What is Blockchain Sharding & How Does It Work?

This digital era is all about scalability, and with blockchain 

And cryptocurrency gaining traction, there are more concerns about their scalability.

Most of the well-known crypto projects have scalability issues in terms of the time and cost required to complete a transaction. 

The efficiency of a project is strongly influenced by its scalability. Users will always choose the network with the lowest cost and fastest speed for performing a particular transaction. For example, an NFT transfer on the Ethereum network will cost up to $6, whereas an NFT transfer on the Polygon will just cost $0.00055. 

Scalability has evolved as a major concern for blockchain networks desiring to stay relevant in the highly competitive crypto market. As a result, the developer community is working on Sharding, a database partitioning technique used to improve the blockchain’s scalability and capacity. It enables blockchains to execute more transactions per second. Let’s have a detailed look at it. 

What is Sharding?

Sharding is simply a partitioning technique used to distribute computational and storage effort across a peer-to-peer (P2P) network so that each node is not responsible for handling the network's transactional load. It divides a blockchain’s entire network into smaller partitions known as "shards." Each shard is made up of its own data, making it different from other shards. Instead of a node storing all the information, each node stores only information about its division or shard.

Sharding is used by blockchain companies to increase scalability by processing more transactions per second. Every node can still view every ledger entry; they just don't process and retain every piece of data. This means that a shard's information can still be shared among other shards, keeping the ledger safe and decentralized.

How does Sharding work?

To understand how sharding works within a blockchain network, it's important to know how data is stored and processed. A blockchain can be viewed as a network consisting of nodes. The blockchain nodes are completely autonomous entities that are responsible for handling all network activities, data, and transactions. Each node in a blockchain network is in charge of storing, processing, or managing the entire volume of transactions that occur within the network. 

Since each transaction is stored on each node, this significantly slows down transaction processing on a blockchain. The transactional burden of a blockchain network can be partitioned or distributed via sharding, which can be beneficial because it means that each node in the network does not have to manage or process the entire blockchain's workload. Sharding divides the workload into sections called "shards" so that it can be managed more efficiently.

Sharding is done by horizontally partitioning databases and dividing them into rows. The rows are conceptualized as shards based on their characteristics. For example, one shard could be in charge of storing the state and transaction history for a specific type of wallet address. Shards may also be divided based on the type of digital asset they store. 

For a better understanding, consider a large database with eight rows. The table can be divided into four smaller, horizontal rows for easier processing of the large data table. Similarly, horizontal partitioning in blockchain sharding aids in the conversion of larger databases into smaller and more efficient versions of the original while retaining key features. 

Each shard can still be shared with the other shards. In other words, a shard could perform tasks like coordinating with other shards for transaction processing. Suppose shards are divided on the basis of wallet addresses, and two people from different shards want to make a transaction involving a particular digital asset. Then the transaction could be made possible by combining shards.

Advantages of Sharding

• Scalability: The most significant benefit of using sharding on a blockchain is increased scalability. Through the use of sharding, a blockchain can connect more nodes and store more data without significantly slowing down transaction times.

• Data Compression: Sharded blockchains allow nodes to avoid downloading the entire blockchain's history or validating every transaction that passes through the network. This improves network performance and enables blockchains to scale to handle a larger number of users.

• Improved Accessibility: Additional benefits of sharding may include increased network involvement and improved user accessibility. Sharding in many cases can reduce the amount of hardware required to run a node, making it possible to do so on a consumer device such as a personal computer or even a mobile phone. As a result, more people will have the opportunity to join the network.

Limitations of Sharding 

• Shard Corruption: In the Sharded network, blockchain security comes into question because taking over a single shard is easier than taking over the entire network. Even though each shard is self-contained and only processes data relevant to itself, there is a security risk associated with the possibility of the shards becoming corrupted. If we consider each shard to be its own blockchain network, a hacker can gain control of a shard. Following that, the attacker may introduce fraudulent transactions.

• Collision of Shards: One of the security concerns is the possibility of one shard taking over another or of one shard overriding another. As a result, there is a chance that some or all of the information will be lost or that malicious shards will introduce corrupted data into the network. This security risk is mitigated on Ethereum 2.0 by randomly assigning nodes to shards, followed by random reassignment of those nodes at random intervals.

• Complexity in reaching consensus: As sharding divides a single blockchain into smaller shards. Therefore, in order to reach a consensus, sometimes a shard needs to communicate with the nodes from the other shard. It becomes complicated if the developers do not handle the communication between the shards properly.

Popular Blockchain protocols that use Sharding 

The application of sharding is still in the testing phase, and several blockchain projects are working on it. Here are a few well-known blockchain networks that use sharding to have high throughput and accessibility.

Ethereum

The fundamental idea behind Ethereum was more than just the need to create a new currency. Now, it is at the forefront of sharding research as a potential solution to scalability and latency issues. According to Ethereum's official website, sharding will be present in 2023.

The sharding of Ethereum is a multi-phase upgrade that will improve scalability and capacity. Shard chains will provide additional, lower-cost storage layers for applications and rollups. They allow Layer-2 solutions to offer low transaction fees while maintaining Ethereum's security.

Sharding will complement layer 2 rollups by spreading the burden of handling the large amount of data required by rollups across the entire network. This will continue to reduce network congestion while increasing the number of transactions per second. These shards will give Ethereum more capacity to store and access data but will not be used for the execution of code.

Ultimately, sharding in Ethereum 2.0 will reduce the demand for all compute power, storage, and network bandwidth linearly. However, this results in lower data availability, and cross-shard transactions are required to validate data.

Polkadot 

Polkadot is the next interesting entry among sharding blockchain projects. Sharding in Polkadot means splitting up the work that occurs across multiple sub-blockchains. All of these sub-blockchains are referred to as "parachains." It is a useful approach to distributed database sharding and provides a more straightforward view of the blockchain.

Each parachain has its own state-transition function designed specifically for a particular use case. Different types of transactions have different specialized chains that efficiently serve their users. Polkadot provides security as well as messaging functionality for all parachains that are connected.

Computations performed by each shard on Polkadot are inherently independent, which increases network capacity. However, because there is no way to validate data between shards, dispersed mining reduces data availability and security.

NEAR

Sharding is the key aspect behind the NEAR Protocol’s design. NEAR follows the concepts of Nightshade and Dynamic Resharding, both will be introduced in 2023 to increase scalability. Nightshade will enable keeping a single data chain while dividing the computing required to keep this data into "chunks." These chunks are processed by nodes, which add information to the main chain. 

Nightshade architecture allows for fewer potential points of failure in terms of security, as participating nodes are only responsible for maintaining smaller sections of the chain. Additionally, the blockchain is designed to allow any low-cost device to function as a node in the network.

The idea of dynamic resharding will be introduced after nightshade. In dynamic resharding, instead of a fixed number of shards, the network on NEAR will adjust the number supported regularly based on user demand. NEAR can reduce the average cost of using the network while maintaining the potential for high transaction throughput by dynamically adjusting the number of shards used.

Conclusion

Sharding, which divides a blockchain network into separate shards, can help reduce network latency or slowness. This has the potential to accelerate the adoption of blockchain technology across a wide range of industries, especially the financial sector. If transactions can be completed more quickly, fintech businesses that use blockchain technology may find competing with centralized payment systems easier.

However, it is worth noting that the application of sharding to blockchain networks is currently in the preliminary testing phase. The benefits of sharding are not guaranteed, and it may pose some security risks. Also, sharding is not the only way to achieve scalability. Other solutions, such as layer 2 scaling solutions are also available.