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Op Ed: The Many Faces of Sharding for Blockchain Scalability

12 minutes ago on bitcoinmagazine.com

Any programmer who has ever sat down to build a DApp at one point has had to think about the limits of current public blockchains, the most important and obvious one being their limited throughput, i.e., the number of transactions processed per second. In order to run a DApp that can handle real-world throughput requirements, blockchains must become scalable.One answer to blockchain scaling is sharding. Sharding promises to increase the throughput by changing the way blocks get validated by the network. The key feature of sharding that makes it unique among all (on-chain) scaling solutions is horizontal scaling, i.e., the throughput increases as the mining network expands. This particular characteristic of sharding may make it the ideal fuel to spur rapid adoption of blockchain technology.This article will briefly discuss the scaling issues with existing blockchain platforms — briefly only, because most readers must already be familiar with it. It will then discuss how sharding and its different forms can be a promising solution to the scaling problem. It will also touch upon some of the theoretical and practical challenges to implementing sharding and how some of these challenges can be overcome.Scalability Issues With Existing BlockchainsOne of the biggest problems that public blockchain platforms face today is scalability. All popular platforms are struggling to handle a larger number of transactions per second. In fact, today the public Ethereum and Bitcoin networks can handle 7-10 transactions per second on average. These figures are far inferior to those of centralized payment processors like Visa, which processes roughly 8,000 transactions per second on average.Slow transaction processing creates a major problem because they choke up the networks, making it difficult to use the blockchain for applications such as real-time payments. The longer a payment takes to be processed, the more inconvenient it becomes for the end user; this is one of the main reasons why payment methods like PayPal and credit cards like Visa are still much more attractive. As more complex DApps start to rely on the same network, the problems caused by slower transaction speed will only compound.From a more technical standpoint, all blockchain consensus protocols have a challenging limitation: Every fully participating node in the network must validate every transaction and must seek agreement from other nodes on it, and this is the component of blockchain technology that creates distributed ledgers and makes it secure.In most chains like Bitcoin and Ethereum, nodes are run by the public. While the decentralized consensus mechanism provides some vital advantages such as fault tolerance, security, political neutrality and authenticity, this method to verify chains comes at the cost of scalability. It will take more and more processing power to verify these public blockchains as they get larger, and this may create bottlenecks in these networks and slow down the creation of new applications. Sharding: Divide and ConquerSharding is a scaling technique that was inspired by a traditional concept of database sharding, whereby a database is partitioned into several pieces and placed on different servers. In the context of a public blockchain, the transaction load on the network would be divided into different shards comprising different nodes on the network. As a consequence, each node would process only a fraction of incoming transactions, and it would do so in parallel with other nodes on the network. Breaking the network into shards would result in more transactions being processed and verified simultaneously. As a result, it becomes possible to process more and more transactions as the network grows. This property is also referred to as horizontal scaling.We could imagine that existing blockchains operate like a busy highway with one toll station operating on only one toll booth. The result would be a traffic jam as people wait in long lines to pass the toll station. Implementing a sharding-based blockchain is like adding 15 or 20 toll booths to the highway. It would dramatically improve the rate at which traffic can progress through the stations. Sharding would make a tremendous amount of difference and dramatically improve transaction speed.The implementation of sharding-based blockchains could have various benefits for public blockchains. First, thousands of transactions or even more could be processed every single second, changing the way people feel about the efficiency of cryptocurrencies as payment methods. Improving transaction throughput will bring more and more users and applications to decentralized systems, and this will, in turn, advocate further adoption of blockchains, making mining more profitable and attract more nodes to public networks, creating a virtuous cycle. Furthermore, sharding could help bring down transaction fees since less processing will be needed to validate a single transaction; nodes can charge smaller fees and still be profitable to run. Coupling low fees with high transaction processing capability, public chains will become increasingly attractive to real-world use cases. The more these positive trends continue, the more mainstream adoption we’ll see of cryptocurrencies and blockchain applications in general.Sharding StrategiesThis is the basic concept, but there are more granular ways to implement sharding strategies like network and transaction sharding, and state sharding. With network and transaction sharding, the network of blockchain nodes is split into different shards, with each shard formed to process and reach consensus on a different subset of transactions. This way, unconnected subsets of transactions can be processed in parallel, significantly boosting the transaction throughput by orders of magnitude.On the other hand, on today’s mainstream public blockchains, the burden of storing transactions, smart contracts and various states is borne by all public nodes, which could make it prohibitively expensive in terms of required storage space to maintain ongoing operations on the blockchain.One potential approach, called state sharding, has been proposed to resolve this issue. The crux is to divide the entire storage into pieces and let different shards store different parts; thus every node is only responsible for hosting its own shard’s data instead of the complete blockchain state.Complexities Underlying ShardingWhile all the different forms of sharding may be very intuitive, unspooling the technical details can reveal the complexity of the approaches and the underlying challenges. Some of these challenges are easy to overcome, while others not quite so. Generally speaking, network and transaction sharding are easier to accomplish while state sharding is much more complicated. Below, for the different sharding mechanisms, we categorically discuss some of these challenges and how feasible are they to be overcome.Network ShardingThe first and foremost challenge in sharding is the creation of shards. A mechanism will need to be developed to determine which nodes reside in which shard in a secure way in order to avoid possible attacks from someone who gains a lot of control over a particular shard.The best approach to beat an adversary (at least in most of the cases) is through randomness. By leveraging randomness, it should become possible for the network to randomly sample nodes to form a shard. Random sampling prevents malicious nodes from overpopulating a single shard.But, where should the randomness come from? The most readily available source of public randomness is in blocks, for instance, the Merkle tree root of transactions. The randomness available in blocks is publicly verifiable and (close to) uniform random bits can be extracted from it through randomness extractors.However, simply having a randomized mechanism to assign nodes to a shard is not sufficient. One must also ensure that the network agrees on the members in a shard. This can be achieved through a consensus protocol like proof of work, for example.Transaction ShardingTransaction sharding isn’t as simple as it may sound. Consider introducing transaction sharding in a Bitcoin-like system (without smart contracts), where the state of the system is defined using UTXOs. Let us suppose that the network is already composed of shards and a user sends out a transaction. The transaction has two inputs and one output. Now, how should this transaction be assigned to a shard?The most intuitive approach would be to decide on the shard based on the last few bits of the transaction hash. For instance, if the last bit of the hash is 0, then the transaction is assigned to the first shard, else it is assigned to the second shard (assuming we have only two shards). This allows the transaction to be validated within a single shard. However, if the user is malicious, he may create another transaction with the same two inputs but a different output — yes, a double spend. The second transaction will have a different hash and, hence, the two transactions may end up in different shards. Each shard will then separately validate the received transaction while being oblivious of the double-spend transaction being validated in the other shard. In order to prevent the double spend, the shards will have to communicate with each other while the validation is in progress. In fact, since the double-spend transaction may land in any shard, a given shard receiving a transaction will have to communicate with every other shard. The communication overhead may, in fact, defeat the entire purpose of transaction sharding.On the other hand, the problem is much simpler to solve when we have an account-based system (without smart contracts). Each transaction then will have a sender’s address and can then be assigned to a shard based on the sender’s address. This ensures that two double-spend transactions will get validated in the same shard and hence can be easily detected without any cross-shard communication.State ShardingWith the promises of state sharding come a new set of challenges. As a matter of fact, state sharding is the most challenging of all sharding proposals so far.Continuing with our account-based model (let us not bring in smart contracts for the moment), in a state-sharded blockchain, a specific shard will only maintain a portion of the state. For instance, if we have two shards and only two user accounts, say for Alice and Bob, respectively, then each shard will keep the balance of one single user.Imagine that Alice creates a transaction to pay Bob. The transaction will be handled by the first shard. Once the transaction is validated, the information about Bob’s new balance must be shared with his shard. If two popular accounts are handled by different shards, then this may entail frequent cross-shard communication and state exchange. Ensuring that cross-shard communication will not outweigh the performance gains from state sharding is still an open research problem.One possible way to reduce the cross-shard communication overhead is to restrict users from making cross-shard transactions. With our example, this would mean that Alice would not be allowed to transact directly with Bob. If ever Alice has to transact with Bob, she will have to hold an account in that shard. While this does eliminate any cross-shard communication, it may limit the usability of the platform somewhat.The second challenge with state sharding is data availability. Consider a scenario where, for some reason, a given shard is attacked and goes offline. Since the state of the system is not replicated across all shards, the network can no longer validate transactions that have dependency on the offline shard. As a result, the blockchain may become largely unusable. A solution to this problem is to maintain archival or backup nodes that can help the network troubleshoot and recover from data unavailability. However, those nodes will then have to store the entire state of the system and hence may introduce centralization risks.Another point to consider in any sharding mechanism (certainly not specific to state sharding) is to ensure that shards are not static for resilience against attacks and failures; the network must accept new nodes and assign them in a random manner to different shards. In other words, the network must get reshuffled once in a while.However, reshuffling in the case of state sharding is tricky. Since each shard only maintains a portion of the state, reshuffling the network in one go may render the entire system unavailable until some synchronization is completed. To prevent outage, the network must be reshuffled gradually to ensure that every shard has enough old nodes before a node is evicted. Similarly, once a new node joins a shard, one has to ensure that the node is given ample time to sync with the state of the shard; otherwise the incoming node will reject outright every single transaction.ConclusionIn conclusion, sharding is definitely an exciting and promising direction for blockchains to pursue in order to solve scalability problems without compromising decentralization and transparency. However, there is no doubt that sharding, particularly state sharding, is notoriously difficult to do right both at the design level and at the implementation level. Sharding should be handled with care. Also, more research needs to be done to establish the viability of state sharding as it may not be the silver bullet to storage problems. Researchers and developers are actively seeking alternate solutions at this moment. And perhaps, the answer is just right around the corner.This is a guest post by Dr. Yaoqi Jia, head of technology at Zilliqa. Views expressed are his own and do not necessarily reflect those of BTC Media or Bitcoin Magazine. This article originally appeared on Bitcoin Magazine.

Crypto Markets Fluctuate After Rapid Rebound, But Decline Is Still Insignificant

an hour ago on cointelegraph.com

Cryptocurrency markets continue bouncing around yesterday’s levels, news about G20 proceedings to make further signals. #NEWS

PR: WBF – ‘Blockchain Set to Heat up Dubai’

2 hours ago on news.bitcoin.com

With less than a month to go, Blockchain enthusiasts move quickly to secure tickets to World Blockchain Forum Dubai, joining global crypto elite in the heart of the UAE. Final release begins April 1st. The Keynote team returns to Dubai for their third year to host visionary leaders, inspirational speakers and enterprising investors from around the world at World Blockchain Forum. Presentations will address investing, innovation and global opportunities of blockchain and crypto-technology. The post PR: WBF – ‘Blockchain Set to Heat up Dubai’ appeared first on Bitcoin News.

Mark Carney: Cryptocurrencies Do Not Pose Serious Risks

2 hours ago on bitcoinmagazine.com

When it comes to bitcoin and cryptocurrencies, Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board (FSB), is known for being a harsh critic. Though Carney has praised the technology behind cryptocurrency in the past, he has often referred to digital money as a “bubble,” claiming it has failed users and is “no substitute for cash” or credit cards.“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” Carney told CNBC in early March 2018, further stating that the “average volatility of the top ten cryptocurrencies by market capitalization was more than 25 times that of the U.S. equities market in 2017.”Just days ago, Carney proclaimed that illicit activities surrounding cryptocurrencies were causes for major concern, citing everything from personal wallet thefts to terrorist funding, only now, it appears his sentiment has suddenly changed.Less than 24 hours before he was scheduled to speak at this year’s G20 meeting, Carney seemingly reversed his stance on digital currencies, saying that they did not pose serious risks to financial stability. Carney and the Board published an official letter on March 18, the eve of the summit, stating:“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time … Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited.”Carney, whose term with the Bank of England ends in 2019, also insinuated that whoever succeeds him in the position is likely to run a more “open” operation, concentrating more on reviewing current rules and regulations, rather than implementing more strenuous standards.“As its work to fix the fault lines that caused the financial crisis closes, the FSB is increasingly pivoting away from design of new policy initiatives toward dynamic implementation and rigorous evaluation of the effects of the agreed G20 reforms,” he said.The G20 summit began on March 19, 2018, and will last through March 21. Several economic leaders are gathering in Buenos Aires to discuss cryptocurrencies and the future of the planet’s financial infrastructure.Despite Carney’s newfound attitude toward digital assets, not every nation agrees that cryptocurrencies aren’t hazardous. Some countries, like France, Germany and Japan, are calling for further regulation, with the Central Bank of Germany stating that bitcoin should be regulated on a “global scale.” France and Germany are allegedly creating a joint proposal for cryptocurrency regulation that representatives will present at this year’s summit.Carney, himself, explained that while he is pursuing a more “balanced approach” toward cryptocurrencies, the financial system will likely mold and change as more is understood about them:“The market continues to evolve rapidly, and this initial assessment could change if crypto-assets were to become significantly more widely used or interconnected with the core of the regulated financial system.”Still, it seems most virtual currency advocates have something to celebrate since, aside from his more lenient stance on coins themselves, Carney feels that the technology behind cryptocurrency has the potential to enhance and assist the economy as needed. This article originally appeared on Bitcoin Magazine.

Canadian Bitcoin Entrepreneur Slams BCH As ‘Scam’ During Parliamentary Testimony

2 hours ago on cointelegraph.com

Canadian BTC advocate calls BCH a ‘scam’ during Parliamentary testimony, then jokingly asks for donations on Reddit and is shot down by angry Reddit users #NEWS

Second Life Creator: High Fidelity’s HFC Is a Social Cryptocurrency for VR

2 hours ago on bitcoinmagazine.com

In December 2017, High Fidelity announced the launch of Avatar Island, a Virtual Reality (VR) space where High Fidelity users can purchase items for their avatars, all contributed by digital artists from around the world, and pay with High Fidelity’s own blockchain-based cryptocurrency, the High Fidelity Coin(HFC).High Fidelity is a next-generation platform for Virtual Reality (VR) worlds developed by Philip Rosedale, the creator of the once very popular Second Life. Despite a very promising start, Rosedale’s previous creation never achieved mass popularity. But perhaps Second Life was just too advanced. “[The] most surprising thing about Second Life is not that it's still a thing, but that 13 years after its inception, it is still way ahead of its time,” noted a 2016 Motherboard story.High Fidelity supports next-generation VR interfaces that could give it a critical boost in usability and appeal. Perhaps the release of “Ready Player One,” Steven Spielberg’s film adaptation of Ernest Cline’s cult book, scheduled to be released in the U.S. on March 29, 2018, will give VR and High Fidelity a boost toward critical mass.In September 2017, High Fidelity announced that it was developing a blockchain for intellectual property protection and an in-game cryptocurrency. In February 2018, the company introduced a key feature in the HFC ecosystem: the ability for users to pay other users directly, with HFC. HFC person-to-person payments can be either given “in-hand” to another user that is nearby in the virtual world or sent to a connection in the user’s friends list.“We believe that a strong gig economy will emerge in virtual worlds, in High Fidelity and beyond, where people from all over the world can offer each other services and find a new place to work,” said Rosedale. “A frictionless cryptocurrency that can be exchanged directly between avatars, in addition to the blockchain ownership systems for digital assets that we deployed last December are the key enablers of this trend.”In an interview with New World Notes, a blog focused on VR and virtual worlds, Rosedale argues that blockchain technology is well suited to social VR payment systems. Replying to a VentureBeat post, in which fellow VR developer Adam Frisby criticized blockchain technology saying that it isn’t ready for prime time, Rosedale defended High Fidelity’s choice.Frisby’s point is that current blockchain-based transactions can’t be fast, low-cost and decentralized at the same time. In the real world, cryptocurrency systems are still far from the efficiency and throughput (transactions per second) of the major credit card networks. Similarly, in game worlds, “some of the largest online game economies manage more than a million user-to-user transactions per day, instantaneously, with no fees,” says Frisby. “And yet, I can name half a dozen startups trying to inject an expensive and slow blockchain into this very problem.” Frisby is also unhappy with the fact that lost cryptographic keys can’t be recovered.Rosedale’s answer to the last point is that the keys are entirely in the hands of the user, which is a good thing. Rosedale also pointed out that the High Fidelity permissioned blockchain is up and running and has 2-second settlement times.High Fidelity opted for a new, public but “permissioned” blockchain, because the Bitcoin and Ethereum blockchains have limited throughput and high transaction fees, which makes them unsuitable for HFC. The High Fidelity blockchain is based on the Elements codebase from Blockstream.Rosedale argues that social payment systems for global VR worlds should be open to people without credit cards, and should support direct user-to-user payments with seamless cross-border transactions. For example, content creators need the ability to sell their creations to customers that may be located anywhere.The market for virtual goods can be significant. At the apex of Second Life’s popularity in the late 2000s, thousands of developers were able to earn a full living by selling virtual creations. If, as Rosedale and his team hope, High Fidelity will achieve and exceed Second Life’s past popularity, the High Fidelity marketplace could play an important role in the gig economy.According to Rosedale, the only viable solution for social payment systems in global VR worlds is to use either a cryptocurrency or a custom-built solution. Since a full, global custom-payment system is expensive to develop and maintain, blockchain technology is the best option. “The cryptocurrency approach shares the work with other companies because the actual exchange of local currency into or out of the cryptocurrency can be done by an exchange,” says Rosedale.In a conversation on the High Fidelity forum, Rosedale said that HFC will be traded on external cryptocurrency exchanges soon. “We will probably start by establishing simple ways to exchange HFC for the larger cryptocurrencies like ETH or BTC so that people can start making money from their content creations,” he said.At this moment, High Fidelity is giving initial HFC grants to users, but the only way for users to obtain HFC is to “physically” (that is, virtually) go to the “Bank of High Fidelity” and meet with High Fidelity staff.Speculators shouldn’t, however, rush to High Fidelity and buy HFC hoping for a spectacular rise of the value of High Fidelity’s cryptocurrency. Rosedale explained that HFC is designed to have a stable value for trade, so it is different from other cryptocurrencies. “[It] doesn’t make sense to hold it for the expectation of future gains,” he said. “We are working on an algorithmic strategy to increase the money supply automatically as usage of HFC increases, probably using an oracle monitoring the exchange rate. Again, the goal is price stability, not speculation.”In the future, the HFC could be linked to an ERC20 token on the Ethereum blockchain, which could enable smart contracts in the High Fidelity economy.“Where it is useful, we will build bridges between our HFC blockchain and other blockchains,” said Rosedale. “Probably the most obvious example would be bridges to the Ethereum blockchain, so that people could choose to move currency or asset information there for trade. We are also excited about other upcoming blockchains, such as EOS, that may offer the high transaction rates and low fees that caused us to ‘roll our own’ with HFC for now.” This article originally appeared on Bitcoin Magazine.

New Survey Shows Around 26 Mln Americans Own - And 8 Percent Plan To Buy - Cryptocurrencies

3 hours ago on cointelegraph.com

A survey on Americans and cryptocurrency shows 8 percent, or 26 mln Americans, own crypto #NEWS

Bill “On Digital Assets” Filed in the Duma, Disagreements Resolved

3 hours ago on news.bitcoin.com

The draft-law “On digital financial assets” aimed at regulating crypto-related matters in Russia has been officially filed in the State Duma on Tuesday. Disagreements between the Central Bank and the Ministry of Finance have been resolved, according to Deputy Finance Minister Alexei Moiseev. The CBR will have the final say in regards to the circulation […] The post Bill “On Digital Assets” Filed in the Duma, Disagreements Resolved appeared first on Bitcoin News.

Mainstream Media Reports of “Blockchain Elections” in Sierra Leone Are All Fake News

3 hours ago on news.bitcoin.com

The hype around so called applications of “blockchain technology” is nothing new, as many people have successfully used it to get free publicity for themselves, riding the coattails of Bitcoin’s success. But while it so far was limited mainly to promoting ICO tokens and inflating stock prices, now it seems to have crossed a border […] The post Mainstream Media Reports of “Blockchain Elections” in Sierra Leone Are All Fake News appeared first on Bitcoin News.

German Researchers: Child Abuse Content Found On Bitcoin Blockchain, Users Must Be Protected

4 hours ago on cointelegraph.com

Blockchain must deal with illegal content and keep users safe from prosecution, says new research. #NEWS