Blockchain technology has grown over the years, with many benefits like transparency, fast borderless transactions to excellent security.
The use cases have increased over time and as developers continue to explore other possible applications and user adoption doubles. Layers are created upon blockchains to scale them and give room for more explorations.
Conversations around blockchain technologies like Polygon often refer to it as a Layer 2 blockchain extending Ethereum and reducing gas fees.
In this article, we will look at the different layers and how blockchain technology setup works on them.
There is no central body that manages a blockchain, therefore transactions are managed on a distributed ledger that is safe, secured, and transparent. The blockchain makes use of nodes or computers to process, validate and confirm transactions.
Blockchain layers are categorised into:
Layer 0 blockchain
This is the foundation of the blockchain ecosystem and covers protocols, hardware, and various components that serve as the background network architecture.
Layer 0 allows different blockchains to interact. They often have native tokens creating room for participation and incentivising users to secure the network.
Avalanche, Cosmos, and Polkadot are some popular Layer 0 blockchains.
Layer 1 blockchain
These maintain the operational structure of the blockchain network like consensus mechanisms, smart contracts, and other components. They are the blockchains everyone is familiar with, consisting of blockchains like Ethereum, Binance Smart Chain, Bitcoin, and Solana.
There are a lot of scalability concerns with the number of transactions happening on these blockchains, and the increase in nodes and the high amount of power required for computation makes processing slower and creates the need for fees bigger than usual.
Layer 2 blockchain
These are created on top of layer 1 blockchains to extend their capacity and enable them to cater to many more users.
Layer 2 is a new type of network that enhances layer 1 blockchains, constantly interacting with it, validating transactions, and more.
Lightning Network is a famous example of a layer two blockchain deployed on Bitcoin. Polygon is also another example, built on Ethereum.
Layer 3 blockchain
This layer of the blockchain ecosystem is considered the client side. This layer allows all users to interact with an interface, permits inter-chain operability, such as decentralised exchanges and liquidity, and provides simple overall functionalities.
Layer 3 is where participants will eventually interact with the user interface. Decentralised apps (dApps) are layer three protocols creating real-world blockchain solutions; Uniswap is a good example.
Blockchain Architecture Layer
Hardware infrastructure layer
The data of a particular blockchain is stored in multiple peer servers, and users can interact with this content from application servers and access different applications. A blockchain validates and records transactions with this peer-to-peer (P2P) network creating decentralized databases. Hence a blockchain is a network of devices or nodes interacting with each other, and the records are also stored across devices creating the distributed ledger.
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The Data Layer
Blockchains are a build-up of blocks that store data containing transactional records. Transactions validated by the nodes on a blockchain are grouped into a block that is linked to a preexisting block. The ‘Genesis Block’ is the first block, a block is linked to the genesis and the process continues for every block that comes after that, gradually expanding the blockchain.
The Network Layer
The Peer to Peer architecture allows millions of nodes to send transaction data and ensure the blockchain is operational. Each node must be able to find and interact with other nodes for faster communication. Inter-node communication is a core of the network layer, making creating blocks and node identification possible.
The Consensus Layer
This is the operational layer of the blockchain that handles validating transactions and ensuring a blockchain doesn’t fail. This layer decides the protocol required for nodes to be able to validate each transaction. It helps maintain the blockchain’s decentralized nature, ensuring no node has sole control over any transactional data. All nodes come to the same conclusion before a transaction is valid and is referred to as a consensus mechanism.
The Application Layer
This hosts decentralized apps (dApps) and smart contracts. It creates room for end users to interact with the blockchain and provides a lot of use cases for the blockchain in the real world. It powers consumer interaction on blockchains and is accessed on low-end devices with interfaces that provide robust functionalities.
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The scalability of blockchain technology plays a role in its global adoption. It will take a long time to achieve a fully scalable blockchain. The blockchain is still very young, and complex and requires beginners to study how they work and better comprehend the concepts to be able to properly contribute.
Credit : Medium