DEFINITION of 'Sharding'

Most conversations about cryptocurrencies generally begin and end with bitcoin. But the original cryptocurrency suffers from serious drawbacks. In addition to its high transaction fees, bitcoin has a fundamental privacy flaw. The idea of a public and transparent blockchain is an attractive one but it challenges modern notions of privacy. While the action could tamp down on criminal activities, broadcasting financial transactions publicly could easily cause problems for users. For example, a tax-related transaction on a public blockchain could reveal a user’s personal data. Similarly, private business-related transactions available on public blockchains could prove problematic for users who conducted them. (For more, see also: The Future of Cryptocurrency.)

Zcash is a privacy-focused blockchain that was developed in response to bitcoin’s flaws. It uses the same algorithm as bitcoin but improves upon it by enabling semi-transparent processing. In simple words, this means that it eschews the radical transparency of bitcoin’s blockchain for a more nuanced implementation. In this implementation, user transaction data is revealed selectively. (For more, see also: What Is Zcash?)

Zcash’s roots lie in Zerocoin, which was developed in the 1980s. It was developed by Matthew Green, currently a professor at John Hopkins University. Back then, he was a graduate student at the institution. Zerocoin employed a novel sophisticated mathematical technique called zero-knowledge proofs in order to conduct blockchain transactions. The proofs ensured that the transaction’s contents remained anonymous even as the transaction was publicly visible on a decentralized ledger.

BREAKING DOWN 'Sharding'

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