A shard means a small part of a whole. Sharding is heavily used in

databases where a large database is partitioned into smaller units for

faster and easier processing. Shards can also be located in different

parts of the world, carrying area-specific customer data for security

and faster access. Hence, sharding, in certain cases, is considered

as a Layer 1 solution.

When it comes to Blockchain, sharding helps distribute the workload

across the network reducing the workload on the nodes, leading to a

much faster processing. On the down side, it might induce certain

security concerns as it breaks the Blockchain into multiple shards

and is prone to attacks.

1.12.4.2 State Channels

As represented in Figure 1.16, a State channel is a mechanism

where a group of users interact with each other outside the

Blockchain network for a number of transactions through a channel.

Only the final outcome is reported to the main ledger. Refer to Figure

1.16, as follows:

Figure 1.16: State Channel

Bitcoin’s lightning network, Ethereum‘s Raiden network, Cardano’s

Hydra, and Neo Blockchain’s Trinity work on such architecture.