A beginner's guide to understanding the layers of blockchain technology

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Layers of Blockchain

This post provides an overview of blockchain technology and the different layers of the technology stack. In brief, blockchain is a distributed ledger that enables a peer-to-peer network to record transactions without a third party.

There are three main components to blockchain technology: the blockchain protocol, the blockchain network, and the blockchain applications. Each layer of the technology stack has its own role and benefits.

The blockchain protocol is the foundation of the blockchain network. It defines the data structure, transaction format, and security protocols.

Understanding the layers of the blockchain


Blockchain protocol

The blockchain protocol is the foundation of the blockchain network. It defines the data structure, transaction format, and security protocols. The blockchain protocol defines the rules that govern the data structure and the security protocol of the blockchain network.

The blockchain protocol defines the rules of the game and ensures that all participants follow the rules.

For example, a bitcoin blockchain uses a consensus algorithm called proof-of-work. This algorithm is designed to prevent double-spending and other forms of fraud. Bitcoin, Ethereum, and other blockchains use this type of consensus algorithm.

Data structure
A blockchain is a shared ledger that records transactions. It stores data in a distributed manner across a network of nodes.

Blockchain network

It is a distributed database that stores and verifies the blockchain transactions. A blockchain network is composed of nodes that maintain a shared ledger of transactions. The nodes are distributed across the network, ensuring that the ledger is not stored in a single location.

Blockchain application

It is a decentralized application (DApp) that runs on a blockchain network. Examples of blockchain applications also include Bitcoin and Ethereum.

A blockchain application can be a service or a product. It can be a platform or a program that is developed to use blockchain technology. It can be a website or a mobile application that provides a user interface.

A blockchain application is a decentralized application that uses a blockchain network to store data and/or to conduct transactions. It is the decentralized version of a website or a mobile application.

What is blockchain scalability?

Scalability is the ability of a blockchain network to handle more transactions and transactions per second (TPS). Scalability is a critical issue in the blockchain industry. It is an important factor in determining whether a blockchain network can be adopted by the mainstream public.

There are two types of scalability:

Blockchain capacity (or latency) scalability: This is the ability to handle more transactions and transactions per second.

Blockchain throughput scalability: This is the ability to process more transactions and transactions per second.

The blockchain trilemma

The blockchain trilemma is the dilemma that arises when we consider the trade-offs between security, decentralization, and scalability.

Scalability and decentralization

If we have a large network, we need to maintain security, but we also need to ensure that the network is decentralized. The blockchain trilemma arises when we try to find a balance between these two.

Security and Centralization

In a decentralized network, there is no single point of failure. This makes it difficult to breach security. However in a centralized network, we can have a single point of failure. This makes it difficult to ensure security.

In a centralized network, there is no way to increase the network capacity. In a decentralized network, the capacity can be increased by increasing the number of nodes in the network.

The interplay among scalability, security and decentralization

We can say that the blockchain trilemma is a dilemma that arises when we consider the trade-offs between security, decentralization, and scalability.

To solve this problem, we have to consider three different approaches to achieve a balance between these three factors. The first approach is to increase the decentralization of the network. The second approach is to increase the security of the network. The third approach is to increase the scalability of the network.

Each of these three approaches has its own advantages and disadvantages. However, if we take into account all of the different aspects of the blockchain trilemma, we can say that the best solution for achieving a balance among security, decentralization, and scalability is to use all three approaches simultaneously. Now that we understand the trilemma, lets actually look at the layers of blockchain.

The layered structure of the blockchain architecture

Hardware infrastructure layer

The hardware infrastructure layer includes the following:

- Hardware devices such as the CPU, the memory, the storage, and the GPU.
- Hardware algorithms such as cryptography, encryption, and hashing.
- Hardware algorithms such as the elliptic curve cryptography (ECC) algorithm.
- Hardware cryptographic libraries such as OpenSSL, libsodium, and libgcrypt.
- Hardware cryptographic primitives such as the AES, SHA, and SHA3 algorithms.

Data layer - blockchain architecture

The data layer blockchain architecture includes the following:

- Data layer protocols such as the Byzantine fault tolerance (BFT) protocol.
- The underlying data storage mechanisms such as the blockchain and the ledger.
- The data storage mechanisms such as the blockchain and the ledger.
- Data storage mechanisms such as the blockchain and the ledger.
The data layer is the layer that provides the consensus and the security of the blockchain network.

Network layer - blockchain architecture

The network layer is the layer that provides the communications between the nodes of the blockchain network. There are multiple elements to the network layer that you want to know about:

The communications infrastructure: The message format such as the Bitcoin Message Format (BTMF)

The network security: The message authentication, the encryption, the replay protection, the anonymity, the stealth, the integrity, the origin authentication, and the non-repudiation.

The message encryption: The symmetric and the asymmetric encryption algorithms.

The message authentication: The message authentication codes such as the digital signature, the message digest, the digital signature with the public key, the symmetric authentication codes, the symmetric authentication with the public key, the digital signature with the private key, and the hash message authentication code.

The network architecture: The network architecture is the architecture that defines the way in which the messages are transmitted between the nodes of the blockchain network.

Consensus layer - blockchain architecture

The consensus layer is the layer that provides the consensus among the nodes of the blockchain network.

The consensus algorithm: The consensus algorithm is the algorithm that defines the consensus among the nodes of the blockchain network.

The consensus validation algorithm: The consensus validation algorithm is the algorithm that verifies the consensus among the nodes of the blockchain network.

Note: The consensus algorithm and the consensus validation algorithm are mutually exclusive.

The consensus time: The consensus time is the time that is required to achieve the consensus among the nodes of the blockchain network.

The consensus timeout: The network architecture is the architecture that defines the way in which the messages are transmitted between the nodes of the blockchain network.

Application layer - blockchain architecture

The application layer includes the following:

The applications such as the cryptocurrency, the digital asset, the digital token, the digital identity, the smart contract, the IoT, the blockchain-based application, the dApp, and the smart contract.

Most Web 3.0 applications (or cryptos) that you have ever interacted with - you interact with them at this layer. This is also the point where the Web 3.0 infrastructure connects to Web 2.0. Since most of us are actually interacting with these tokens or applications via a centralized (Web 2.0) application, its important to understand how the technology behind the blockchain layers work.