Why Moody’s Ratings Cares About Blockchain Sharding & Scalability

Sharding is an approach to scaling blockchain networks that is rapidly gaining traction — and the TradFi world is beginning to take note.

The technique divides the blockchain into smaller, more manageable segments — known as shards. By then parallelizing transactions across multiple shards, sharding dramatically increases network throughput, reduces latency, and strengthens consensus mechanisms.

Why would the hundred-year-old credit rating company Moody’s Ratings be paying attention to this feature of blockchain? That’s the question Techopedia wanted to ask.

So we sat down with Rajeev Bamra, SVP and Head of Strategy, Digital Economy at Moody’s Ratings, to understand how the technology gains popularity beyond the blockchain community.

Table of Contents Table of Contents

1. Key Takeaways
2. Moody's Ratings Has Its Eye on Blockchain Sharding
3. Disruption in Finance, Insurance, Energy, and Healthcare
4. The Bottom Line
5. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Moody's Ratings Has Its Eye on Blockchain Sharding
3. Disruption in Finance, Insurance, Energy, and Healthcare
Show Full Guide
4. The Bottom Line
5. References

Moody’s Ratings Has Its Eye on Blockchain Sharding

The traditional financial (TradFi) sector has, in the past, been slow to embrace Web3 and blockchain technology but is now watching with much more keen interest.

Bamra from Moody’s Ratings explained that sharding addresses one of the biggest headaches in digital finance — scalability, which is needed for high-demand applications processing billions of transactions a day.

Bamra explained that sharding could enable decentralized platforms to handle significantly more users and transactions without the congestion or high fees that currently plague many blockchain networks.

“As sharding becomes more widely adopted, it will allow decentralized applications (dApps) to scale effectively, laying the foundation for broader adoption of digital technologies across industries.

“This scalability could be the catalyst for unlocking the full potential of DeFi and other blockchain-based innovations.”

In parallel, scaling solutions, such as rollups, bundle transactions off-chain and only settle the final data on the main blockchain — further improving transaction speeds and reducing costs.

Moody’s Ratings specifically views sharding as useful in several use cases and believes sharding can transform traditional sectors by managing large volumes of data and transactions.

In today’s world, where traditional and decentralized economies start to co-exist, the speed and efficiency of transactions are paramount to success.

With billions of operations occurring daily on a global scale, even minor delays can significantly impact profitability.

Bamra told Techopedia that “scalable blockchain solutions could facilitate faster and more efficient processing of large volumes of financial transactions, reducing costs (dramatically) and improving overall transaction speed”

“This may include real-time processing of payments, cross-border transactions, and settlements.”

Disruption in Finance, Insurance, Energy, and Healthcare

From the energy sector — decentralized energy grids, energy production, and consumption tracking — to healthcare, Bamra suggested some of the energies where sharding may come into play.

“In healthcare, scalable blockchain solutions may perhaps support large-scale patient data management systems, enabling secure and efficient sharing of medical records among institutions.

“Sharding could help manage and process extensive health data while maintaining data integrity and privacy.”

Sharding could also create a more efficient global supply chain management by partitioning the vast amounts of data these giants generate.

This would translate into improvements in logistics, inventory management, supply coordination, and much more.

Similarly, the insurance industry benefits from scalable blockchain solutions by improving the efficiency of claim processing, risk management, and policy administration.

Sharding could help handle large volumes of data associated with policyholder records, claims, and underwriting.

But as a starting point, the finance world is the closest industry to blockchain — the test bed will be there, and that’s why Moody’s is watching as the crossovers begin.

The Bottom Line

As traditional financial institutions like Moody’s Ratings take notice of sharding’s potential, it will be a fascinating few years to see how much blockchain replaces the underlying tech that runs the financial system.

Maybe a little, maybe a lot — it’s worth remembering that while we think of the finance world as largely computerized, that only became true in the late 1980s. Things move slowly and then at speed.

Trust, uptime, and scalability are all factors, and sharding may be the next big leap that will make TradFi sit up.