It is no secret that Blockchain is a highly functional and advantageous piece of technology, offering numerous improvements over the conventional Web 2.0 methodology. This novel solution offers rock-solid security, lower transaction costs, complete anonymity and decentralisation. Today, we will examine the technical structure of Blockchain, including the essential layers that make everything tick.
Let’s Review the Basics
At its core, Blockchain operates on a distributed ledger methodology, which entails storing data within encrypted blocks. The encryption process secures any type of data uploaded on the digital blocks, making the entire network secure for asset and information exchange. With this structure, users do not have to share their sensitive data with third parties in order to process and execute desired transactions.
Although this methodology is most recognised for creating cryptocurrencies, it can be applied to a variety of industries like healthcare, manufacturing, real estate, etc. The underlying technology of Blockchain has made a sound basis for developing numerous applications with wildly varying purposes.
Blockchain technology can be divided into specific layers responsible for particular functionalities and features within the network.
Understanding Architecture and Protocol Layers
To fundamentally understand blockchain technology, we must examine the individual layers that make this complex system work. The layers of Blockchain can be divided into two different groups – Architecture and protocol layers. Both systems are responsible for equipping the decentralised networks with security, anonymity, speed and freedom of borderless transactions. Let’s discuss both layer groups in greater detail.
The Architecture Layer
The first layer group that powers the blockchain methodology consists of five unique layers. Below, we analyse the nature and significance of each layer in relationship to the decentralised networks:
The Layer of Data
This layer utilises the hashing mechanism to store transaction information into digitally encrypted blocks. As a rule, the Genesis block is the first data-storing unit, which initialises the digital chain of subsequent informational blocks. As a result, the data layer provides a foundation for building a chain of digital blocks that are impossible to breach or corrupt with conventional means.
Each block in the chain mentioned above corresponds to a particular transaction added by the network users. These transactions are encrypted with private keys only available to respective users, ensuring their private data and assets are not available to anybody else. Additionally, these data blocks are legally tied to their respective asset owners, ensuring complete ownership within the network. The private keys and digital signatures create a solid layer of security and anonymity for the network participants.
The Hardware Layer
The next layer provides suitable backups for security breaches or data disasters. This backup solution is built on a client-server structure combined with the P2P network. The mix of these digital systems produces uninterrupted and efficient data flow. As a result, the data exchange between various network devices creates a distributed ledger that makes and links encrypted data blocks.
- The Application Layer
The penultimate layer in this structure simplifies the entire blockchain operation process. It is no secret that decentralised networks are astronomically complete mechanisms that require expert knowledge to understand, let alone operate easily. Thus, to make these networks more accessible, the application layer provides an intuitive user interface. As a result, users can transact without expert knowledge, and creators can develop decentralised applications with a more straightforward process.
The Consensus Layer
The third layer in this list ensures honouring all underlying principles of the Blockchain methodology, including decentralisation, anonymity and security. The consensus mechanism is a verification principle that lets all network participants cast their votes in the block validation process. This way, it would take most network users to verify a faulty transaction, which is highly unlikely to happen.
The Network Layer
The final layer in this structure focuses on the execution of transactions and other operations in the decentralised network. The network layer, also known as the “propagation layer”, lets individual data blocks connect and communicate. Additionally, this layer generates new data blocks and connects them to existing data chains.
As a second layer structure, we have the protocol layers, which can be visualised as the different floors in an apartment. Let’s discuss each of the protocol layers individually and assess their functionality within the decentralised networks.
- Layer 0: This initial layer is the foundational pillar for decentralised networks. It allows the digital nodes to link together and communicate with each other seamlessly. Layer 0 also ensures complete anonymity and security of individual blocks.
- Layer 1: This layer introduces consensus mechanisms to decentralised networks. The consensus methodology allows the network participants to adopt a particular structure for validating blocks. Popular strategies include proof-of-work and proof-of-stake mechanisms.
- Layer 2: As an execution layer, layer 2 allows the decentralised transactions to be processed outside of the main layer. This mechanism catalyses the execution of transactions, letting users enjoy much faster finalisation and fewer gas fees.
- Layer 3: The final layer is responsible for letting creators construct various decentralised applications in the Web 3.0 sector. Layer 3 also accommodates DAO construction.
For individuals and businesses who want to master the Blockchain methodology, it is essential to understand the underlying layers that make everything work. Both layer groups discussed in this article provide crucial functionality and features. Without them, the Blockchain networks would not accommodate the decentralisation, anonymity, speed and efficiency of respective networks.