The rapid development of the blockchain sphere has brought numerous new possibilities to the world of cryptocurrencies, including uniting users globally, creating decentralized economic systems, and moving away from monopolies. However, it has also introduced a set of challenges. One of the most pressing issues, consistently highlighted in the media, is the scalability problem of networks. Overcoming this challenge is crucial for networks to embrace scalability, which is directly linked to the influx of new users into blockchains, the creation of new projects, and network congestion. Major blockchain platforms like Bitcoin or Ethereum struggle to handle the load during periods of increased demand, hindering the overall industry's progress.
There are several potential solutions to scalability issues, and many well-known companies continue to work in this direction. In this material, we will discuss sharding — a form of database partitioning aimed at relieving the main system.
What is sharding?
Sharding is a popular new solution for scaling Layer 1 blockchains like BNB Smart Chain (BNB), Ethereum (ETH), Bitcoin (BTC), and Solana (SOL). Usually, it is applied as a method to increase network throughput. Sharding is also considered a strategy for scaling databases and applications, and the process of implementing this strategy is referred to as sharding.
Scaling blockchain while maintaining decentralization and security is a technically challenging task. Sharding technology, according to developer experts' assumptions, is expected to address this challenge.
What does cryptocurrency sharding entail?
In simple terms, sharding is a new form of splitting a blockchain's database applied to its distributed ledgers. Large databases are divided into small functional pieces, thus distributing the load more evenly.
Nodes, the main points or nodes of the network, are responsible for distributing data in the blockchain. They enable the direct transfer of information among themselves, without involving a third controlling entity (achieving decentralization). Due to the enormous network loads, nodes require additional "helpers" to process data. These helpers are known as shards, which take on specific tasks within their own subdivisions: nodes, transactions, smart contracts, and individual blocks.
Sharding operational principle:
- Selection of a significant block of information (logical dataset) to shard.
- Information from the shared database of this block is divided into microblocks and distributed across different servers (shards).
- Establishing interconnections between all blocks for the proper functioning of the system.
Why is sharding needed?
First-level blockchains require all nodes in their networks to store and process all information about conducted transactions (a complete copy of the entire blockchain). Nodes are responsible for storing:
- Account balances;
- Contract codes;
- All additional data.
Nodes also participate in processing all transactions, essentially forming a single massive network node. Over time, nodes become filled, and their operational speed decreases, leading to increased transaction fees. Notably, speed is a crucial factor when dealing with highly volatile and unstable assets. The blockchain's speed is typically determined by the speed of operation of a single node.
Sharding technology eliminates the need for nodes to store and process the entire blockchain, positively impacting the overall performance of the blockchain. Now, each node will report to the main chain about the work done, providing only the results (key indicators), rather than a complete report.
It's worth noting that sharding will be implemented at the protocol level.
Significance of Proof-of-Stake mechanism for sharding
The transition of blockchains to the Proof-of-Stake consensus mechanism provides additional security to the system and increases the computational power of its nodes. Remaining on the early Proof-of-Work mechanism, nodes susceptible to sharding would be weakened to the point that hacking them would be relatively easy.
With sharding on PoS, malicious individuals cannot concentrate on a single shard, as the necessary information will be distributed among several shards.
Drawbacks of sharding
While sharding may seem like an ideal solution to resolve the main blockchain issues, it has not been universally adopted by all leading blockchains. Two main drawbacks of sharding are:
- Communication
The logical division of one chain segment into parts would only be logical if all these parts could communicate with each other as smoothly and quickly as if they were one entity. Currently, the mechanism of such communication raises concerns among developers and requires thorough verification.
- Security
Security refers not so much to the vulnerability of a system divided into shards but to the absence of trust algorithms between nodes and shards. To ensure data security, nodes are given specific rules for exchanging information, and they must reach an independent consensus. The additional fragmentation of the system makes this process much more challenging to implement.
Conclusion
Sharding is a concept familiar to the world even before the invention of cryptocurrencies. The sharding strategy was widely used in the late 1990s in the management of traditional centralized databases.
The term "shard" became known through the multiplayer role-playing online game Ultima Online. In an effort to relieve the system, developers distributed players across different "worlds" (servers), successfully handling the massive traffic and avoiding overloads.
The segmentation of blockchains into manageable segments solves one of the most significant problems in the cryptocurrency world – the scalability problem. Without this, the crypto industry cannot progress further in its development, and standing still is no longer acceptable, given the large number of users involved in this ecosystem today.
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If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Risk-Reward Ratio Explained” and “Role of Crypto in Crowdfunding: ICOs, IEOs, and STOs”.
