[Analysis] Cross-shard DeFi composability - Vitalik Buterin

There was a growing concern among Devcon attendees last week that Ethereum 2.0’s proposed scaling solution, sharding, will break the ability for different Ethereum-based applications to easily interact with each other. In its current state, Ethereum ($ETH) protocols and smart contracts can act as composable building blocks to formulate more functional end-user applications. This property has led to the relative success of the decentralized finance (DeFi) sector and helped Ethereum establish a healthy lead in available infrastructure and developer tools compared to newer smart contract platforms. If sharding fails to preserve protocol composability, the function of certain popular DeFi applications would be completely disrupted.

Vitalik Buterin penned multiple pieces mid-conference to address specific concerns circulating within the Ethereum community, including one on the fate of cross-shard composability. Vitalik states transactions between shards can be executed through the use of receipts, rather than in the typical “all-or-nothing” fashion (i.e., atomic transactions). But most DeFi use cases would not be significantly interrupted and may only need trivial updates to survive in a receipt-based, cross-shard model.

In particular, the ERC-20 standard would need to be modified, since tokens would need to be able to exist on all shards. High-volume DeFi applications, such as Compound, MarkerDAO, and Uniswap, could exist on their own shards. Vitalik argues users would have to transfer tokens over to the appropriate shard, but the general user experience would otherwise remain the same. Overlay tools, such as InstaDApp and PoolTogether, would need to create new contracts for each supported function so these tools could continue to interact with multiple dApps living on different shards.

Let us know what you loved about the report, what may be missing, or share any other feedback by filling out this short form. All responses are subject to our Privacy Policy and Terms of Service.