Sign upWhat is crypto sharding and how does it work?
Intermediate
2025-07-04
We've witnessed insane growth in the crypto industry, especially when you consider how much of a newcomer it is to the ancient world of finance. As blockchain adoption accelerates across finance, gaming, logistics, and digital identity, one critical issue remains: scalability.
Today’s most-used blockchains, like Bitcoin and Ethereum, struggle to process large volumes of transactions quickly and affordably. To address this, blockchain developers are turning to a powerful solution borrowed from traditional database systems—sharding.
In this article, we at Toobit Academy will explore what crypto sharding is, how it works, and why it's being hailed as a cornerstone for blockchain's future scalability.
What is sharding?
Sharding is a technique that breaks up a blockchain’s data and workload into smaller, manageable sections called shards. Each shard functions as a semi-independent blockchain that processes a specific subset of the network’s transactions and smart contracts.
Rather than requiring every node in the network to store and process every single transaction (as is the case with traditional blockchains), sharding allows each node to handle only a portion of the total data. This massively reduces the processing and storage requirements for individual nodes while allowing the network to process multiple transactions in parallel.
The origin of the concept
Make no mistake, while sharding does exist in crypto—it is not unique to blockchain.
It originated in the world of databases, where systems needed to handle enormous amounts of data across distributed servers. In those systems, sharding meant dividing a database into smaller parts to improve performance and reduce latency.
Blockchain sharding simply adapts this concept to decentralized networks instead.
Why is sharding necessary in blockchain?
Scalability is one of the “Blockchain Trilemma” issues—alongside security and decentralization—that must be balanced in designing effective blockchain systems. Traditional blockchains emphasize decentralization and security but often sacrifice speed and throughput as a result.
Let's take Ethereum as an example.
Previously, Ethereum could only handle roughly 15–30 transactions per second (TPS). While that may be sufficient for simple use cases at the time, it fell drastically short for global-scale applications like decentralized finance (DeFi), non-fungible tokens (NFTs), and blockchain gaming.
During times of network congestion, users experience high gas fees and long transaction wait times. With the help of sharding, Ethereum will be able to process anywhere from 20,000 to 100,000 transactions per second!
This is why it is inagurable that without scalability improvements, mass adoption becomes impossible. Sharding addresses this by allowing blockchains to process many transactions in parallel, rather than sequentially.
How does sharding work?
Understanding how sharding works in a blockchain context requires diving into how networks are organized and how data is shared among nodes. So, let's check that out:
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Creating shards
The first step in sharding is to split the blockchain network into multiple shards. Each shard is capable of maintaining its own ledger and state. Instead of having a single blockchain that processes every transaction, you now have multiple smaller chains (shards) working simultaneously.
For example, if a blockchain is split into 10 shards, each one can process a different group of transactions independently. This means the network can potentially process 10 times as many transactions at once.
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Node assignment and validation
Nodes in the network are randomly assigned to different shards. Each node is responsible for storing data and validating transactions within its assigned shard. This dramatically reduces the amount of data each node needs to process and store, making the network more lightweight and inclusive—enabling more participants to run full nodes without needing enterprise-grade hardware.
To prevent malicious behavior, nodes may be periodically reshuffled between shards using cryptographic randomness, ensuring no group of nodes can collude within a shard for long.
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Cross-shard communication
Shards do not operate in isolation. For the system to function as one unified network, there must be a secure and efficient way for shards to communicate with each other.
Imagine a decentralized app (dApp) on Shard A needing to interact with a smart contract on Shard B. This requires a cross-shard communication protocol, typically managed by a central coordination mechanism. In Ethereum’s case, this is the Beacon Chain, which tracks the state of all shards and helps coordinate validators.
Therefore, cross-shard communication remains one of the most technically complex aspects of sharding and is a focus of active research. Fingers crossed that we will be able to learn more about it in the future!
Benefits of sharding in blockchain
There are a couple of benefits that sharding brings to blockchain. Let's take a look below:
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Improved scalability
By parallelizing transaction processing, sharding dramatically increases the number of transactions a network can handle per second.
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Lower costs
As network congestion eases and block space becomes more available, transaction (gas) fees are likely to drop significantly, making the network more accessible to everyday users.
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Decentralization preservation
Sharding allows nodes to participate in the network without needing to store the full blockchain, enabling a broader set of participants and helping preserve decentralization.
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Energy and resource efficiency
By reducing the workload on each node, sharding lowers computational and storage requirements, improving energy efficiency across the network.
Challenges and Risks of Sharding
While there is no denying that sharding offers major benefits, it also introduces new technical and security challenges.
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Cross-shard complexity
As we mentioned earlier, ensuring data consistency and transaction finality across shards is complex. Poorly designed cross-shard communication can lead to security vulnerabilities such as data breeches or fragmented user experiences.
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Security trade-offs
With fewer nodes in each shard, individual shards may be more vulnerable to collusion attacks. Random validator assignments and periodic reshuffling help mitigate this risk, but it's a delicate balance.
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Developer overhead
Developers may need to design dApps that account for cross-shard data handling, which can increase complexity and reduce composability—especially in DeFi, where smart contracts are often deeply interlinked.
Final Thoughts
Sharding represents one of the most promising scalability solutions in the blockchain world today. By dividing work across smaller, parallel components, sharding allows networks to scale without sacrificing decentralization or security—a critical achievement for long-term viability.
As platforms like Ethereum continue to integrate sharding into their core architecture, we are likely to see a new era of blockchain applications that are faster, cheaper, and capable of supporting real-world use cases at scale. However, realizing this vision will require continued research and rigorous testing.
In the end, sharding is not a magic fix-it-all, but more of a foundational piece of the puzzle. Sharding will help blockchain technology evolve from being just an experimental innovation to a mainstream infrastructure layer for the digital world and all those who inhabit it.
That's all for this week from us at Toobit Academy, folks! We hope you enjoyed this article. For more trading tips, strategy breakdowns, and crypto fundamentals, make sure to check out Toobit Academy — your go-to hub for leveling up your knowledge in the world of digital asse
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