miners verify it to build consensus around the new block and chain.
When a user submits a transaction it is sent to the mempool, where it waits to be picked up by a validator with other pending transactions. If a transaction fee is sizable, a validator will forward it to a block — adding it to the chain once mined. If the fee is too low, no miner will pick up the transaction and it will expire in the mempool. Fees are used to pay for the computational work that goes into adding each transaction to the mempool and Ethereum blockchain. If you want to know what fees look like before you send, use a tracker to see what the average transaction fee amount is.
Many wallet providers will wait for several additional blocks to be mined after the one confirmation with your transaction. After more confirmations occur, your transaction is considered to be added to the blockchain. Some exchange platforms and wallets ask for 30+ confirmations to provide extra security before giving you fund access.
Each block contains the details of accepted transactions. Understanding the process helps, but observing your transaction first-hand is better.
Checking for Yourself — Seeing The Details of Pending Transactions
The Ethereum blockchain is a public ledger viewable to everyone. I like to use the Ethereum blockchain explorer Etherscan.io to view my transaction history and search the blockchain. You can view individual transaction details including those for a pending transaction. You also can search based on wallet addresses, transaction hashes, block numbers, etc.
- First, look up the event in your wallet’s history. If you use an exchange platform like Coinbase or other online wallets, they will provide a record of transactions from that ETH address.
- Copy and paste the transaction ID or public address from the Ethereum wallet into Etherscan’s search box. Using an ID will take you directly to the transactions’ details.
- If you used your wallet address, you can see an overview of your wallet’s activity and view your history of ETH transactions. Select a transaction ID.
- Viewing a specific transaction, you will see an overview of its key details, including:
- Transaction Status — shows if it’s pending or completed
- Block Number — the block with initial confirmation of your transaction
- Number of Confirmations — increases with every additional block mined
- Transaction Fee — the amount paid to the miner for processing the transaction
- Gas Price — the price of the gas fee on a per unit basis, measured in gwei
- Gas Limit — the max amount of “gas” to spend on the transaction and how much of it was used as a percentage, measured in gwei
- Gas Fees — are broken into 3 pieces:
- Base Fees — the entry fee to interact with the network at the time of block creation
- Max Fee — the maximum amount a user is willing to pay for the transaction
- Max Priority Fee — max amount user is willing to give to a miner
With this information, you can view the status of your transaction and know if it is stuck. If it is pending for a while, your fee may be below the base fee — keeping your transaction stuck in mempool purgatory and increasing your wait time. In periods of high use, the base fees and max priority fee increase as users are willing to pay more to see their transactions get added to the blockchain.
You can always send ETH again with a higher fee to get your transaction in a block. Now, that we understand how transaction fees work, let’s dive into the demand drivers for ETH.
A Primer on ETH Use Cases
Similar to how the Internet gained more users the more uses you had for it, Ethereum has seen an overall increase in users since its debut. Ethereum’s adoption is driven by the development of its network and engaging use cases. The largest use case is still users transferring coins from one wallet to another for a variety of reasons, including staking or moving coins to an online wallet (hot wallet) or secure cold wallet (offline wallet). Some of these emerging cases such as NFTs and decentralized finance are pillars of the growing Web 3.0.
ERC20 Token Development
Cryptos such as US Dollar Coin (USDC), Basic Attention Token (BAT), and Maker (MKR) are built according to the ERC20 standard, the dominant technical standard for developing tokens on the Ethereum chain. According to Investopedia, thousands of coins are now operating on this standard. ERC20 tokens operate on the ETH network, adding to its traffic.
Stablecoins
These are tokens tied to an underlying asset like the USD or gold, making them reliable stores of value. Many stablecoins are built on the ERC20 standard.
These coins exhibit less price volatility than other cryptocurrencies not backed by anything. They are tokenized versions of the real deal that are easier to transact with. The ease of using these coins compared to their underlying assets like US dollars is a big driver of their use by financial institutions involved in crypto markets. An investor can profit off of lending their stablecoins to large financial institutions.
Not all stablecoins are created equally as the recent LUNA fiasco revealed with algorithmic-backed stablecoins. Select tokens backed by the actual asset such as USDC, GUSD, or PAXG, meaning that each coin is backed by a certain ratio of the real asset.
Non-Fungible Tokens (NFTs)
A NFT is a one-of-a-kind digital asset (usually art) encoded into a blockchain and stored in one wallet address. Having an NFT represents a share of ownership or rights to a digital asset. They have the potential to help artists monetize and create their own communities, making them popular among independent music artists.
NFTs went mainstream in 2021 as some collections such as the Bored Apes Yacht club, fetched millions per sale — catching the public’s imagination and attention. Creators and buyers transferring NFTs use Ethereum, adding to the network congestion.
Decentralized Finance (DeFi)
Built on SCPs, DeFi promises to shake up the financial system by reducing barriers to entry and eliminating the need for middlemen. Anyone with a crypto wallet can access the ecosystem to take advantage of:
- swapping their crypto for another through a decentralized exchange (DEX)
- earn rewards as you play games (GameFi)
- yield farm through staking, lending, across multiple chains, etc.
DeFi uses more chains than Ethereum, but ETH is a backbone for the ecosystem as many dApps are built on it. As the ecosystem evolves in complexity and offerings the role of ETH and other SCPs will grow in importance.
But what can be done to lower wait times and fees?
Solutions
Use Polygon Network (MATIC)
Polygon is a L2 solution for ETH, making ETH more usable by fixing the high gas fees and wait times. MATIC sits atop the Ethereum network, providing side chains to process transactions and decrease wait times. The side chains periodically send their bundled transactions to the main ETH chain for final settlement. Plus, the side chains are designed to be compatible with ETH dApps and DeFi protocols, allowing for easy porting between the two chains. As of May 2022, MATIC’s gas fees range from $0.0005 to $0.2, far lower than the average ETH fee amount of $55.86 on June 18th, 2022.
Over 19,000 dApps use MATIC to scale their use. Finding a MATIC equivalent to your ETH use case is becoming easier as MATIC”s side chains are designed to be compatible with ETH dApps and DeFi protocols.
Use Solana (SOL) & Other Scalable SCPs
The lesser-known crypto, Solana boasts the highest theoretical throughput of any blockchain at 65,000 transactions per second. This figure is over 4300x faster than Ethereum. Because its network throughput is so much higher, SOL boasts shorter wait times and lower fees. This advantage has led to a surge in the development of the SOL platform. Even leading NFT platforms such as OpenSea are now supporting SOL NFTs, due to their growing popularity. Crypto research firm, Messari found that the SOL NFT scene grew sharply from August to October 2021 as:
- Unique SOL NFT buyers and sellers grew by 276% and 207%, respectively.
- Unique ETH NFT buyers and sellers grew by 17% and 39%, respectively.
ETH 2.0
Ethereum is slated to undergo a fundamental upgrade from Proof-of-Work to Proof-of-Stake, in 2022. After this upgrade, aka the Merge, Ethereum’s network will become more efficient with a max throughput of 100,000 tps — a 3330x increase in efficiency. The chain will become more energy-efficient, taking less computer “work” to execute than what each transaction requires now.
However, it will take a series of several upgrades to reduce gas fees. There is also a risk that the network could experience an outage or become vulnerable to double-spending attacks. Also note this upgrade package has been pushed back several times, making its impact dubious for now.
The Bottom Line
So, how long does an Ethereum transaction take?
It usually takes a few minutes to transfer Ethereum, transaction times are driven by network throughput, usage, and gas fees. Understanding the constraints and demand drivers of the network helps us better understand what is behind the use of the network and how its performance affects its future viability. Investing in crypto is placing a bet on the future success of an emerging technology, and Ethereum’s scalability issues threaten to slow its adoption. Competitors such as Solana (SOL) and Polygon (MATIC) with better technology are seeing growing development and use of their networks.
Though there are threats to ETH, the emergence of ETH 2.0 could put it back in the limelight over time. The digital assets market is an extremely volatile space, especially in recent market conditions. Before deciding to buy into crypto, do your research, gauge your risk tolerance, or seek investment advice from a trusted financial advisor.
