Guide to Understanding the Layers Of Blockchain
You might have heard that blockchain provides numerous unique advantages for exchanging data, such as increased transparency and unbeatable security, as well as increasing efficiency, lower operational expenses, and operations without intermediaries. In this blog post, we will explore how blockchain is organized and how layers of this technology work.
Reminding The Basics
At its core, blockchain is a type of distributed ledger that stores data in the form of encrypted blocks. The secure decentralized nature of this system makes it a powerful platform for exchanging digital assets, as parties don’t need to rely on third-party intermediaries or trust each other in order to transact.
While commonly associated with cryptocurrency, blockchain can have practical applications in healthcare, logistics, and real estate industries. Unique features of blockchain have inspired the creation of numerous blockchain-based businesses and initiatives.
Blockchain architecture is divided into several distinct layers that perform their own functions.
Explaining Layers To Help Understanding Blockchain System
There are two ways to understand blockchain technology. The first is by looking at the blockchain network’s protocol, which consists of four layers: Layer 0, Layer 1, Layer 2, and Layer 3. The second way is by examining its architecture, which includes five layers: data, hardware, consensus, network, and application. In this message, we will explore each of these categories in detail.
Architecture Layers
As previously noted, blockchain architecture is structured into five layers. Let us delve into each of these categories in detail.
- Data layer
A blockchain is a block-based system that stores transactional data using a hashing process. The first block, the Genesis block, is the foundation of the blockchain. Subsequent blocks are added through a continuous linking process, resulting in an ever-growing chain.
Each transaction is digitally signed using the sender’s private key, which is inaccessible to anyone else, to ensure security and confidentiality. Additionally, the digital signature provides a legal association with the sender and cannot be ignored, adding an extra layer of identity protection.
The information stored in a blockchain is highly secure due to data encryption, which makes it virtually inaccessible and tamper-proof. In the language of blockchain, this concept is referred to as “finality”.
- Hardware layer
Robust data servers are deployed to maintain backups to ensure the security and accessibility of blockchain data. The system relies on a client-server structure and a P2P network, which work together to facilitate the exchange of information. As a result, a distributed ledger is created by sharing and monitoring data across a network of devices. Importantly, each node within the network is fully authorized to monitor transactional data randomly.
- Consensus layer
The purpose of this layer is to effectively uphold the network’s rules to maintain consistency across the network. The blockchain cannot be operated by a single node; rather, it requires the consensus of all nodes within the network. This verification process significantly reduces the potential for any fraudulent transactions to be added to the blockchain.
- Application layer
The blockchain serves various purposes, and this layer makes it more accessible. This layer is basically a front end that helps years to work with dApps, exchange transactions, and more. It serves as the interface between the user and the blockchain network. Essentially, this layer is what users navigate to interact with the blockchain’s features.
- Network layer
The P2P framework enables multiple nodes to exchange transaction data to verify the transaction’s legitimacy. To achieve this, every node on the network must have the ability to communicate with other nodes rapidly. The network layer facilitates this communication, called the “Propagation Layer.” The Propagation Layer is responsible for detecting nodes, generating blocks, and adding blocks to the network.
Protocol Layers
- Layer 0: The foundation of the blockchain, where network hardware and connected devices coexist. It serves as the base layer on which all subsequent layers in the blockchain are built upon. This layer forms the basis for communication between nodes in the network, allowing for secure information exchange and trustless consensus to occur.
- Layer 1: The first layer of the protocol consists of blockchain networks such as Bitcoin, TRON and Cardano which ensure secure transactions through consensus mechanisms like proof-of-work and proof-of-stake.
- Layer 2: Also known as the execution layer, this layer supports scalability by implementing off-chain solutions to handle increased transaction loads without compromising the features of the first layer.
- Layer 3: The application layer of the blockchain protocol is home to a variety of blockchain-based applications such as dApps and DAOs. The layer provides users with a variety of services that are tailored to their particular needs and can be used for everything from building decentralized networks, facilitating transactions, and storing data.
Final Takeaways
Having explored the layers of blockchain and its individual components, it should now be easier to understand how the technology works. Blockchain is a complex system that relies on each layer working together to provide an efficient, secure, and reliable way of transferring data or value from one person to another. Understanding the different layers will help developers create more advanced decentralized applications and create new products that can be used in all aspects of life.
