Analysis of Zilliqa: Scalable Blockchain and Sharding Innovator

Source: Cryptopedia

Compiled by: Hu Tao, Chain Catcher

Zilliqa's Scalability Solution: Blockchain Sharding

Zilliqa is a blockchain network designed specifically for executing complex computations and handling high throughput, making it particularly suitable for enterprise use cases. Established in 2017, the Zilliqa network is driven by a dedicated team of researchers and scholars associated with the National University of Singapore, with the primary goal of addressing the scalability challenges posed by many leading blockchain networks today, such as Bitcoin and Ethereum.

Zilliqa's blockchain does not aim to be a one-size-fits-all solution but is built specifically for computation-intensive tasks. The Zilliqa network can process high-throughput transactions on its network through the parallelization of computational sharding. In a sharded blockchain network, the tasks of computing transactions are distributed across the network's partitioned shards. Theoretically, this is faster, more efficient, and more cost-effective than non-sharded networks, where all transactions are processed linearly through a single large chain.

Zilliqa's sharding structure makes it an ideal blockchain for handling more complex computational tasks, such as data mining and financial modeling. Zilliqa can also be used for training neural networks, machine learning (ML) applications, and data-driven academic research. As industries like machine learning and the Internet of Things (IoT) continue to evolve, the demand for scalable blockchain technology will only increase, and Zilliqa's complex blockchain structure is well-suited for this task.

Technical Deep Dive: How Sharding Works on Zilliqa

Even by the complex standards of blockchain technology, Zilliqa employs a sophisticated technical architecture and is renowned for its scalability due to its innovations in blockchain sharding. Sharding is a scalability solution that divides a decentralized blockchain network into smaller components called shards, thereby accelerating processing speeds. When Zilliqa's mainnet launched in 2019, it became the first public blockchain to use network sharding as a scalability solution.

As the Zilliqa ecosystem grows and the demand for scalability increases, Zilliqa aims to scale on demand by adding additional ZIL nodes and miners, which will allow for the addition of extra shards to the network. ZIL is Zilliqa's native ERC-20 token. According to its sharding model, if Zilliqa has 20,000 nodes, the network can be divided into 25 sub-networks, each with 800 nodes, processing data in parallel.

On a technical level, Zilliqa uses two types of blocks, thus employing two collaboratively working blockchains. Zilliqa has transaction blocks (TX-Blocks), which contain transactions sent by network users. It also uses directory service blocks (DS-Blocks), which contain data from network miners that support and protect the network. TX-blocks store transaction data agreed upon by the nodes of the DS-Block. Additionally, each DS-Block is linked to several TX-blocks.

Zilliqa's blockchain sharding is a two-part process. First, directory service (DS) committee nodes are elected, then the sharding process is initiated, and nodes are assigned to each shard. Once transactions are validated within a shard, they can be verified by the entire network and enter a global state that combines transactions from all shards into a single verifiable source of truth on the Zilliqa blockchain.

Zilliqa's Custom Programming Language Scilla

Scilla, short for Smart Contract Intermediate Language, is a programming language developed specifically for Zilliqa. Zilliqa focuses on the security of smart contracts and developed Scilla to verify the safety of smart contracts and decentralized applications (dApps) deployed on its blockchain. Developers using Scilla can utilize mathematical proofs to verify that their smart contracts meet certain requirements. In addition to security, Scilla, centered around smart contracts, is designed to fully leverage the scalability and sharding architecture of the Zilliqa network.

ZIL Token Economics

In 2017, Zilliqa launched its native ERC-20 token on the Ethereum network. The ZIL token has been in use until Zilliqa launched its mainnet and native blockchain in 2019. At launch, early ZIL tokens were exchanged at a 1:1 ratio for the new ZIL tokens.

Similar to other blockchains, Zilliqa's native ZIL token is used to fund and secure its ecosystem. In addition to incentivizing miners through block rewards and transaction fees paid in ZIL via a proof-of-work model, it can also be used as a cryptocurrency. ZIL can be used to purchase products in online marketplaces and to buy other crypto assets and collectibles. ZIL is also essential for transactions on the Zilliqa network. With Zilliqa's transaction fees being just a fraction of a cent, ZIL is well-suited for micro-payments as well as for running low-cost smart contracts and dApps.

While many blockchains halve their PoW mining rewards at fixed intervals, ZIL token mining rewards will gradually diminish over a decentralized process lasting up to ten years. This approach aims to maintain Zilliqa's hash rate stability while still incentivizing miners. Zilliqa has also been optimized for GPU mining, which they hope will make it more resistant to the specialized mining hardware used on other blockchains, making it difficult for small mining operations to compete profitably for mining rewards. This is intended to support a competitive environment for small-scale miners.

Zilliqa's Partnerships and Roadmap

Zilliqa is available on multiple major exchanges, supported by major software and hardware wallets, and has numerous partnerships. One of the most well-known Zilliqa dApps is Unstoppable Domains, which allows users to create human-readable blockchain domain names that can be used to receive crypto payments instead of hexadecimal crypto addresses.

Zilliqa has also partnered with the Mintable marketplace, allowing users to purchase NFTs using ZIL tokens. Zilliqa collaborates with CommX, an investment platform where users can tokenize and fractionalize physical assets. This provides retail investors who may not have high net worth the option to purchase a share of high-value assets like artwork or real estate. Zilliqa has also partnered with entities supporting inventory tracking and engine monitoring, as well as blockchain gaming applications that use ZIL and allow in-game NFT trading.

Zilliqa is continuously working to improve its network and expand its ecosystem through the development of numerous protocol enhancements, including: storage pruning, sharding upgrades, privacy improvements, cross-chain support, and more. In 2020, Zilswap was launched on Zilliqa as an automated market maker (AMM). It operates using the ZSWAP governance token and is another sign of Zilliqa's efforts toward a bright future.