Bitcoin and Ethereum are the two most popular blockchains. Coincidentally, both are plagued by scaleability problems. To solve this, developers on both ends have proposed two different solutions. The one being Sharding and the other being the Lightning Network. Let’s have a comparative look at the two options.
As the adoption of blockchain technologies has steadily increased, the most popular of them have all found themselves inundated with the high transaction volumes. In their current state, there are no blockchains that truly exhibit the three characteristics most needed for mass adoption – in line with Satoshi’s vision. These are decentralization, security, and scaleability.
To address this, developers working on the two most capitalized cryptocurrencies have come up with a solution tailored to fit their respective blockchains. First up were the Bitcoin developers who proposed – and implemented – a layer-2 protocol called the Lightning Network. Then we have Ethereum who see Sharding as the most promising path to scaleability.
What Are The Differences?
Beginning with Ethereum, Sharding refers to a process where the entire Ethereum blockchain is partitioned to multiple lesser chains known as “shards”. This is planned as part of the Ethereum Network’s migration to ETH2.
Upon successful deployment, each individual Ethereum shard will be responsible for its own unique set of smart contracts and transactions.
As for the Lightning Network, one could think of it as a second layer of micropayment channels that increase the Bitcoin network’s transaction speed while reducing the cost of each transaction by taking them off-chain. This is where one of the most obvious differences between the two can be found.
The Juicy Little Details
Nodes on the Ethereum blockchain carry the burden of verifying the work of miners and compliance with the network’s consensus rules. To achieve this, each node has to record and store a copy of the entire ledger. With Ethereum’s rapid growth, the network runs the risk of sacrificing decentralization as the cost of running a node out pace the everyday user.
The Sharding approach to solving this problem works by separating the blockchain into smaller chains – rather than going the off-chain route. This means that a node will no longer need to process every transaction, only the ones on the specific shard it is attached to.
With each shard still cryptographically connected to the main chain, the ETH2 blockchain will be like an archipelago of blockchains.
The Lightning Network – on the other hand – tries to solve the scaling problem by adding a second layer to Bitcoin’s blockchain. This layer is not a lesser blockchain, but rather a network of transaction channels between the network’s users. Through these channels, users are able to transfer funds between themselves without the need to have the transaction data immediately communicated to the blockchain – this data is sent to the main network once the channel is closed.
Difficulties Faced by These Innovations
For the Lightning Network, one of the most notable risks is that the network needs to be online all the time. This means that users are not afforded the option of cold storage.
Another potential pitfall for Bitcoin’s layer-2 solution is the risk of losing decentralization due to the potential of nodes belonging to businesses with more active channels starting to resemble the “hub-and-spoke” system used in the incumbent financial sector. A malfunction of one such node could interrupt or damage a significant portion of the network.
Sharding may not be a silver bullet solution either. The first challenge faced by Ethereum developers is that fact that a successful is best executed on a Proof-of-Stake blockchain. This is because of a Proof-of-Work blockchain’s vulnerability to a 51% attack. Theoretically, a shard on a PoW blockchain would face the same risks.
The other challenge isa shard getting taken over by a malicious node, which could lead to a permanent loss of all information regarding the transactions on that shard. To combat this, Ethereum is working on a system of randomly assigning nodes to shards – known as random sampling.
“The idea is to make it difficult for an attacker to predict, or force, which shard their (malicious) node gets assigned to. This makes it more difficult to get a Byzantine takeover of any one shard,” as per David Huseby, a cyber security expert at the Linux foundation.