Crypto vs. Credit Cards

By guest author Shelly Palmer. Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and the CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and CNBC and writes a popular daily business blog. He’s the Co-Host of the award-winning podcast Techstream with Shelly Palmer & Seth Everett and his latest book, Blockchain – Cryptocurrency, NFTs & Smart Contracts: An executive guide to the world of decentralized finance, is an Amazon #1 Bestseller.  Visit

VisaNet can process more than 65000 tps (transactions per second). By comparison, Bitcoin (BTC) can only process ~5 tps. Therefore, Bitcoin (and other cryptocurrencies by proxy) are inherently too slow for practical use. Before you buy into this apples-to-oranges comparison, let’s define the word “process.” With a little more clarity, you will be better able to frame your thoughts about centralized (VisaNet) versus decentralizsed (Proof of Work) crypto transactions.


According to Visa, there are approximately 3.3 billion Visa cards worldwide and VisaNet, the company’s global processing network, can handle more than 65,000 tps (transactions per second). On an average day, Visa processes only about 2,000 tps, but it’s nice to know that if everyone on earth had a Visa card, VisaNet wouldn’t blink. Fast, secure, reliable payments are core values for Visa. It has been scaled to global proportions, and it is one of the most secure financial networks in the world.

Processing vs. Settlement

When a merchant processes your credit card transaction on VisaNet, the transaction is approved, but it is not settled. It may take days (or longer, depending on the merchant’s deal with Visa) for the merchant to receive the money. Importantly, even after the money is received, the deal is not settled. You (the customer) have the right to reverse the transaction by requesting a chargeback from Visa. If your claim prevails, Visa will take the money back from the merchant. But it doesn’t end there.

If the merchant will not refund your money and if Visa can’t or won’t charge the merchant back, you can go to a court of law and make your case. If you win your lawsuit, in some cases, the court can put a lien on the merchant’s bank accounts and get your money returned.
In practice, a Visa transaction is never settled. It’s simply processed. If all goes well, you get your goods or services, the merchant gets paid, and Visa charges a fee for its services.

Now, let’s examine a Bitcoin transaction.


Bitcoin blocks hold between 2,500 and 2,700 transactions. They are mined about every 10 minutes. This translates to ~5 tps. So in practice, you can’t have 3.3 billion people spending bitcoin. It would be impossible to confirm the transactions in any reasonable timeframe. This is absolutely true.


When a bitcoin transaction is “processed,” it is permanently and irrevocably settled. Upon confirmation of the transaction, the bitcoins have moved from one wallet to another and the only way to reverse the transaction is to do a new transaction. Nothing can roll back the blockchain to void a settled bitcoin transaction.

It makes no sense to compare a credit card transaction with a bitcoin transaction. They have nothing to do with one another.

The Trilema: Scalable. Secure. Decentralized. Pick Any Two.

The promise of Decentralized Finance (DeFi) is the financial freedom afforded by three critical attributes: scale, security, and decentralization. Unfortunately, there are some significant technical hurdles preventing any system from attaining full measures of all three. So in practice, your network can be big and secure, or decentralized and secure, or big and decentralized. But it cannot be big, decentralised, and secure.

Could Bitcoin Scale by Using Bigger Blocks?

Bitcoin blocks are 1 MB each. As of February 2022, the Bitcoin blockchain was ~384 GB. The entire Bitcoin blockchain must reside on all ~11,000 nodes in the Bitcoin network. (Learn how to run your own full node here.) This means each new 1 MB block must be transmitted through a peer-to-peer network over the public internet to ~11,000 computers. This takes about 14 seconds.

You can make the blocks bigger, but bigger blocks mean a bigger blockchain. At a certain point, only massive data centers would be able to hold full copies, which would “centralize” the world’s first decentralised cryptocurrency.

It should be noted that Bitcoin’s slow transaction speed is traded off for exceptional decentralization and security. Ethereum is in the same boat.

Ethereum Layer 2 to the Rescue!

The promise of Layer 2 solutions (such as Ethereum’s Optimism) is that they will scale because they are much, much faster. But imagine the following: you build a Layer 2 solution that can handle 1000 tps. That’s excellent scale. Your Proof of Stake protocol calls for 1001 validators to confirm each block. That’s excellent security. You grow your community to 2000 nodes. That’s excellent decentralization. Problem solved!

Except it isn’t solved, because now lots of people are starting to use your network to do ordinary things and the peer-to-peer networks over the public internet can’t handle the amount of data you need to move around to keep all your validation nodes in sync. So, you have two choices. You can reduce the number of validators (reducing security), or you can put the validators in commercial data centers where the internet speeds are not an issue (reducing decentralization). Like I said: scale, security, and decentralization. Pick any two.

The Workarounds

This is one of those “deep in the weeds” problems most people ignore because they are sure that some smart engineers will work it out. Even if that’s not possible, they figure the exponential rate of technological change we experience in the normal course of our lives is sure to provide a solution. Maybe. In the meantime, Polygon and Polkadot are doing exceptional work in this area. And there are many others. Notwithstanding the tradeoffs we’re exploring here, Layer 2 solutions are going to change the world.
How Does This Play Out?

You’re going to have to pay close attention to the strategies and philosophies of this new class of DeFi solutions. Each new network and protocol—in fact, every blockchain-based solution—will have to be designed to balance security, scalability, and decentralization for its specific use case. You will want to be well aware of those tradeoffs. But remember, there is a nontrivial difference between processing a transaction and settling a transaction.

Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it. I am not a financial advisor. Nothing contained herein should be considered financial advice. If you are considering any type of investment you should conduct your own research and, if necessary, seek the advice of a licensed financial advisor.