How Ethereum Measures Up to the Stock Market

By Sam Schumacker

One common complaint about Ethereum, a global computing network, is that its transaction time is just too slow. Some have compared Ethereum blockchain to Visa, for example, pointing out that the former processes 15 transactions per second while the latter does more than 45,000. Ethereum's speed in hindered by the fact that there is a limit to the the number of computations per block. A skeptic would say that this slow transaction time proves that Ethereum is insufficient as a payment platform. An optimist, on the other hand, would argue that this is just the beginning, and there's plenty of room to scale.

While comparing Ethereum transaction times to Visa provides an interesting data point, the comparison is flawed. It juxtaposes a top company in a mature industry against an emerging technology and conflates credit card payments with fully settled transactions.

To understand the future direction of blockchain technology, and Ethereum in particular, we need more data. So here is another data point to further the discussion: a comparison between the transaction volume of the Ethereum blockchain to that of major stock exchanges world wide.

Why is this worth exploring? Well first, consider what a stock exchange is. A stock market is a venue for companies to raise capital, and a platform for the exchange of thousands of products from the simple (stocks) to the more complex (listed options, structured warrants). Several exchanges also offer settlement, clearing, and custody services. Compared to a credit-card business, much more work is being done for any given transaction: listing, trading, settlement, keeping track of ownership, and more. This sounds very similar to functions directly offered by, or easily extendable from, the Ethereum blockchain.


    At first glance, the above chart tells us what we could have already guessed, which is that the largest stock exchange in the world (by market capitalization of listed companies) sees more trades than other, smaller exchanges. But where does the Ethereum blockchain stand in comparison to other major exchanges around the world? Viewing the same data with a log-scaled Y-axis, which shows growth in non-linear terms, paints a clearer picture.


      Even just over the past several months, the above chart demonstrates the number of daily transactions on the Ethereum blockchain has grown by several orders of magnitude. This period coincides with a broader increase in awareness of Ethereum worldwide, and this rise in transactions may reflect the resulting interest and speculation. Just 18 months ago, Ethereum transaction volume was below even that of a small regional exchange. Today, it is comparable to exchanges in major financial centers such as London and Hong Kong. The comparatively stable transaction counts of the major stock exchanges reflect the maturity of that business model. Meanwhile, as cryptocurrency regulations worldwide are more clearly defined, and if technologies like smart contracts come into broader usage, there may be further catalysts for growth in Ethereum transactions.

This comparison has its limitations, of course. Transaction volume is more easily compared across platforms than the quantity or value traded, but the assets themselves can be very different. In the broader Ethereum blockchain, any number of these transactions could be one-off smart contracts, whereas traditional exchanges deal in standardized products. Furthermore, Ethereum might have fewer transactions than a given exchange on a day-to-day basis, but more on a month-to-month basis, by virtue of operating 24 hours every single day.

Still, the stock exchange comparison gives us a clearer sense of Ethereum's general direction, and reason to be optimistic about Ethereum's viability going forward, whether as a platform for payments or for more complex transactions.

Sam Schumacker is a Chicago-based finance and technology professional. This article was written in collaboration with Curvegrid.


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