Blockchain layers PT1


Nowadays, there are so many technologies and so much information about them that learning all of it is really hard. Sometimes, it seems like new technology “layers” appear every day!


To begin with, let’s look at blockchain. You can already use Bitcoin – the most famous of blockchains – even if you don’t understand what it is. So how do you know if something is really important? Maybe just checking out what Wikipedia has to say about Bitcoin or blockchain will help:


Blockchain (database) – Wikipedia


Artificial Intelligence – Wikipedia


Blockchain Technology – Wikipedia


If you read through all this information, you probably noticed that there are different kinds of blockchains, but what about blockchain applications? Here is an article for those who want to find out more about that:


Blocks Blockchain Explained Simply For Dummies! | Blocksale


What Are Application Layer Protocols?


The simplest way to understand different layers of blockchain is by looking at the internet. A lot of people use the internet every day but hardly anyone knows what software, hardware or protocols it consists of. At this point in time, most people just use the parts that they need. Like using social networks like Facebook and chat apps like WhatsApp. The same happens with blockchain technology – people use Bitcoin for example, even though they don’t know how it works either! So let’s find out more about how it all “fits” together.


To begin with, I want you to click on one of the three pictures below and read about its content. Each one describes one of the layers separately, but what they have in common is that they all “work together”.


Blockchain Technology – Wikipedia

Artificial Intelligence – Wikipedia

How does Blockchain technology work?

When you are done reading or watching these examples, you’ll get an idea of what blockchain is and how it works. The next step is to find out more about the different types of blockchains that exist and then we will try to answer the question: what’s in it for us?


Blockchain Technology – Wikipedia

Artificial Intelligence – Wikipedia

How does Blockchain technology work?

What is Bitcoin? –

How Bitcoin Works Under The Hood – Bitcoin Explained In Nontechnical Terms by ConcernedApe


  1. Blockchain’s history and future:


The first blockchain was created in 2008 as a core component of Bitcoin, a digital currency system that has gained worldwide acceptance as an alternative payment method for online commerce and services such as international money transfers. Bitcoin is an open-source technology and was designed by Satoshi Nakamoto, a person or group of people whose identity remains unknown to this day.


Some people say that Bitcoin was (and still is) the first blockchain application, but that’s not entirely true as it wasn’t the first application using some sort of distributed ledger technology. It took 10 years for new industries and companies to realize what kind of potential there was in creating decentralized technologies and how they could use DLT  to create their own applications. This led to massive growth in the development of blockchain-based applications which we can now see all around us – so let’s take a look at some of them:


Ethereum: Ethereum is a decentralized platform that runs smart contracts  – applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference. Applications on the blockchain are executed with ether, the fuel used to pay for transaction fees and services on the Ethereum network.


Many people think with Bitcoin when talking about blockchain but in fact, just like there are many types of blockchains, there are also multiple cryptocurrencies. Some people argue whether Ether should be considered one at all considering it’s not mined through a consensus of miners via proof of work ( PoW ). It was created by Vitalik Buterin who together with his co-founders raised around 31 thousand Bitcoins at ICO which was equal to 18 million dollars at that time.


The smart contracts enabled by Ethereum can be particularly useful to the financial and insurance industries, as well as for clearing complex transactions across borders. But they can also serve as a trusted mechanism for any type of agreement, including supply chain logistics, voting, and governance applications – even in Internet Of Things (IoT) scenarios.


For now, we will focus our attention on Bitcoin, but keep in mind that there are other blockchains out there that have different functions and features. In order to learn more about them read – What Are Distributed Ledgers? Blockchain Technology Explained.


  1. The layers of blockchain: Let’s start from the bottom layer first:


Layer 1 – The Blockchain Layer – the layer that enables decentralized transactions

The Blockchain Layer is also referred to as the “Data layer” because it records all of the data within a given blockchain. This is where blockchains differ in design and function. Some are designed in such a way that only certain entities can view selected information on the ledger, while other blockchains are completely open for public viewing unless access permissions have been enabled for privacy reasons.


One example of an open blockchain is Bitcoin, which allows everyone to see anyone else’s account balance (if their wallet number is known) without needing permission. On the other hand, Ripple’s consensus protocol requires trusted nodes across its network to prevent transaction spamming or censorship by rogue actors.


Bitcoin and Ripple are both open blockchains – where anyone can view any transaction on their network. While this might seem like a security risk, it’s important to keep in mind that most people do not go out of their way to collect random transactions from around the web.


The Blockchain Layer enables different cryptocurrencies to be traded freely on the market with no regulations or restrictions, allowing for enhanced competition. Because of its design, many companies don’t need third-party trust and validation and as such, they choose to use blockchain technology (some openly and some behind closed doors).


Layer 2: The “Consensus Layer” – Where consensus is reached across the nodes regarding the current state of the system we call it the “consensus layer”. While it is technically not a separate layer, the consensus layer does play an important role in blockchain technology. The goal of this layer is to provide agreement on how new transactions are added into the system by validating the data with nodes distributed across its network. We call this process ” achieving consensus ” – when everyone agrees about the same state of things.


The layers at which blockchains operate range from governing agreements, governance rules, and regulations to smart contracts which are enforced by code rather than law. All these additional features are integrated into blockchain applications through their consensus layers.


To share information, every node within a blockchain network connects to each other via peer-to-peer protocols. This allows for all of them to act as “blocks” in the same system rather than individual nodes. This is possible due to how information is shared and accessed across the blockchain network. When data or transactions are created, they are broadcast across all nodes within a given blockchain app which ensures that everyone has the same version of the truth when it comes to who owns what, where things are in transit, etc.


Blockchain technology works by providing consensus mechanisms for decentralized networks. These mechanisms ensure that no single node can control or manipulate any transactions within its own self-interest without reaching an agreement with other nodes on the network. If there’s a disagreement between these nodes they will run different versions of transaction logs (or ledgers) until an agreement about their current state is reached.


The most important thing to remember about consensus mechanisms is that they are integral in maintaining overall agreement and balance on a blockchain network. On the other hand, one of the biggest challenges when it comes to scaling blockchains is dealing with scalability at this layer since it’s dependent on the bandwidth, speed, and scale of information processing that any given node is capable of.


Layer 3: The “Execution Layer” – Where business logic gets executed by smart contracts which enable users to build applications through decentralized transactions or exchanges. This layer works by providing rules or regulations that dictate how nodes interact with each other within the system. One example of this would be Ethereum’s Turing-complete programming language. It allows developers to create complex applications that interact with each other and the rest of the network.


When it comes to blockchain technology, people usually think of bitcoin when they hear the word ” blockchain .” This is understandable since this cryptocurrency was among the first ones developed. What makes it so special?


Rather than banks or any central entities being in charge of a single ledger that holds all records for a system, information is instead distributed across a network so that no one can manipulate data within their own interest without reaching an agreement with others on the network. Anyone who attempts to do so will have their activity rejected by everyone else – thus making it very difficult for anyone to bypass regulations. In order to reach an agreement about what’s going on in a system, all nodes run a consensus algorithm that ensures every node has the same version of the truth.


Blockchain technology represents a whole new way of doing things and one that doesn’t require any central authorities to govern it – which is why so many people are excited about its potential to change how we do business.


blockchain applications operate by allowing transactions to be validated across peer-to-peer networks. What’s important to understand is that all these transactions within blockchain networks contain validation mechanisms. For each transaction carried out, there will always be an answer from everyone else on the network as to whether or not the information they hold agrees with what was sent. To ensure this happens reliably, application layers built on top of blockchains need consensus mechanisms for validating data across distributed networks.


Layer 1: The “Data Layer” – Data within blockchain apps is stored redundantly on nodes across peer-to-peer networks. This provides the first layer of the security that makes blockchain technology so unique. Since all information is shared by everyone on a network, it’s more difficult for bad actors to gain access to sensitive information using traditional hacks since they would need to control over 50% of the overall network before being able to carry out an attack.


With this context in mind, each individual blockchain app will have its own way of handling consensus at its own distinct layer or level. Knowing these differences can help you understand how blockchains work and also reveal some of the trade-offs involved when it comes to scaling and developing blockchain apps in the future.


A very simple definition of an application protocol would be one that uses a network protocol in order to enable client-server communication. These types of protocols operate on top of the Internet Protocol Suite, which consists of various layers where each layer is responsible for serving different functions. The Internet Protocol Suite can therefore be thought of as a foundation for protocols such as HTTP, SMTP, and FTP, all of which function at Layer 7.


Blockchain works in much the same way because its own suite includes protocols such as payments (Layer 3), file storage (layer 4) or smart contracts (Layer 5). Each app within a blockchain platform will be built with specific functionalities that solve particular problems, but they will still be built on top of the same foundation. It’s only logical that each application layer should also provide consensus mechanisms for carrying out transactions among its users. When you’re deciding where to build your next blockchain app, it helps to know what makes these different layers unique and how they function together.


The more distinct layers a network has, the more independent interactions can take place within each one. Regardless of how many applications are built on top of a blockchain platform, all blockchains have miners at their base level who validate information through cryptographic methods before blocks are added to their respective chains. In order for them to do this successfully, they need to carry out a consensus at Layer 1. Layers 2-7 of Blockchain platforms, on the other hand, are where all decentralized applications will be developed and carry out their own consensus mechanisms.


Because of this division in functionality, it’s also possible for multiple applications to run on top of blockchain networks without necessarily intruding upon one another’s business operations. This means not only can more than one application access the same blockchain platform simultaneously but they don’t have to rely on shared nodes or channels that might interfere with the speed of transactions. It opens up a world of possibilities when it comes to building scalable apps while also protecting an underlying layer that already exists within the blockchain.


Layer 8: The “Public Policy Orchestration Layer” – Governments, Non-Profits, and other organizations that are built around the idea of the public good would benefit greatly from blockchain technology. This layer will help to open up opportunities like using voting records for charity programs or giving citizens more control over their own data.


Layer 7: The “Smart Contract Layer” – Smart contracts are self-executing agreements that can be programmed to execute when certain conditions are met. They allow business agreements to be embedded in code instead of relying on legal documents. With these types of smart contracts, payments can only go out after specific items have been delivered (or set amounts of time have passed) along with multiple other triggers that could be based on anything from GPS coordinates to random numbers pulled by an oracle. All of these checks and balances help to make sure that both sides of a fair smart contract can be consistently trusted.


Layer 6: The “Exchange Layer” – This layer is what most people think about when they hear the word “decentralized exchange”. There are many different types of exchanges that operate in the digital world, including decentralized exchanges. A decentralized exchange can occur across blockchain networks, meaning you no longer have to rely on middleman platforms like Coinbase or other centralized authorities to handle all your transactions. This gives you access to cross-chain atomic swaps where cryptocurrency values are exchanged while also having their respective chains independently recorded. It’s another way for developers to create more functional apps while making them easier for users to adopt by leveraging the existing foundation of the blockchain platform.


Layer 5: The “Microservices Layer” – This layer will enable developers to build their own microservices using smart contract templates. If you want your app to run in a decentralized environment, this is one way for them to do so without having to develop everything from scratch. Your customers might also benefit by being able to use services like insurance applications, communication apps, and many other types of solutions that are needed in today’s economy.


Layer 4: The “Data Management Layer” – When it comes to financial transactions, the data that gets sent over networks between parties needs to be verifiable at all times. To accomplish this feat, all data objects need their own digital fingerprints. It’s up to blockchain developers to build out this layer so that financial operations can be recorded and verified with the most accuracy possible.


Layer 3: The “Computational Layer” – Because of exponential growth, computations will need to increase as well. When it comes to making sure transactions are processed in a timely manner, a lot is going to depend on how fast a blockchain platform can send over data from one place to another. This computational layer will also help support Turing-complete smart contracts which allow them to store an unlimited amount of information using very few resources. It’s designed for applications that require heavy storage capabilities while simultaneously offering the highest level of security for its users.


Layer 2: The “Data Storage Layer” – In order for any application to be usable, it has to have a way of storing information. If you want something that is both scalable and lightweight, the data storage layer will help accomplish this feat. This is where decentralized file storage services are needed because they’re designed for efficiency. With these types of networks, your entire life could potentially one day run off blockchain technology without having to rely on third-party providers or middlemen.


Layer 1: The “Decentralized Layer” – At this stage, blockchains become decentralized systems that have no central point of control. They use proof-of-work or proof-of-stake protocols with consensus algorithms that allow the system’s users to check their transactions through cryptographic methods. It’s another example of how blockchain technology can uphold one of Satoshi’s core beliefs, “Don’t trust. Verify.”


Because the blockchain industry is moving so quickly, it’s hard to know exactly where each layer will take the original blockchain concept. Its potential seems endless, but no matter what happens there are always going to be at least six layers within this technology platform. These six layers are described below:


Let’s say you want to issue a cryptocurrency token that isn’t tied into any centralized institution or authority. You’ll need to build out your own decentralized layer for developing your applications based on an open-source protocol. Then you might have problems connecting all the different apps together which means having some sort of interconnectivity option built into the blockchain development process Delegated-Proof of Stake (DPoS) was born.


Not all blockchains need to be completely decentralized. If you’re looking for a way to create applications that don’t rely on consensus algorithms, centralized databases or third-party validators might be the answer. Both Ethereum and Neo are building out their own layered blockchain infrastructure which means they can handle additional transactions while also offering something similar to other distributed ledger technologies like Ripple’s XRP Ledger.


There is no doubt blockchain technology has already made itself useful within today’s society. Just look at how many different blockchain companies have launched around the world since Satoshi Nakamoto first introduced bitcoin in 2009. We even have smart contract platforms that let us take advantage of automated services either by issuing tokens or transacting seamlessly within their network.