The Ethereum developer community has been keen to address the blockchain’s prevalent scalability challenges via development updates. Following the shift to proof of stake (PoS), the next scalability step is Ethereum sharding.

Read on as we define sharding, explain how it works on the Ethereum network, and highlight its importance.

Sharding is a scaling solution aimed at improving the Ethereum network’s capacity and transaction speed.

The Ethereum “mainnet” is divided into smaller, interconnected networks called “shards.” Each shard processes its own transactions and smart contracts parallel to the others, significantly increasing the network’s throughput and helping to reduce gas fees.

Sharding also helps to decentralize the Ethereum network as it reduces the load on individual nodes by distributing the transaction load across many nodes.

Ethereum sharding starts with the division of the network into multiple sections. Each shard handles a set of nodes that process transactions. Consequently, the nodes in each shard process transactions that belong to that shard. The validators on each shard verify the transactions and maintain the state.

Allocation to a shard is random and requires validators to have a stake to participate. Under the proof of stake consensus mechanism, a validator stakes a certain amount of ETH for their participation.

The sharding technique departs from the current transaction processing format, where all nodes are involved in every transaction. Cross-shard communication prevents role duplication, with shards sharing information about their transactions.

Currently, full nodes take up plenty of space and continually increase in size as more users join the platform. Sharding reduces node sizes since users only need to store a part of Ethereum’s transactional information.

Sharding Ethereum presents various benefits and drawbacks. Here’s a look at the most significant ones.

Instead of a single chain processing transaction, sharding enables parallel processing, which increases the number of transactions. This will go a long way in rivaling Web2 transaction speeds. Payment systems such as MasterCard and Visa process up to 24,000 transactions per second (TPS), while Ethereum currently stands at 20-30 TPS.

Sharding offers the opportunity to scale without compromising transaction security. Ultimately, people can validate transactions without specialized hardware or high electricity consumption.

With transaction processing broken down to the shards level, attackers could potentially target a single unit. If such an action were successful, the bad actors could share information on invalid transactions with other shards, potentially compromising the entire network’s security.

The possibility of collusion arises with the splitting of nodes into smaller groups. Such collusion could potentially lead to a form of centralization that goes against the ethos of Web3.

However, danksharding is a possible solution to the challenge of ensuring diversity and randomness in the composition of the committee members.

Developers may need to modify their smart contract codes since not all may be compatible with sharding. For those already live on the network with no upgrade option, that may present a challenge in their execution due to the incompatibility.

Sharding offers a solution to the high gas fees and low transaction speeds that hinder the use of the Ethereum mainchain from mass adoption.

Overly optimistic projections suggest sharding could help hit 100,000 transactions per second. Such speeds would present Ethereum as a convenient payment infrastructure that could rival mainstream payment rails.

With the number of participating nodes increasing, the power distribution also increases (provided there’s no collusion). This would lead to increased security as a highly decentralized network lacks a single point of failure.

Successful sharding implementation could open up new use cases for Ethereum as more businesses could choose to embrace the fast and secure transactions the network could provide. However, the successful implementation of sharding relies on the Ethereum developer community identifying potential challenges and developing solutions.