Throughput and Latency Constraints

Throughput and latency constraints are the fundamental physical limits of a blockchain network, determined by factors like block size, block time, and propagation speed. High throughput allows for a large number of transactions per second, which is essential for scaling derivative markets to global levels.

However, increasing throughput often requires larger blocks, which can lead to centralization as only nodes with significant resources can participate. Latency, the time it takes for a transaction to be broadcast and included in a block, directly impacts the responsiveness of the market.

If a network has high latency, traders cannot react to fast-moving market data, creating an arbitrage disadvantage for those on the slower network.