In Destiny 2 you can earn Legendary Shards from dismantling Legendary (Purple) Armor / Weapons. You get three shards per dismantled item.
The Legendary Shards are used for Infusions, Buying Exotics from your Vault Collection, and buying Exotics from Xur.
- Infusions: They allow you to sacrifice one piece of gear and transfer its power level to another item of the same category. For example, to upgrade a legendary chest armor from power 220 to 230 you can sacrifice a level 230 rare chest armor. The infusions are done from the inventory by pressing Triangle on the item you want to upgrade. Then scroll over the item in the bottom left that says “infuse”. Now select an item with a higher power level that you want to sacrifice. The sacrificed item will be destroyed permanently in the process.
- Exotics from Vault Collection: Every Exotic you find (across all your characters) is stored in the Vault. The Vault is accessed from the social spaces (Farm & Tower). In exchange for 10 Legendary Shards you can craft any of the already collected Exotics. You can make as many copies of them as you want, so long as you got enough Legendary Shards. It’s even possible to craft exotics you found with another character of yours.
- Buying Exotics from Xur: Xur is a traveling merchant known from the first Destiny. He spawns in random places each week. You can pay him with Legendary Shards in exchange for Exotic Gear. His inventory changes every week. So stock up on Legendary Shards to exchange them for Exotics.
How to Get Legendary Shards: Dismantle Legendary Gear (Weapon / Armor).
How to Use Legendary Shards: To Infuse Weapons (upgrade their power level), to buy Exotics from your Collection Vault and buy Exotics from Xur.
Pro Tip: Did you know Exotics come with a legendary armor / weapon mod installed? Infusing weapons that have a purple +5 damage mod or armor with a +5 armor mod also increases the power level by 5 points more than usual. Example: infusing a level 220 exotic chest armor with a level 230 rare/legendary chest armor will put it at level 235 (that’s because the exotic’s +5 armor mod is added to the equation)! You get +5 power levels extra for the infusion. Use this trick to level your gear more quickly and make sure you have purple mods installed in your gear before infusing it with legendary shards.