Understand the Blockchain layers to solve the scalability challenges

Introduction

In case you have engaged in research related to cryptocurrencies or blockchain, you would definitely have come across terms like layer one and layer two protocols. However, you may not know what these levels are and why they exist. In this article, we will look at blockchain layer architecture and how it enables trust and consensus in the chain. We will also explore how it might develop in the future.

Blockchain is a unique combination of various existing technologies—distributed ledger technology, cryptography, game theory, networking, and so on—with several potential applications, including cryptocurrency. Cryptography refers to the mathematical and computing discipline that encapsulates the encoding and decoding of data.

Furthermore, without control from a central authority, distributed ledger technology (DLT) ensures that the information is sufficiently verified by cryptography among a cluster of users through a specific network protocol. The combination of these technologies creates trust among individuals or parties who would not otherwise have a reason to do so. They allow users to securely trade cash and data over blockchain networks.

The different layers of the blockchain are grouped together to ensure security and scalability. In fact, blockchains must be very secure due to the fact that there is no central authority. They must also be scalable to ensure they can accommodate the growing number of users across the global system. Layers arose as a result of the need for scalability while maintaining top security.

The layered structure of the blockchain architecture

In the blockchain architecture’s distributed network, each participant views, approves, and updates new entries. Blockchain technology is made up of a series of blocks containing transactions in a predetermined order. These lists can be stored in a database or as a flat file (in text format). A blockchain’s architecture can be public, private or consortium-based.

Blockchain’s design is divided into five layers.

Hardware infrastructure layer

This hardware layer stores blockchain data securely on a server. We access this date via the client-server architecture. When we use blockchain apps, the client machine sends a request to the data server for access. Since blockchains are peer-to-peer (P2P) networks, they connect clients with “peer-clients” for data sharing. So this layer is nothing more than a large network of devices that communicate and exchange data with each other. In fact, this is how a distributed ledger is born.

Data layer

Blockchain’s data structure is composed of a linked list of blocks in which transactions are ordered. Once a certain number of transactions are authenticated by nodes, the data is collected into a “block”, uploaded to the blockchain and linked to the previous block of data. This is how a chain of blocks arises and eventually expands. The root hash of the Merkle tree is included in each block, along with the previous block’s hash, date, etc. This ensures the security, integrity and irreversibility of blockchain systems.

Each transaction on the block is digitally signed with the private key from the sender’s wallet. Since this key is only available to the sender, data cannot be tampered with by anyone. This step is called ‘finality’. The digital signature also protects the owner’s identity, which is encrypted for security reasons.

Network layer

The network layer, also known as the Propagation Layer or the P2P layer, drives communication between nodes. The network layer also drives node discovery, node identification, transactions, block production and block propagation. The peer-to-peer architecture of blockchain enables nodes to agree on the legality of a transaction. The actual transaction on the blockchain is carried out by nodes.

This layer ensures that nodes are able to discover each other, disseminate information and synchronize with each other to bring authenticity to the blockchain.

Consensus team

The heart of all teams is the consensus team. This is the layer that enables the key functionality of blockchain: consensus mechanism between nodes. In addition, it provides consensus in a decentralized manner and thus eliminates the need for a central authority. This is the approach that is at the heart of decentralization provided by the blockchain. That is why each transaction is processed by a large number of nodes, all of which must agree with each other and validate the authenticity of the transaction. No single node has control over transaction data. If this layer fails, the entire blockchain system fails.

This layer manages the protocol, which requires a minimum number of nodes to validate each transaction or how much cryptocurrency a participant has in the network.

Key challenges in the consensus layer have to do with making sure that there really is one true version of the computer’s state at any given time, and that no one undermines the truth.

Application layer

The layers outlined so far make up a complete blockchain computer. On top of this stack, developers can distribute programs and have the computer run those programs.

The application layer ensures the deterministic nature of the blockchain. The application layer has the programs that users use to communicate with the blockchain network. This facilitates communication with consumer devices with the blockchain. The application acts as the user-facing front end, while the blockchain stack acts as the back end. Specifically, the key ingredients of the application layer are scripts, application programming interfaces (APIs), user interfaces, frameworks, smart contracts, and decentralized apps (dApps).

The application layer protocols are divided into application and execution layers. Smart contracts, underlying rules and chain code are part of the execution layer. Each layer plays its own role in the transaction’s journey. A transaction starts from the application layer and then moves to the execution layer where validation takes place. After that, it is executed at the semantic layer.

Next, let’s map the above layers to the common terminology used in the blockchain world: layers 0, 1, 2, and 3.

Create zero

Layer zero of the blockchain consists of the internet, hardware and connections that will enable the next layer to function. These components form the technology that allows any blockchain to function. In the terminology outlined above, layer zero consists of the hardware infrastructure layer and the data layer.

Layer zero includes the hardware layer, but also miners and validators. It also includes peer-to-peer network protocols that also allow communication between each other to eventually arrive at an agreed state of what the network looks like.

Create one

Once all these participants are able to agree on the current state of the blockchain computer, they must be able to compute in a way that is verifiable and guaranteed, which is game-theoretic mechanics. This is where the data layer comes in. Both the data layer and the consensus layer are usually bundled together in almost all blockchain systems. Both of these teams together are called team one.

When we talk about Polygon or Ethereum, we are referring to the Polygon or Ethereum network layer. As explained above, this network layer manages consensus mechanisms, programming languages, block time, dispute resolution, and the rules and parameters that keep a blockchain network running. Bitcoin is an example of a layer one blockchain. This layer provides security to the entire blockchain through its pure immutability.

Layer one has gone through scalability challenges and has therefore been in development. As the number of blockchain users grows, layer one becomes strained. This is when the consensus process can slow down the entire blockchain. While the blockchain is secure, speed can become a limiting factor. Miners must solve cryptographic algorithms using computational power. As a result, the need for increased computing power and time is growing. Proof-of-stake and sharding are two new mechanisms that solve these speed challenges for layer one.

Make two

Layer two is a third-party integration used with layer one to solve the scalability issues of underlying layers by increasing the number of nodes. Layer two consists of overlapping networks that sit on top of the base layers. Protocols typically use layer two to solve the blockchain’s scalability challenges by removing some interactions from the base layers and as a result increase system throughput. As a result, smart contracts ensure that off-chain transactions follow regulations.

Layer two approaches are by far the most popular approaches to solving scaling problems. Nested layers, rollups and sidechains are examples of layer two architectures that have addressed the blockchain challenges. Bitcoin’s Lightning Network is an example of a layer two blockchain.

Make three

The application layer forms layer three. This layer hosts the applications and activation protocols. Layer three acts as a user interface while masking the technical aspects of the communication channel. This layer brings blockchain utility and real interoperability to developers.

Summary

In summary, blockchain makes it possible to capture business value in a sustainable way at equilibrium. But scalability is an inhibiting factor in the widespread use of blockchain. As decentralization as a concept gains momentum across sectors, the demand for blockchain will grow. So it is crucial to solve the scalability and throughput limitations of blockchain.