Original title: What is Shardeum and How Does It Work?
Author: CJ, CoinGecko
Compiled by: Cookie, ChainCatcher
Shardeum is an EVM-based Layer1 network designed for linear scalability. Thanks to its advanced sharding solution, Shardeum promises to keep gas fees low forever. Shardeum will also launch its own native token SHM.
Key Takeaways
Shardeum solves the scalability problem through linear scaling and sharding, as well as automatic scaling and its unique Proof-of-Quorum consensus.
Shardeum utilizes dynamic state sharding to increase transaction throughput while keeping gas fees low.
Arbitrum is Ethereum’s scaling solution that allows transactions to be executed with higher TPS and cheaper gas fees, which is one of the reasons for the network’s popularity. Therefore, Arbitrum’s airdrop event is highly anticipated by the crypto community, with ARB rewarded to those who participate in the Arbitrum mainnet early on.
In addition, there are many protocols in the crypto space that aim to achieve DeFi expansion, and Shardeum is one of them. Shardeum was founded by the founder of WazirX, a leading Indian cryptocurrency exchange, and the team has been building Web3 projects since 2017. Shardeum completed a $18.2 million seed round in October 2022 and may airdrop to those who participate in its testnet.
Source: Shardeum Blog
In this article, we will learn what Shardeum is, as well as its unique scalability features and ecosystem.
What is Shardeum?
Shardeum is an EVM-based Layer1 blockchain designed for linear scalability, promising low gas fees while maintaining decentralization and security through dynamic state sharding. Shardeum's potential use cases range from DeFi to open source AI and gaming, aiming to bring the next billion people into the cryptocurrency space.
To overcome the blockchain trilemma of scalability, security, and decentralization, Shardeum draws on Ethereum’s decentralization and security while enhancing linear scalability through dynamic sharding and its combined Quorum and Proof-of-Stake consensus.
Shardeum will launch its own native cryptocurrency SHM. The team has announced its token economics with a fixed supply of 508 million, but SHM is still in the development stage.
Next let’s explore what makes Shardeum noteworthy.
Shardeum’s unique features
Shardeum scales by using sharding technology, which divides the blockchain into smaller, more manageable parts.
Specifically, blockchain is essentially a large database system, and sharding blockchain refers to splitting large data tables into smaller data tables. By breaking down information into manageable parts, sharding networks can process more transactions per second (TPS) than non-sharding blockchains.
Sharding is not new to Shardeum, as it is used by Zilliqa, Polkadot, Near, and even Ethereum (they use a version called Proto Danksharding). However, Sharedum uses a unique sharding technology called “dynamic sharding.”
Dynamic Sharding
Dynamic state sharding is one of the cutting-edge solutions for sharding technology. Its architecture is flexible and can easily adapt to changes in the entire blockchain ecosystem. In dynamic sharding, all nodes do not cover the same address range, but different address ranges are assigned to these nodes, so that transactions from multiple shards can be processed simultaneously instead of sequentially. This technology can reduce the time to process transactions and also help increase transaction throughput while always keeping gas fees low.
Essentially, it allows the network to add or remove blockchain shards or data storage methods on the fly, based on dynamic demand fluctuations. The advantage is that the network can be easily upgraded without stopping the ecosystem.
Unlike static sharding, dynamic sharding does not slow down the network because it can be performed as the network load changes and easily copes with fluctuations in network load.
Atomic processing and cross-shard composability
Shardeum also supports the use of atomic processing technology to ensure that transactions are executed correctly. Atomicity means that transactions can be executed partially or not at all. Without atomic processing, transactions may fail and cause inconsistent network data, leading to security risks and reduced reliability.
Shardeum combines atomic processing and cross-shard communication to allow transactions to access data and status of different shards. It will enable complex transactions and smart contracts to be executed in a sharded environment, making coding easier for smart contract developers.
Automatic scaling feature
Because the load and demand on the network can change over time, automatic scaling needs to adapt to highs and lows in demand without compromising security and network performance.
Autoscaling is based on load to measure the network load every period (1 minute) and it will reach a consensus with the number of validator nodes required to handle the load. The whole process is self-executing without any intermediary. This is similar to how the Bitcoin network automatically adjusts its difficulty level every two weeks based on the hash rate.
For example, when the Shardeum dApp receives a lot of activity, the network automatically adds more active validator nodes to increase throughput. When activity decreases, it will reduce the number of active validators and keep operations on the network lean.
Linear scaling
As the name suggests, Shardeum allows more nodes to be added to the network to instantly increase transaction throughput during peak demand, making Shardeum a linearly scalable Web3 network. When a node is in standby state, it is waiting for network activity to resume and needs to be activated to increase TPS.
These are the main X factors that influence blockchain usability, including throughput, decentralization, security, and constant transaction fees, regardless of network demand.
Therefore, if there is enough demand and nodes, Shardeum has the theoretical potential to achieve transaction speeds of over 100,000 TPS.
Proof of Quorum (PoQ)
Shardeum uses a unique combination of consensus mechanisms, using both Proof of Stake (PoS) + Proof of Quorum (PoQ).
Proof of Stake is a mechanism for how to validate new blocks of transactions, whether the validation is correct, and who can get rewards. Anyone who holds the minimum required stake in SHM can participate in validation. This is currently the most popular consensus mechanism, used by Ethereum, other L1s, and all Cosmos applications.
Shardeum uses proof of stake to validate new blocks, and in addition, it uses proof of quorum to validate transactions within the group. In detail, proof of quorum is used to manage how transactions are validated within a consensus group, which consists of multiple nodes in a shard. PoQ nodes individually validate transactions as soon as they receive a timestamped transaction (this prevents "double spending," where someone changes the blockchain network to regain cryptocurrency they've already spent so they can spend it again). The transaction is then broadcast to all other nodes in the consensus group/shard on the network, rather than every node on the network.
Proof of Stake and Proof of Quorum together allow Shardeum to collect votes (a.k.a. quorum) in a trustless manner and receipt, keeping the network decentralized.
Permanently low gas fees
On Shardeum, consensus and processing are done at the transaction level rather than the block level.
Thanks to dynamic state sharding, the network will shard its state evenly and dynamically distribute computational workload, storage, and bandwidth across all nodes. This type of parallel processing of transactions makes the overhead of validator nodes very low, as they will only store state data for the transactions they are involved in.
This allows Shardeum to always keep gas fees low for developers and users.
Shardeum Ecosystem
Shardeum currently has three testnets: Shardeum Liberty 1.X, Liberty 2.X, and Sphinx1.X, and has 69 projects in its ecosystem.
There are various categories of applications on Shardeum, from NFTs to DeFi, and on-chain games.
The most important pillar in the ecosystem is the DEX, so let’s first look at the DEX that is already live on the Shardeum testnet.
Decentralized Exchanges
Every ecosystem needs a DEX as it is where most of the trading and transactions are done. At the time of writing, Swapped Finance is the only DEX running on the Shardeum testnet.
Swapped Finance is similar to a Uniswap v2 style DEX where users can swap different tokens for a 0.3% fee, as well as provide liquidity and earn a proportional fee of about 0.21% across all trades.
Domain Name Services
Dotshm.me is a Web3 domain service similar to the Ethereum Name Service (ENS) that makes it easier for others to send cryptocurrency to a custom domain instead of a user’s “0x” address.
Users simply connect their wallet to Liberty2.X, search for available domain names, and register a domain name.
NFT Market
The DeFi ecosystem is incomplete without an NFT marketplace, and Spriyo.xyz is exactly that. There are nearly 3,000 different collections with over 120,000 NFTs minted. Users can explore the marketplace and bid on the NFTs they like.
Keep in mind that all of these applications are testnets at the moment, but it is also possible that they will offer airdrops of individual projects to testnet users in the future.
in conclusion
As the next billion users enter the crypto space, scalability becomes a real problem that many networks are looking to solve. Sharding is one of the ways to improve scalability, dividing the blockchain database into smaller tables. It is also one of the next major upgrades for the Ethereum ecosystem, although they will face competition from other chains. Shardeum is likely to be one of the main players in the field of scaling and sharding, as they have been building their own advanced version of sharding since 2017, which allows their network to scale infinitely.
Luckily, they are still in the testnet phase, which means it is still possible to get the SHM airdrop, especially since the team announced that 5% will be reserved for the ecosystem and airdrops.