Blockchain Architecture
Blockchain has transformed how data is stored and transferred, emerging as one of the most groundbreaking innovations of the 21st century. It’s poised to become an integral part of everyday internet applications, though many still find its complex workings hard to understand. In this article, we’ll break down how blockchain operates and explore its various layers in the simplest way possible.
At its core, blockchain is a decentralized ledger that records transaction data. Take Bitcoin, for example: it runs on the Bitcoin blockchain, and each transaction involving Bitcoin—whether sending or receiving—is logged on this blockchain. Blockchain offers a more efficient and transparent alternative to traditional record-keeping systems, as anyone can view transactions on a public blockchain.
Unlike traditional systems, a blockchain isn’t owned by a single entity. Instead, it is maintained by everyone involved in validating the transactions. This decentralized nature removes the risk of a single point of failure, making blockchain virtually impossible to hack, since there’s no central origin point. Blockchain ensures transparency, reduces the need for intermediaries, and cuts down on operational costs.
Now that we’ve covered the basics, let’s delve deeper into the layers of blockchain technology and the role each layer plays.
Blockchain is built on five primary layers: the hardware infrastructure layer, the data layer, the network layer, the consensus layer, and the application layer. Each of these layers serves a distinct function, working together to create a comprehensive system—from managing data on the backend to powering user-facing applications.
Read more: Top 5 Blockchain Protocols
The Hardware Layer
Blockchains rely on peer-to-peer information sharing, with a network of computers providing the computing power that supports the blockchain, forming the hardware layer. Essentially, blockchains are made up of all the nodes within the network. A node is a computer or a group of computers responsible for decrypting transactions.
The Data Layer
The layer that follows the hardware layer is the data layer, where transaction details are recorded. Each transaction stored in a block—the basic unit of a blockchain—contains information such as the amount of crypto sent, the recipient’s public key, and the sender’s private key. Every block, which holds transaction data, is linked to both the previous and the next block in the chain. The only exception is the genesis block, the very first block in the network, which is only connected to the next block and not to any prior block.
The Network layer
The network layer manages the communication between nodes on a blockchain. As blockchain operates in an open system, each node needs to be aware of the transactions being validated by other nodes. The network layer facilitates this essential communication, ensuring the smooth operation of the system.
The Consensus Layer
The consensus layer is responsible for validating blocks on the blockchain. Let’s explain how it works with an example. Suppose John and Mark are two validators on the blockchain. They each receive transactions to decrypt and add to a block.
John receives transactions A and B, while Mark receives transactions B and C. If both John and Mark validate their transactions and add them to the blockchain, transaction B will be recorded twice, causing double spending. To prevent this, John and Mark compete to solve a complex mathematical puzzle, and the first one to solve it gets to add the block to the blockchain. This method of consensus is called Proof-of-Work (PoW).
In the case of Proof-of-Stake (PoS), instead of competing to solve puzzles, the system randomly selects a validator to add the block.
The Application Layer
The application layer in blockchain is where various apps are built. These can range from wallets and social media apps to Defi Apps and NFT platforms, among others. While the user interface (UI) and user experience (UX) of these apps resemble those of traditional applications, the key difference lies in the decentralized nature of data storage at the backend, which is powered by blockchain technology.
Blockchain Layers Explained
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Layer 0
Blockchain in itself is called layer zero. The components required to make blockchain real are the internet, hardware, and many other connections. Layer zero blockchain is the initial stage of blockchain that allows various networks to function, such as Bitcoin, Ethereum, and many more. Layer 0 also provides blockchain with a facility of cross-chain interoperability communication from top to different layers. Layer 0 provides the underlying infrastructure for blockchain.
Layer 1
Layer 1 blockchain is an advancement in layer 0. Under this layer, the blockchain network is maintained functionally. However, scaling is a limitation in the layer one blockchain. Any changes and issues arising in the new protocol in layer 0 will also affect layer 1. It is also called an implementation layer. Examples of layer one blockchains are Bitcoin, Ethereum, Cardano, Ripple, etc.
Layer 2
Layer 0 has many interactions that have been removed by layer 2. For specific blockchains, layer 2 blockchain is the scaling solution. It works with third-party integration and removes the limitations of layer 1. It is the most popular approach for solving scaling issues attached to POW networks. At present, various industries have begun implementing layer two technologies.
Layer 3
Layer 3 blockchain is also referred to as the “application layer”. The main task of this layer is to host the DAapps and many other protocols that enable other apps. Here, the blockchain protocol is split into two significant sub-layers, that being, application and execution. It is the most potent solution made to separate blockchains with cross-chain capabilities for achieving the target of real interoperability.
Read About: Different Types Of Blockchain
Differences Between Layers 0,1,2,3
Layer 0 | This layer has the hardware, protocols and other foundational elements |
Layer 1 | Maintains the dispute resolution, consensus mechanism and programming of the blockchain. Examples: Bitcoin blockchain, Ethereum blockchain |
Layer 2 | Has better scaling capabilities than Layer 0 and 1. It has the capability to be integrated with third-party solutions |
Layer 3 | This layer is used to host dApps and other user-facing applications |
What is Blockchain Scalability?
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Blockchain scalability refers to the network’s ability to handle an increasing number of transactions and nodes effectively. It measures the number of transactions a blockchain can process per second. As blockchain technology evolves, the transactions per second are steadily rising, contributing to the concept of scalability.
Security is another fundamental aspect of blockchain, alongside decentralization. Blockchain protocols are designed to protect data from potential network attacks. Scalability ensures that the blockchain can support future growth and high transaction volumes. With continuous advancements, blockchain is increasingly able to compete with centralized platforms and legacy systems.
Additionally, the “scalability trilemma” addresses the challenge of balancing security, scalability, and decentralization. Currently, most blockchain technologies prioritize two of these properties, but few manage to effectively address all three. The ideal blockchain is one that is both fast and secure while being highly scalable.
What is Blockchain Security?
In a blockchain system, computers are connected through a peer-to-peer network, with nodes distributed across the open network. This setup introduces a potential risk of a 51% attack, where hackers could gain control of the majority of the network’s computing power. Additionally, there is a risk of data manipulation within the network. To maintain blockchain security, it is crucial to protect the system from external threats and ensure robust safeguards against such vulnerabilities.
Conclusion
Blockchain technology may seem complex at first, but with some effort, its potential and applications become clear. Rapid advancements are happening in this field, and both governments and organizations are taking notice, integrating blockchain into various sectors. At this point, the technology is steadily gaining traction and proving its value across industries.
FAQs on Blockchain Layers
What is a blockchain, and how does it work?
Blockchain is a distributed ledger that stores transaction records. For instance, Bitcoin transactions are recorded on the Bitcoin blockchain. It’s transparent and owned by all participants, eliminating a single point of failure. It ensures transparency, reduces middlemen, and minimizes operational costs.
What are the primary layers of blockchain technology?
Blockchain consists of five layers: hardware infrastructure, data, network, consensus, and application layers. These layers handle functions from data storage to user-facing applications.
How does the consensus layer work in a blockchain?
The consensus layer validates blocks in blockchain. It often uses Proof-of-Work (PoW), where nodes compete to solve cryptographic puzzles. In PoS (Proof-of-Stake), validators are randomly chosen.
What are the key differences between blockchain layers 0, 1, 2, and 3?
1. Layer 0 includes foundational elements like hardware and protocols.
2. Layer 1 maintains dispute resolution, consensus mechanisms, and blockchain programming (e.g., Bitcoin, Ethereum).
3. Layer 2 offers better scaling capabilities and third-party integration.
4. Layer 3 hosts decentralized applications (dApps) and user-facing applications.
What is blockchain scalability, and why is it important?
Blockchain scalability refers to a network’s ability to handle increased transaction and node loads. It’s vital for accommodating growing transaction volumes. Scalability ensures blockchain’s competitiveness and addresses many of its inherent challenges, striving for the “Scalability trilemma” of security, scalability, and decentralization.
Are blockchain layers present in all blockchain networks?
No, blockchain layers are not present in all blockchain networks. Some blockchains have a single layer, while others employ multiple layers for enhanced functionality and scalability, like Ethereum’s Layer 2 solutions.
Can a new layer be added to an existing blockchain network?
Yes, a new layer can be added to an existing blockchain network through a process known as “layering” or “sharding.” This allows for increased scalability and functionality without altering the underlying blockchain’s core protocol, enhancing its capabilities while maintaining compatibility with existing layers.
Do blockchain layers impact the transaction speed of a blockchain network?
Yes, blockchain layers can impact transaction speed. Layer 2 solutions, like Lightning Network for Bitcoin or Rollups for Ethereum, aim to improve transaction throughput and reduce latency. They achieve this by processing transactions off-chain or in a more efficient manner, enhancing the overall speed of the blockchain network.
Are all blockchain layers decentralised?
Not necessarily. While decentralization is a core principle of many blockchain networks, the degree of decentralization can vary among layers. Some layers may prioritize decentralization, while others, like certain sidechains or off-chain solutions, might sacrifice some degree of decentralization for scalability or efficiency gains.
Can blockchain layers be customized for specific use cases?
Yes, blockchain layers can be customized for specific use cases. Developers can design and implement layers tailored to particular requirements, such as privacy, scalability, or smart contract functionality. This flexibility allows blockchain technology to adapt to a wide range of applications and industries.