What is Scalability?
Scalability is the ability of a cryptocurrency to cope with the influx of a large number of transactions at a time. For example, the Ethereum blockchain operates smoothly at 15 transactions at one time. Any more transaction after this limit results into the problem of network congestion. However when the network is clogged, transactions are being backed up in the memory pool, which is where the pending transactions are staged.
How Scalability issue affects us?
Firstly, the scalability issue causes our transaction to be processed slower than usual, which could sometime leads to loss in opportunity.
But that is not the only way it affects us, since miners, those who process transactions on the network, directly take the gas fee for each transaction, which makes them the main deciding authority for the average cost of gas. A transaction with a higher gas cost attached to it will be accepted faster, and transaction with a lower gas cost being generally slower due to miners prioritising “better returns”. In the network clogged state, transactions being staged in memory pool and miners prioritising transactions with higher gas prices, results into increase in the lowest gas price for confirming a transaction.
This creates a situation where the network’s gas fee goes up to exorbitant levels as the network becomes more clogged, only worsening the situation. The transaction fee in Ethereum had touched $3500 due to popular NFT mints.
Basically, Scalability issue eventually leads to the higher gas prices which then affect us a lot.
Other Blockchains who suffer or can suffer from the Scalability Trilemma
Binance Smart Chain, Solana, Terra, Avalanche, Polygon and Algorand to name a few which provide the exact same or similar smart contract functionality as Ethereum have been developed to fill the demand left by Ethereum. Among these new smart contract platforms a majority of them have given up decentralization to achieve higher TPS. We intentionally use the term “higher TPS” instead of “higher scalability” here because these networks are not designed to scale, but rather just raises the bar from Ethereum’s 15 TPS to a higher max TPS. Typically this is about 500 TPS. Once any of these networks hits the max TPS limit, it will experience the same high gas fees and slow processing times as Ethereum. These platforms can only increase TPS if each node in the system is upgraded to have more compute, storage and bandwidth. This is referred to as vertical scaling.
How Shardeum solves the Trilemma of Scalability?
Sharding is the solution to the scalability trilemma. The scalability trilemma says that as a blockchain tries to achieve scalability, decentralization and security, it will only be able to attain any two of these. With security being an essential requirement, there will be a trade-off between scalability and decentralization. Sharding provides a way to achieve both scalability and decentralization while maintaining security.
Sharding involves splitting a blockchain into multiple pieces, or shards, and storing them in different places. By storing the data across different computers, the computational burden on each can be reduced. This allows the network to process a larger volume of transactions.
Shardeum uses Dynamic State Sharding, whose general principle is to divide the address space of accounts into multiple fixed size regions called shards and nodes in the network are assigned to different shards. In a network with state sharding, transactions between contracts in the same shard are fast and easy while transactions across multiple shards are much slower, but not impossible. If a transaction needs to affect more than one shard, it needs to be executed consecutively in each shard. Because transactions are grouped into blocks and consensus is done at the block level, transactions that affect multiple shards risk the possibility of being confirmed in one shard, but getting rolled back in another shard. To prevent this and maintain atomic processing of transactions requires additional complexity. Also transactions which affect multiple shards will require additional processing time proportional to the number of shards they affect. Even with these complexities sharding is still beneficial since the TPS of the whole network will increase proportional to the number of shards it has.
In simpler terms the advantages to Sharding are:
1. Allows for greater scalability,
2. Reduces the processing and memory burden placed on full nodes
3. Works well for proof-of-stake networks
How does Swapped Finance Benefits from the Shardeum Blockchain
Shardeum Blockchain’s fundamental features like, immune to MEV or front-running and sharding for scalability will also be extended to the Swapped Finance platform because the underlying blockchain behind Swapped Finance is Shardeum.
These fundamental features helps along with the features inbuilt to the Decentralised Application, Swapped Finance to compete with it’s competition. Where the competition faces Scalability issues and Front-running from time to time, Swapped Finance will not have to encounter such issue beacuse of the Shardeum and it’s technology.