What Is Sharding in Cryptocurrency?

Sharding is a technique for separating large databases into smaller, faster, more easily managed parts called data shards. The word shard means a small part of a whole.

Each subset of data is called a shard or node, and all the shards together comprise the entire dataset. The number of shards in an application depends on its performance requirements, such as storage capacity or read/write speed.

The objective of sharding is to distribute data across multiple machines and allow multiple transactions to happen in parallel. In other words, the goal is horizontal scalability. Sharding can be used in blockchain networks as well. For example, Ethereum plans to implement sharding to its network in order to boost its scalability.

In this article, we’ll explain what sharding is and how it works in Cryptocurrency.

Sharding is one of the most promising scaling technologies in the cryptocurrency space that has been gaining attention lately. Sharding is a process that aims to enhance blockchain scalability by splitting it into smaller units (known as “shards”) that can be processed in parallel and thus add to the network’s overall transaction throughput capacity. 

Why Do We Need Sharding?

When a node wants to participate in a cryptocurrency network the client downloads the whole transaction history. The reason for this is so that it can validate the transactions and verify that no double spending has happened. This means that in order to participate in a blockchain you have to download all of the data.

If you want to host or run a node in Bitcoin and receive the full block reward you need at least 200GB of storage space, as of April 2018. In Ethereum this number is even higher, as of April 2018 there are over 100GB of data stored on each node. With a typical internet connection downloading all this information takes about two weeks. This is not practical for most people who want to get involved in a cryptocurrency network.

Sharding was first introduced in database management systems to improve the performance, efficiency and scalability of database services by splitting data across multiple machines. Sharding is used in modern database systems because it can increase the overall speed of an application. The same idea is now being applied to blockchain technology as well.

Blockchain networks like Ethereum are trying to implement sharding with the aim of increasing the scalability of their network, which would allow them to process more transactions at a faster rate. Ethereum co-founder Vitalik Buterin has been researching and developing the concept of sharding for some time, and that research resulted in the creation of EIP 1559, one possible implementation of sharding on Ethereum.

The idea of sharding has been around for a while, but it was first used in the cryptocurrency world by Zilliqa. The proof-of-work (PoW) blockchain model isn’t ideal if you want to create a network that can handle a high volume of transactions. Zilliqa was the first company to try and fix this problem by creating one of the fastest blockchain networks on the market.

Zilliqa uses a sharding solution that allows it to increase its transaction capacity as more nodes join the network. The more computers are added to the network, the more transactions can be processed per second.

How Sharding Works

A blockchain is a distributed ledger that consists of data stored in blocks; each block contains a certain amount of data, and these blocks are chained together to form the ledger. The chain is maintained by nodes — participants which hold a copy of the entire ledger and update it when new information is received. Each node must validate new data before it can be added to the chain. If a company needs to scale up their system, they have two options: buy more expensive hardware or find an alternative solution that makes use of their existing hardware better.

Sharding is one of several approaches to database scaling and high availability. Other approaches include response caching, master-slave replication and cloud hosting.

Sharding distributes the data across multiple servers, as shown in the diagram below. Each shard acts as a separate database, and each database server handles read and write operations for its own shard. In order to split a database into shards, each shard must contain some type of metadata that assists with identifying which data should be stored in which shard.

Ethereum is planning to use sharding for its scaling solution. Currently, there are two types of nodes in Ethereum: full nodes and light nodes. Full nodes store all the information about the blockchain (up to 1 terabyte) while light nodes store only a small portion of that information or just a summary of what’s happening on the chain. With Ethereum’s sharding solution, full nodes will be split into “collation” and “attester” nodes. By doing so, collation nodes will have far fewer validators than full nodes have right now and will be able to store much less information than full nodes do at present. This means that more people will be able to participate in the network as validators and maintainers.

This approach offers several benefits:

Benefits and Advantages of Sharding in The Crypto Market 

As mentioned above, sharding aims to divide the large workload into small sub-workloads. This, in turn, helps to improve scalability and efficiency of a network. The benefits of this method include higher throughput and faster transaction speeds. The latter is particularly important to crypto exchanges that are looking for an alternative and more efficient way to handle users’ transactions.

  1. Reduced costs – Sharding allows you to grow your database horizontally instead of vertically because each shard can be hosted on a separate server. This means that you can start off with less powerful, less expensive hardware and then add more shards as your system grows in size or needs more processing power. 
  1. An increase in demand for transactions on blockchains causes congestion and increases the value of transaction fees; this can cause problems in cryptocurrency ecosystems where the “miners” are rewarded with the transaction fees. The higher the value of the fee, the more incentive there is to mine blocks. However, if transaction fees are too high, they can be prohibitively expensive for some users — which could lead to a decline in adoption.
  1. Faster queries – The shards can be distributed on different servers, which reduces the time it takes for each query because there’s less data to search through.
  1. Increased Scalability: The throughput increases with the increase in number of nodes which can be used to support more transactions per second on a network. The idea behind sharding is similar to storing different data in different database servers or using multiple servers for different tasks. This helps in maintaining a database that is large and can handle many transactions per second.
  1. High Availability: Since database is divided into smaller databases called shards, even if one fails there are many other shards that can help in maintaining network availability.
  1. Decreased Latency: When you have multiple database servers, they can be placed closer to users and

The Disadvantages of Using Sharding 

The disadvantages of sharding are really in the implementation, not the concept. Implementing sharding is difficult and requires hard forks since there are many variations of sharding proposals. Further, without proper implementation and testing, it can lead to centralization risks due to broken chains or improper rewards distribution.

Some of the biggest issues with sharding are in the practicalities. For example, if you have multiple shards (blocks of data), then how do you know which one has the most up-to-date information? If one shard has an old version of some data and another has a newer version, which one should be used? This is called “shard synchronization,” and it’s something that developers need to work out before they implement a new system

  • Shards can become unavailable if any network errors occur
  • It takes time to re-shard when the number of nodes changes in the system.
  • It can be difficult to locate information in the event of failure

Sharding isn’t like a magic wand that can solve all blockchain problems at once. It’s a concept that requires a lot of work to implement, and there are always tradeoffs. Security will always be the primary concern for blockchains — if you make it easier for someone to attack the network, then you have to make sure that your security is still good enough to fend off those attacks.

It is clear that sharding has great potential as it could help to increase the number of transactions per second by increasing the number of shards. As a result, users would be able to enjoy faster transaction times. And when it comes to cryptocurrency exchanges and trading platforms — that is what matters the most.