Detailed Explanation of Shardeum's Basic Concepts and Operating Mechanisms

Original Title: “What is Shardeum and How Does It Work?”

Author: CJ, CoinGecko

Compiled by: Biscuit, ChainCatcher

Shardeum is an EVM-based Layer 1 network designed for linear scalability. With its advanced sharding solution, Shardeum promises to keep gas fees low forever. Shardeum will also launch its native token, SHM.

Key Points

• Shardeum addresses scalability issues through linear scaling and sharding, as well as automatic scaling and its unique Proof of Quorum consensus.
• Shardeum utilizes dynamic state sharding to enhance transaction throughput while maintaining low gas fees.

Arbitrum is an Ethereum scaling solution that allows transactions to be executed with higher TPS and cheaper gas fees, which is one of the reasons for its popularity. Therefore, the airdrop event for Arbitrum has been highly anticipated by the crypto community, with ARB rewards for those who participated early in the Arbitrum mainnet.

In addition, there are many protocols in the crypto space aimed at achieving DeFi scalability, and Shardeum is one of them. Shardeum was founded by the founders of WazirX, a leading cryptocurrency exchange in India, and the team has been building Web3 projects since 2017. Shardeum completed a $18.2 million seed round funding in October 2022 and may airdrop to those who participated in its testnet.

Source: Shardeum Blog

In this article, we will learn what Shardeum is and its unique scalability features and ecosystem.

What is Shardeum?

Shardeum is an EVM-based Layer 1 blockchain designed for linear scalability, promising low gas fees while maintaining decentralization and security through dynamic state sharding. The potential use cases of Shardeum 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 native cryptocurrency SHM, with the team announcing its tokenomics, which has a fixed supply of 508 million tokens, but SHM is currently still in development.

Next, let's explore what makes Shardeum worth paying attention to.

Unique Features of Shardeum

Shardeum scales by using sharding technology, which divides the blockchain into smaller, more manageable parts.

Specifically, a blockchain is essentially a large database system, and a sharded blockchain refers to splitting a large data table into smaller tables. By breaking down information into manageable parts, sharded networks can process more transactions per second (TPS) than non-sharded blockchains.

Sharding is not new to Shardeum; Zilliqa, Polkadot, Near, and even Ethereum are using sharding (they use a version called Proto Danksharding). However, Shardeum employs a unique sharding technology called "dynamic sharding."

Dynamic Sharding

Dynamic sharding is one of the cutting-edge solutions in sharding technology, with an architecture that is flexible and can easily adapt to changes in the entire blockchain ecosystem. In dynamic sharding, not all nodes cover the same address range; instead, different address ranges are assigned to these nodes, allowing multiple shard transactions to be processed simultaneously rather than sequentially. This technology can reduce the time taken to process transactions and also helps increase transaction throughput while always maintaining low gas fees.

Essentially, it allows the network to add or remove blockchain shards or data storage methods in real-time based on fluctuations in dynamic demand. 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 operate during changes in network load and easily handle fluctuations in network load.

Atomic Processing and Cross-Shard Composability

Shardeum also supports atomic processing technology to ensure that transactions are executed correctly. Atomicity means that transactions can either be partially executed or not executed at all. Without atomic processing, transactions may fail, leading to inconsistencies in network data, resulting in security risks and reduced reliability.

Shardeum combines atomic processing with cross-shard communication, allowing transactions to access data and states from different shards, enabling complex transactions and smart contracts to be executed in a sharded environment, making coding easier for smart contract developers.

Automatic Scaling

As network load and demand can change at any time, automatic scaling needs to adapt to varying demands without compromising security and network performance.

Automatic scaling measures the network load for each cycle (1 minute) based on load and reaches consensus on the number of validator nodes required to handle that load. The entire process is self-executing, requiring no intermediaries. This is similar to how the Bitcoin network automatically adjusts its difficulty level every two weeks based on hash rate.

For example, when a Shardeum dApp experiences a surge in activity, the network automatically adds more active validator nodes to increase throughput. When activity decreases, it reduces the number of active validators and maintains streamlined operations on the network.

Linear Scaling

As the name suggests, Shardeum allows for the addition of more nodes to the network to immediately increase transaction throughput during peak demand, making Shardeum a linearly scalable Web3 network. When a node is in standby mode, it is waiting for network activity to resume and needs to be activated to increase TPS.

Regardless of network demand, this is a major X factor affecting blockchain availability, including throughput, decentralization, security, and constant transaction fees.

Therefore, with sufficient demand and nodes, Shardeum theoretically has the potential to achieve transaction speeds exceeding 100,000 TPS.

Proof of Quorum (PoQ)

Shardeum uses a unique combination of consensus mechanisms, employing both Proof of Stake (PoS) and Proof of Quorum (PoQ).

Proof of Stake is a mechanism for verifying new transaction blocks, validating their correctness, and determining who can receive rewards. Anyone holding the minimum required stake of 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 it uses Proof of Quorum to validate transactions within the group. Specifically, Proof of Quorum is used to manage the validation of transactions within the consensus group, which consists of multiple nodes in a shard. PoQ nodes immediately validate transactions individually upon receiving timestamped transactions (this prevents "double spending," where someone alters the blockchain network to reclaim their spent cryptocurrency for reuse). The transaction is then broadcast to all other nodes in the consensus group/shard, rather than every node on the network.

The combination of Proof of Stake and Proof of Quorum allows Shardeum to collect votes (also known as quorum) in a trustless manner and in the form of receipts, thereby keeping the network decentralized.

Permanently Low Gas Fees

On Shardeum, consensus and processing are done at the transaction level rather than the block level.

Due to dynamic state sharding, the network will evenly shard its state and dynamically distribute computational workloads, storage, and bandwidth among all nodes. This type of transaction parallel processing keeps the overhead for validator nodes very low, as they will only store the state data of the transactions they are involved in.

This enables Shardeum to maintain permanently low gas fees for developers and users.

Shardeum Ecosystem

Shardeum currently has three testnets: Shardeum Liberty 1.X, Liberty 2.X, and Sphinx 1.X, with 69 projects in its ecosystem.

There are various categories of applications on Shardeum, ranging from NFTs to DeFi and on-chain gaming.

The most important pillar of the ecosystem is DEX, so let's first look at the DEX that is already running on the Shardeum testnet.

Decentralized Exchange

Every ecosystem needs a DEX, as it is where most trades and transactions are completed. At the time of writing, [Swapped Finance](https://www.rootdata.com/zh/Projects/detail/Swapped Finance?k=NjYwOQ==) is the only DEX operating on the Shardeum testnet.

Swapped Finance is similar to a Uniswap v2-style DEX, where users can swap different tokens and incur a 0.3% fee, as well as provide liquidity and earn approximately 0.21% of fees proportionally across all trades.

Domain Services

Dotshm.me is a Web3 domain service similar to Ethereum Name Service (ENS), allowing others to send cryptocurrency more easily to personalized domain names instead of the user's "0x" address.

Users simply connect their wallets to Liberty 2.X, search for available domain names, and can register a domain.

NFT Marketplace

Without an NFT marketplace, the DeFi ecosystem is incomplete, and Spriyo.xyz fulfills this role. With nearly 3,000 different collections, over 120,000 NFTs have been minted. Users can explore the marketplace and bid on NFTs they like.

Keep in mind that all these applications are currently on the testnet, but they may also potentially offer airdrops for individual projects to testnet users in the future.

Conclusion

As the next billion users enter the crypto space, scalability has become a real issue that many networks are seeking to address. Sharding is one method to improve scalability by 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 competitors in the field of scalability and sharding, as they have been building their advanced version of sharding since 2017, allowing their network to scale infinitely.

Fortunately, they are still in the testnet phase, which means there is still a possibility of receiving SHM airdrops, especially since the team has announced that 5% of the ecosystem and airdrops will be reserved.