Sharding is a process used extensively in databases for enhancing their efficiency. A shard represents a horizontal section of a database, and separate servers store each shard. The result is a uniform spread of the load, which in turn, increases database efficiency.
When sharding is implemented within blockchain, each node contains only a certain section of the blockchain data and not the complete information. Nodes which use a shard maintain the data within their specific shard on a sharing basis.
This process still maintains the decentralization system and the entire blockchain avoids data overload with information from all the nodes. This tweaking enhances scalability and enables the blockchain to handle a higher volume of transactions every second.
Why is Sharding Necessary?
All cryptocurrencies, including Bitcoin and Ethereum, are infamous for their poor scalability and transaction rate issues. Bitcoin only processes 3-4 transactions every second and Ethereum about 20 per second. On the contrary, the processing speed of Visa is 1667 transactions per second and PayPal almost 193 transactions/sec. Therefore, compared to the centralized systems, the transaction speed of even the major cryptocurrencies is extremely low.
This poor processing speed not slows down the transactions, but also adversely affects the efficiency of the network. Transactions that process slowly end up obstructing the network. This creates difficulty for customers using these digital assets for real-time payments. For instance, imagine paying for groceries using Bitcoin and having to wait for 15 minutes for transaction validation and processing.
Therefore, with such poor speeds, cryptocurrencies don’t present a feasible solution for real-time transactions and payments. Implementing sharding helps counter these rate and scalability issues.
How Sharding resolves Scalability issues?
Currently, all the nodes of a blockchain network have to validate a cryptocurrency transaction to complete it. This implies that whenever someone transacts using cryptocurrencies, thousands of computers have to approve the transaction.
The positive aspect of requiring many nodes is the increased security which it adds to the network. However, the negative aspect is that the network ends up becoming slow due to data overload.
Sharding fixes this problem by reducing the number of nodes participating in the validation process.
Sharding is defined as the process involving the division of all the blockchain nodes into ‘shards’, which subsequently provide approval for the transactions. By reducing the load of the nodes on the blockchain, it eventually solves the scalability issue of the network.
The Technical mechanism of Sharding
All blockchains have computers in their network called nodes which maintain a shared version of all the network data. Therefore, each node retains all the information in the specific blockchain.
The blockchain use a consensus mechanism for validating the transactions on the network. This consensus mechanism makes use of a POW (proof-of-work) algorithm. According to this algorithm, a miner needs to mine for validation. Such miners involve a combination of a user, special function software and a powerful hardware system. Mining implies first solving a very complicated cryptographic puzzle and then adding a new block. As the miner completes the operation in a high speed, the rest of the nodes require approval for the transaction.
Such a network system with a POW algorithm may add security but adversely affects the transaction throughput.
On the contrary, a blockchain with sharding uses a different consensus algorithm known as POS (proof-of-stake). A POS algorithm contain designated nodes which take the responsibility of validating a transaction. These nodes are known as ‘stakers’, since they involve staking of the crypto assets for validating the transaction. When transaction validation is successful, the staker gets earns a portion or all the fees for transaction. The greater the number of crypto asset stakes involved in transaction validation, and the longer the stake duration, the bigger the number of complete transactions that a node can validate.
Advantages of POS over POW
The POS algorithm enjoys certain advantages over the POW algorithm, some of which are:
- There is a designated number of nodes involved in transaction validation, and not the complete network.
- The energy needs are much lower.
- There is no need for costly, function-specific powerful hardware as the process does not involve mining.
- The process of identifying highly loyal validators is easy. All one needs to do is to identify the ones involved in staking of a greater number of tokens over a long period of time.
- A blockchain implementing sharding can identify stakers in every shard that involve users responsible for transaction validation. As the staker loyally carry out transaction validation, the blockchain security remains high.
Current use of Shards
The use of sharding is in a preliminary phase in the blockchain ecosystem. However, it has found significant application in some projects like SHARD (Shard Coin). An ambitious project involving TON (Telegram Open Network), at present in a phase of privately held token sale, also plans to use sharding. Their aim is to use it to accelerate transactions on their network.
The messaging app Telegram is developing TON and plans to use their cryptocurrency GRAM for remittance-free cross-border transactions.
Challenges in the Adoption of Sharding
To widely implement sharding in the blockchain, crypto and blockchain, it is necessary for developers to improve inter-shard communication. Contrary to inter-node communication, which is relatively easy, communication between shards needs the development of a different protocol. However, this protocol is still in its infant stages and without it the inter-shard communication would be ineffective. Therefore, many technical hurdles prevent sharding-associated blockchain from becoming a widely adopted phenomenon.
Additionally, fear exists that groups of shards could be vulnerable to hacking. Therefore, it might result in a double spending of cryptocurrencies. Similarly, other scaling solutions like Lightning Network and Raiden Network gained prominence in improving blockchain scalability. As long as the focus is on them, companies may not invest in the development of the shard mechanism.
For cryptocurrencies to render mainstream payment channels obsolete, they need to enhance their transaction rate manifolds. Scalability is not a luxury, but a necessity for the mass adoption of the crypto system.
Sharding, with its simple and effective mechanism, could be key in resolving scalability issues. This can only happen if the associated complications are successfully dealt with.
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