Interview with Ankr’s Stanley Wu
Blockchain can best be described as a decentralized type of database used to maintain a growing list of records called blocks. Each block contains a list of transactions, a timestamp, and a link to the previous block, effectively creating a chain of immutable blocks.
However, as the data stored in the blocks continues to grow, the underlying blockchain network begins to face scalability issues, leading to additional issues of decentralization and security. This problem, often referred to as the “Blockchain Trilemma”, is among the significant roadblocks that blockchain technology must overcome.
Several new solutions have emerged in recent years, most of which focus on helping the base layer (also known as Layer-1) blockchain achieve greater scalability, including standalone Layer-2 and Layer-3 blockchain networks. Each blockchain solves different problems, but the core goal is to relieve the main chain (Layer-1) as well as improve transaction throughput.
With so many different layers of blockchain, it gets a little overwhelming to understand the basics. To better understand the role of layers, why we need so many layers in blockchains, and how layers solve scalability problems, we invited Stanley Wu, co-founder and CTO of Ankr blockchain, to a conversation. Stanley has over a decade of experience across large-scale cloud computing services, including brands such as Amazon. He is also highly skilled in web services, decentralized ledger technology and decentralized finance.
What would be the best way to explain the layers of blockchain in plain language? Why do we need different layers?
Stanley: Blockchain, like most other technologies, requires a stack of layers to provide a higher level of usability and performance. If we think about our phones, there are many layers such as hardware, operating system, applications and mobile services that all play an important role in making things work like magic. These layers are built up and improved year after year – the same goes for blockchain.
Most people have by now heard of Layer-1 blockchains, which are basic networks like Bitcoin (BTC-USD) or Ethereum (ETH-USD). Bitcoin can be seen as the first mobile phone in terms of functionality, but instead of sending and receiving calls, you can send and receive digital currency (with no financial intermediaries involved). Ethereum expanded on this idea and added new features for applications, much like the first iPhone. However, as the popularity of using blockchains increased to send crypto and use applications, these networks became more strained. This is why other layers were created to increase speed and transaction throughput while improving the user experience.
Please help the public to understand the differences between Layer-0, Layer-1, Layer-2 and Layer-3 blockchains.
Stanley: Layer-0 nomenclature originally emerged to describe an “internet of blockchains”, which acts as an ecosystem that provides tools for creating custom networks. Layer 0s, such as Polkadot or Cosmos, provide a unified foundation upon which many different Layer-1 blockchains can be built. The benefits of Layer 0s include increased scalability in terms of transactions and interoperability (blockchains that work and communicate seamlessly together).
Layer-1 networks, in turn, provide the infrastructure for creating decentralized applications (dApps). They have a native crypto or “token” that allows users to interact with applications developed on the network. However, the growing use of Layer-1 networks has highlighted their scalability challenges.
Layer 2 was developed to improve the scalability and performance of Layer-1 networks. The improvement in scalability is achieved by taking much of the transaction load off congested L1 chains. Layer-2 solutions can serve applications on their own while sending data back to the registry in Layer 1, which keeps the history. This way layer 1 is not overloaded and shares the security with layer 2. Some of the biggest examples of layer 2 are polygon, arbitrum and optimism.
Finally, decentralized applications (dApps) built on top of Layer 1 or 2 are known as Layer 3. Layer-3 applications are what give blockchains their real-world utility. Just as applications on your phone give it more functionality, blockchain applications give us new ways to create apps for DeFi (decentralized finance), gaming, NFTs, social media and many other uses.
If Layer 1 is the main blockchain architecture, how do Layer-2 and Layer-3 architectures work with it? How do they achieve compatibility with each other?
Stanley: The different layers of blockchain technology are designed to work together in harmony to provide an end user experience that is fast, affordable in terms of blockchain gas fees and as easy to use as any other part of the internet.
The ideal future of “Web3” – a term that encompasses all layers – will allow all blockchains to interact seamlessly with each other through solutions such as bridging, ZK rollups and interoperability standards. Together with Layer-2 scaling solutions, this will provide an experience that is integrated with the Internet in a way that allows everyone to easily benefit from the underlying principles that drove blockchain’s creation in the first place – true digital ownership, trustless systems, and both improved privacy and transparency when desired.
We read that Layer-2 networks extend the functionality of Layer-1 chains. Is it true? Can you explain how it works?
Stanley: Yes, that is very true. For example, the Polygon network extends the functionality of Ethereum by taking a large transaction burden off of Ethereum. By building applications and transacting on Polygon, users still gain the underlying security and decentralization benefits inherent to Ethereum, while gaining improved transaction speed and affordability.
How does Layer 3 work in the blockchain? Please highlight some use cases of Layer 3.
Stanley: Layer 3 is responsible for including the direct user integration component. Layer 3 is also referred to as the application layer. It hosts decentralized applications (dApps), which demonstrate how blockchain technology can be used in the real world.
We hear the term “web3 infrastructure” a lot these days. What exactly is web3 infrastructure in layman’s terms? How is it different from blockchain infrastructure?
Stanley: Infrastructure is simply the term we use for the building blocks required for things to work in technology. Web3 infrastructure is the hardware and software solutions in place that allow apps to talk to blockchains, developers to build apps more easily, and chains to function properly. The Web3 infrastructure includes nodes, APIs, bridges, developer tools and all other solutions across all blockchains.
How do you think the Web3 infrastructure protocol ecosystem should be structured?
Stanley: A Web3 infrastructure protocol should strive to add as much decentralization as possible to its services. This means cooperation between different organizations to provide open source solutions for Web3 as a whole. To avoid the centralization of blockchain at the infrastructure level, we must ensure that neither party controls too many of the critical components of their inner workings.
Your company Ankr supplies RPCs for developers and decentralized applications. What is an RPC? How does it fit into these blockchain and web3 infrastructures?
Stanley: Ankr operates a global network of blockchain nodes that service RPC (Remote Procedure Call) requests coming from thousands of developers and applications that need access to different blockchains. On average, Ankr serves approximately 7.2 billion of these requests every day.
Ankr’s RPCs are a type of API that connects applications, crypto wallets and developers to a number of different blockchains. Imagine them acting as a messenger relaying blockchain-based information between nodes, applications, and end users so they can perform transactions, understand wallet balances, access ownership information, and more.
Our readers would like to know more about Ankr, its solutions and use cases. Can you give a quick overview of how Ankr works as a web3 infrastructure protocol, what problems it solves and how it does it?
Stanley: Ankr is designed to act as an all-in-one portal to support Web3 growth. In addition to our multi-chain dApp development tools, we offer crypto staking solutions and a decentralized global node infrastructure that can power these services across dozens of blockchains.
The Ankr network, along with RPC and API tools, is used to cultivate publicly available and incredibly scalable solutions to help Web3 developers and users keep up with an exponentially growing industry. Ankr’s solutions make it easy for anyone to build and earn on Web3 and participate in a crypto-economy for a more decentralized, democratic and user-owned web experience.
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