Over the past year and change, there simply hasn't been a more impressive asset class than cryptocurrencies. In just over one year's time, the aggregate value of every single virtual currency added up catapulted from less than $18 billion to $835 billion. Yes, this includes new coins that entered the market, but it also demonstrates just how rapidly cryptocurrency valuations exploded higher.
With nearly 1,500 cryptocurrencies now listed, the market is getting crowded. What's more, the proprietary blockchain technology that's fueled this rally in alt-coins is getting tougher to differentiate. For those unfamiliar, blockchain is the digital, distributed, and decentralized ledger that underpins virtual currencies and is responsible for logging all transactions without the need for a financial intermediary, which is often a bank.
These cryptocurrencies are among the quickest at processing transactions
Though there are a lot of factors that should be taken into account when differentiating one proprietary blockchain from another, transaction speed per second certainly comes into play. Understandably, transactions per second isn't an all-encompassing measure, since few, if any, sources have examined hundreds of cryptocurrencies side by side under similar stress simulations. In addition, transactions per second fails to take into account block resolution times, which do matter. Nevertheless, a fast processing time is bound to turn heads for investors and potential enterprise customers.
Surprisingly, the two most popular networks are notoriously slow, all things considered. According to a recent analysis from HowMuch.net, bitcoin has a maximum processing time of just seven transactions per second. Similarly, Ethereum's 20 transactions per second isn't much better. By comparison, payment facilitator Visa (NYSE:V) is capable of 24,000 transactions per second using the existing payment networks, so it doesn't look to be dethroned anytime soon.
There are, however, three cryptocurrencies that appear capable of processing 1,500 or more transactions per second while under stress.
Ripple: 1,500 transactions per second
Among the largest cryptocurrencies by market cap, Ripple holds down the current title of quickest processor of transactions, at 1,500 per second. Though that's still miles away from Visa, it's a solid starting point considering its focus on partnering with financial-services companies.
Since November, Ripple has announced two major partnerships. The first, in November, involved a cross-border test with American Express (NYSE:AXP) and Banco Santander (NYSE:SAN). American Express users can send non-card payments to U.K. Santander accounts that'll process through Ripple's blockchain and settle almost instantly.
The second partnership, announced last month, involves money-transfer service MoneyGram International (NASDAQ:MGI). MoneyGram will test quicker-settling money transfers while incorporating Ripple's XRP coin. Imagine a U.S. customer sending dollars to a recipient in Mexico through MoneyGram. These dollars can be converted into XRP coins, and then from XRP into pesos, almost instantly -- and for a fraction of the normal cost to send money via a money-transfer service. Ripple has had no trouble landing willing partners of late, but it has yet to move into any larger tests of its blockchain.
NEM: 4,000 transactions per second
Another cryptocurrency making waves in recent months is NEM, the so-called "smart asset blockchain." According to NEM, its blockchain is capable of operating at 4,000 transactions per second, which is likely to turn some heads.
What makes NEM's blockchain unique is that it sought to tackle one of the biggest corporate objections: how to incorporate blockchain technology into existing networks. After all, doing so could be extremely costly and time-consuming for some businesses and industries. Thankfully, NEM allows for a wide array of blockchain customization, which is a big reason why its network operates so efficiently.
Unlike Ripple, which focuses on financial institutions, NEM appeals to industries that move beyond the financial industry or currency applications. It offers authentication and notary-type services with cryptographic signatures, and it can also utilize its blockchain to turn rewards points into a usable currency for retail consumers, just to name a few of its potential features.
With only one major partnership currently under its belt -- the government-owned Malaysia Digital Economy Corporation -- NEM still has a lot to prove. Nonetheless, it's off to a good start.
RaiBlocks: 7,000 transactions per second
While everything is debatable when it comes to cryptocurrencies, RaiBlocks might just hold the title for fastest transactions per second, at 7,000 -- and it's assumed that a hardware improvement could boost these figures even more.
RaiBlocks uses a block-lattice architecture, whereby each account has its own blockchain. The advantage of this approach is that account chains can be updated instantly, without consensus from the rest of the community, resulting in quick transaction times. It is worth noting, though, that since RaiBlocks validates transactions by the proof-of-stake model, sending funds peer-to-peer requires two separate transactions -- one where funds are deducted, and another where funds are added to the receiver's account balance. It's a bit burdensome, but the process is fee-free, quick, and purportedly very scalable.
Ultimately, the developers behind RaiBlocks would like financial institutions to accept the XRB coin in much the same way fiat currencies are accepted today. They'd also like it to be an option for underbanked regions of the world.
Something to keep in mind
Though all three of these virtual coins offer an incredibly quick transaction processing time, blockchain technology itself is still largely untested, and that's something investors have to keep in mind.
Bitcoin brought blockchain technology into the mainstream nearly a decade ago, but enterprises have only recently given it the time of day in small-scale and demo testing. This isn't to say blockchain won't become the game-changing technology most people expect it to become so much as to point out that the timeline needed for businesses to adjust to this new technology and make the jump to incorporating it could be much longer than most folks figure. It's not uncommon for investors to overestimate how quickly new technology will be adopted, and there's a very good chance we've seen this happen once again with blockchain.
Long story short, keep an eye on Ripple, NEM, and RaiBlocks, as they offer something unique that bitcoin and Ethereum have struggled with: quick processing times. But by the same token (no pun intended), keep your expectations of broader-scale blockchain rollouts for the likes of Ripple, NEM, and RaiBlocks in check.