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There are two ways a monolithic blockchain (a blockchain that provides its own security, executes its own transactions, and maintains its own data availability) can scale: increase capacity at the base layer (on-chain), or move transactions to a second layer (off-chain).
On-chain scaling techniques are upgrades made to a blockchain’s base layer to improve scalability. long-term, on-chain scaling solution is called sharding which actually splits the base layer into 64 chains with shared security ensured by the Beacon Chain.
Off-chain scaling refers to scaling solutions that use external execution layers (Layer 2s) rather than the base layer. These Layer 2s, or “L2s” are secondary layers that sit on top of the base layer, inheriting the mainchain’s security while providing more transactional capacity for the blockchain overall.
Ethereum is pursuing both off-chain and on-chain scaling strategies.
“Ethereum 2.0” (remember this term is deprecated!) is the response to these challenges. It’s a massive upgrade to the entire Ethereum ecosystem to accommodate continued growth and an increasing workload, consume less electric power in its verification process, and to be more secure from attacks. In essence, the Ethereum upgrade will make the network more scalable, sustainable, and secure. That is why Ethereum is changing.
Sharding
??After the switch to Proof-of-Stake, sharding is the next significant hard fork upgrade on Ethereum’s roadmap. Just like the Merge, the sharding plan has evolved over time and may continue to change between now and implementation.
With blockchains, there are two main approaches to scaling:
- Vertically, i.e. making the network’s nodes more powerful
- Horizontally, i.e. adding more nodes (with no improvements to their performance)
Because Ethereum prioritizes decentralization and security above all else, it must be designed so that everyone has the option and ability to run their own node. This means the first option, vertical scaling—which typically leads to more expensive and onerous hardware requirements—is not an option. Ethereum must keep the requirements to run a node low so that it’s open to nearly everyone.
Horizontal scaling is where sharding fits in. Sharding is the partitioning of a database (or blockchain) into subsections. Rather than building layers atop one another (e.g. L2s or Bitcoin’s Lightning Network), sharding scales out or horizontally without a hierarchy or layered structure. Doing so does not create more burden for the average user.
Shards will be divided among nodes so that every individual node is doing less work. But collectively, all of the necessary work is getting done—and more quickly. More than one node will process each individual data unit, but no single node has to process all of the data anymore. Original diagram by Hsiao-wei Wang, design by Quantstamp
In Ethereum’s vision of a sharded chain, a (pseudo) randomly-chosen committee of validators are randomly selected and assigned to specific shards. This means they are only responsible for processing and validating transactions in those specific shards, not the entirety of the network. The randomness of the validator selection process ensures it’s (nearly) impossible for a nefarious actor to successfully attack the network.
Initially, prior to the breakthrough in rollups, Ethereum’s plan was to do sharded computation. However, now with rollups providing the much-needed network scalability, sharding will focus on data availability to provide throughput for the rollups. This is because the bottleneck for rollup scalability is data availability capacity rather than execution capacity. This will give L2s more space to store the chain’s data and offer additional data capacity for rollups.
In a sense, shards will serve as data storage “buckets” for new network data storage demand from rollups. This enables tremendous scalability gains on the rollup execution layer. Just as significant, shards will also help avoid putting overly-onerous demand on full nodes, allowing the network to maintain decentralization.
Sharding will be released in a multi-step process to provide immediate data availability for rollups before releasing the ultimate but more complex vision. A small subset of data shards (four) will initially be released to keep complexity low, i.e. a slow, controlled rollout.
Earlier, we outlined one reason why Ethereum transaction fees were so high was due to all nodes in the network having to process all transactions and reach consensus. Sharding is the answer to the question, “What if each node did not have to process every operation at the same time?” What if, instead, the network was divided into subsections (shards), that operated semi-independently until finally reaching consensus through a central hub (Beacon Chain)?
Shard 1 could process one batch of transactions, while Shard B processes another batch. This would effectively double the transaction throughput of a blockchain, since our limit is now what can be processed by two nodes at the same time. If we can split a blockchain into many different sections, then we can increase the throughput of a blockchain by many multiples.
Ethereum will be split into different shards, each one independently processing transactions. Sharding is often referred to as a Layer 1 scaling solution because it’s implemented at the base-level protocol of Ethereum itself.
