CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What is proof-of-stake sharding (PPOSS)?

Proof-of-stake sharding is the process of horizontally splitting blocks or databases of a proof-of-stake (PoS) consensus blockchain in order to improve the network’s scalability and capacity. 

Sharding splits a blockchain into smaller chains known as ’shards’ thereby allowing distribution of data across the network. This results in reduction of network congestion and increase in transactions per second.   

Here we take a look at what proof-of-stake sharding means, its importance for the cryptocurrency industry and how proof-of-stake sharding works on Ethereum blockchain. 

Proof-of-stake sharding explained

There are two primary consensus mechanisms used by blockchain networks to validate transactions and to reach an agreement on the state of the network’s public ledger. 

Proof-of-work (PoW) consensus is used by Bitcoin. It’s where miners compete to solve complex cryptographic hash puzzles to validate transactions.   

Proof-of-stake consensus is used by more recent blockchain networks like Cardano and Solana, where validators check and confirm transactions to create blocks.

As of April 2022, smart contract platform leader Ethereum is working on transitioning to proof-of-stake from its original proof-of-work consensus.

According to Ethereum, when this transition commonly referred to as ‘The Merge’ happens, it will add shard chains to its network. Each shard chain will be a separate chain that will need validators to process transactions and create blocks.

The blockchain network called sharding a “multi-phase upgrade to improve Ethereum’s scalability and capacity” and added that shard chains will provide “extra, cheaper, storage layers for applications and rollups to store data.”  

How does sharding work

Sharding is one of the main factors that is driving Ethereum towards its switch to the proof-of-stake consensus model. 

The network is facing high gas fees and network congestion due to its growing popularity. Its original PoW consensus model is neither scalable nor fast enough for a smart contract platform that’s home to 3000+ decentralised applications (dApps).   

Ethereum plans to have 64 shard chains. A beacon chain will be critical to the network’s PoS sharding mechanism. 

According to Ethereum, the beacon chain will be responsible for receiving and sending information to and from shard chains. The beacon chain will algorithmically choose validators to propose the creation of new blocks. Validators who have not been chosen to make a new shard block will hold the responsibility to attest another validators new block proposal and confirm its validity.  

Ethereum requires at least 128 validators, known as a ‘committee’, to attest each shard block. Each committee has a time-frame (’slot’) to propose and validate a new shard block. Only one valid block is created per slot. A period of 32 slots is called an ‘epoch’. Once reached, the committee is disbanded and reformed with new participants.

The validator who proposed the new block will be rewarded in ETH once the new shard block proposal gets enough attestation to confirm “inclusion of the block and your transaction in the beacon chain”.

“Shard chains should ship sometime in 2023, depending on how quickly work progresses after The Merge. These shards will give Ethereum more capacity to store and access data, but they won’t be used for executing code,” said Ethereum.

Advantages of proof-of-stake sharding

According to Ethereum, the advantages of sharding are:

  • Sharding promotes decentralisation by eliminating the need to scale by increasing a network’s existing database size. Larger databases make networks inaccessible because of the need for powerful and expensive computers. 

  • Sharding allows validators to store or run data for only the shard chain that they are validating and not the entire network

  • Sharding increase security of the network by promoting decentralisation

  • Sharding reduces hardware requirements for validators and will let you run blockchain networks on a personal computer or a smartphone 

  • Shard chains will allow networks to process more transactions versus a single node

Related Terms

Latest video

Latest Articles

View all articles

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading