Sharding can be defined as a process of distributing data among several machines. If you are an experienced investor in the world of cryptocurrency then you must be acquainted with the fact that there is a scalability issue with both the Bitcoin and Ethereum. Although Bitcoin has somewhat become successful in addressing the issue by activating Segwit, Ethereum, however, is trying to resolve the problem in a different way. Both Ethereum and Bitcoin use a unique combination of many technical tricks to ensure the accurate record without a central authority. Thus Ethereum is trying to resolve the matter in a different way by using “sharding”.
“Sharding” Contributions to Ethereum Remodeling
“sharding” may appear a bit theoretical the favorable consequences of the concept are becoming more genuine and practical. The team behind Ethereum is trying to find out the scaling solution with the help of “sharding”. It would essentially try to fragment the Blockchains into parts that would run on the different servers. Although the initial planning is just now being discussed and the coders are trying to bring about the protocol level designs that could be done by upgrading.
As Phil Daian, a researcher at Cornell University has observed- “Sharding is a huge, huge change to the network”, he further mentioned, “A lot of people think it provides an opportunity to redesign economic models and other aspects of the system.” According to Daian the idea comes from a developer retreat in Taipei where Sharding and other important theoretical changes were discussed. Daian and the team of developers are trying to redesign Ethereum so that it can work more efficiently. The name of the project is Project Chicago that aims to identify the current commodities that are generally traded at the core of Ethereum.
The developer team plans to device a method of implementing protocol level markets by alienating the several network elements like its gas, storage, and UTXO transaction data. This is what they call “crypto commodities”. They want to look what type of services and resources the network can provide and want to create a market-based system for price discovery. The discovery of the tool GasToken, in fact, inspires the researchers to develop the concept. This tool allows the Ethereum users to store gas (Ethereum token is used for paying fees on the network) when it is available at a cheaper rate and sell it later when the price is higher.
It is true that not many people are using this tool till now, yet it effectively allows an incentive flaw within the Ethereum system as people look in to store Gas Tokens. It further, restricts the part of the Ethereum system that generally functions to keep track of all the possible computations. Ethereum currently listed 2nd in Coinmarketcap.com with market cap $41,520,106,797, price $421.60 and volume $1,490,910,000 (as of March 29, 2018). This incentive flaw arouses the possibility of the need for the users to pay charge or “rent” on the amount of time that they required for their data to be stored on the blockchain. However, it is for the GasToken scheme that encourages people to hoard their tokens. As Daian further mentioned, “it’s a clear artifact to point to show people why today’s model is flawed and why rent needs to be introduced,”. For “sharding” Daian said that this process provides a once in a lifetime opportunity to bring about a radical change to redesign the system and it also “reset people’s expectations from scratch.”
Identifying Futures Market Inspiration
According to the Project Chicago, a blockchain is a marketplace where resources are sold to users allowed by the software. Thus, an incentive scheme is drafted by Dian for peer to peer networks. This not only used for routing transactions but also for applying the same logic somewhere else. Project Chicago intends to identify a market for raw resources and tries to pave the way for other financial mechanisms such as futures market.
Daian is aware of the fact that an increased number of incentives can lead to the event of centralization and this can attract a huge number of participants to contribute in storing or mining the blockchain in exchange of rewards. In competitive markets like blockchains, new Cryptocurrencies can emerge to offer free usages in the short term because of the less demand and good supply. Daian, observed that “valuing decentralization and incentive compatibility and robustness with their wallets. And it’s not really clear to me whether or not they do.”
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