Blockchain can be a Revolutionary technology Know that it has affected the financial markets. One of the financial markets that was created with the advent of this technology is the cryptocurrency market. If you are one of the participants in this market, you have probably heard terms such as blockchain layers, its protocols, etc. In this article, we are going to give you a comprehensive explanation about these said reforms; But first of all, we need to answer the important question of what is blockchain.
What is blockchain?
Blockchain is actually a list of decentralized data that is shared between nodes. This list consists of multiple blocks that are linked and secured using cryptographic algorithms such as PoS or POW. In other words, blockchain can be considered a special type of distributed ledger technology that includes a growing list of data. This data is securely connected using encryption.
Since the blocks contain codes and information from their previous block and form a chain, it is not possible to cancel after the transaction. Because for this, blocks and subsequent transactions must be canceled.
Many of you may think that blockchain is one of the emerging technologies. In fact, this technology from the early 1990s by S. Haber And W. Scott was introduced to the world. But its popularity increased when applications and projects were designed and launched using blockchain. One of the most important of these projects is Bitcoin.
Blockchain technology components
In general, blockchain layers consist of five components, which we will introduce below and give brief explanations about each.
Nodes or nodes
Nodes are actually computers connected to the Internet that can be present in a network according to a specific program. Bitcoin wallet and blockchain are examples of this network.
ledger
The ledger can be divided into two types: distributed and shared.
1. Distributed: A distributed ledger allows participants of a blockchain system to access the database and its contents.
2. Common: The common ledger contains a list of regulations that must be followed. To access the information of the distribution office, you must comply with all the regulations in the joint office.
Consensus algorithm
This algorithm can be considered the most important part of a network, the existence of which is necessary for the proper functioning of the network and security in the blockchain. In fact, this algorithm shows the current state of the network and how to make decisions about accepting transactions.
virtual machine
Virtual machines are an important part of the blockchain network, which on common platforms such as Windows are installed so that these systems achieve performance like computing machines. With this work, ordinary systems become a suitable device for operation on the basis of decentralized networks.
peer to peer network
Peer-to-peer network is one of the components of blockchain by which peer nodes are connected to each other without any central server. In fact, this network facilitates the access of nodes to information and prevents the loss of information.
Check blockchain scalability
Scalability in blockchain technology means increasing the power rate of computing operations, which in fact The amount of transactions per second measures This is the reason why blockchain layers need to be accepted by previous people to increase network security, record keeping, etc., so that system nodes increase and network goals are achieved.
The number of transactions performed by a system per second is called output. The higher this amount, the greater the scalability. Currently, there are various networks for electronic payment such as Visa Net and Bitcoin. VisaNet is able to process more than 20,000 transactions per second; But the Bitcoin main chain is only able to process 7 transactions per second.
Since Bitcoin has found its place in the business world, developers hope to reduce processing time and increase network speed by developing blockchain layers (especially layer two) and creating harmony between them.
The role of layers in blockchain trinity
Blockchain triad actually has three meanings Decentralization, security and scalability Refers. Note that decentralized networks are only able to have two of these three features at the same time. For this reason, one of these three concepts must be sacrificed. Many blockchain networks currently pay more attention to security and decentralization and sacrifice scalability to these two concepts.
The Ethereum platform is one of the best examples that can be mentioned. This platform was welcomed by users in the summer of 2022. This reception caused the transaction confirmation to take time; Because Ethereum did not intend to sacrifice decentralization and security for scalability. As a result, the cost of making a transaction increased greatly and many users stopped making transactions in this network.
This problem is also seen in Bitcoin, that’s why many startups and technology companies in the world are looking for a solution to balance blockchain layers one and two. If such a balance is established, the speed of adoption of this technology will increase and everything will change.
Architecture of blockchain layers
According to experts, the architecture of blockchain layers can be divided into two ways. Some believe that blockchain has 7 layers and others believe that blockchain has 5 layers. In this article, we examine the 7-layer model.
Infrastructure layer
hardware or infrastructure layer ( Hardware or infrastructure layer), is the server on which information is stored. When a person calls this data from the server using a blockchain browser, it is available to him.
In this way, each person can communicate with another person. As a result of communicating and exchanging information, a very large peer-to-peer network of different computers is created. Transactions are verified by this large network and recorded in the ledger. (The computers forming this network are also called nodes).
data layer
The layer in which transactions create records and blocks is called the data layer. Simply put, when the number of transactions of a node reaches a certain limit, the data is grouped in a block and uploaded to the network. All blocks are connected to the previous block and create a large chain.
To maintain the security and integrity of the data in the blockchain layers, transactions are digitally signed. For this purpose, a private key is used and anyone who has access to the public key can verify it. This process prevents manipulation of information in the data layer.
network layer
Another layer of the blockchain is the network layer, which is called the layer P2P or publishing The name is known. The main task of this layer is to communicate between nodes, discover transactions and publish blocks. In fact, this layer ensures that nodes in a secure environment can interact, publish and perform the necessary synchronizations. The biggest feature of the P2P layer is the distribution of the processing volume in different nodes.
Consensus layer
If we want to introduce one of the blockchain layers as the most important layer, we can point to the consensus layer. It doesn’t matter if you use Ethereum or Hyperledger. This layer is responsible for validating blocks and orders.
Encouragement layer
This layer is responsible for investigating how to compensate the efforts of nodes to perform transactions and determine the amount of reward for each node. The implementation of this layer has a direct relationship with the type of consensus process. In some processes, there is no need to implement this layer. Another task of this layer is to determine the minimum fee required to complete a transaction.
Contracts layer
This layer actually defines how to provide the service and the information that is provided to the nodes. In general, there are four types of contracts that we will introduce below.
- Service Contract
- Data Contract
- Message Contract
- Policy and Binding contract
Application layer
This layer consists of chain code, smart contracts and decentralized applications. The protocols of this section are divided into execution and program. The way the application layer works is that applications refer instructions to the execution layer that are responsible for executing transactions so that this part confirms the definitive nature of the blockchain.
Blockchain layer protocol based on scalability
There is another type of layer division based on scalability, which we will introduce later.
What is the zero layer of blockchain?
In fact, layer zero and the technologies in it have led to the creation of Bitcoin, Ethereum and other blockchain networks. The blockchain network architecture is based on this layer, which includes the hardware, internet, and connections that make layer one work well. The role of this layer is to establish communication between the chains and support the established communication. Among the most important projects that operate on the platform of layer zero, the following can be mentioned.
- Polkadot
- Avalanche
- Cardano
- Cosmos
What is the first layer of blockchain?
The first layer of the blockchain can be considered the base of the network, whose security is provided by immutability. The layer responsible for programming processes, consensus, block confirmation time, parameters, dispute resolution and rules. This layer is popular among developers and experts in the blockchain field Implementation layer is also famous.
Among the blockchain layers, this section can be considered related to scalability problems. Because as new users join the network, more computing power is needed to solve problems and add blocks to each other. To solve this problem, developers used better consensus techniques such as proof of stake instead of proof of work, which reduced the scalability problem significantly.
Among the most important projects that operate on the basis of this layer, the following can be mentioned.
- Ethereum
- Binance Smart Chain
- Solana
- Bitcoin
What is the second layer of blockchain?
This network, which is also known as the overlay network, is located on top of the base layer and to solve the scaling problem, it removes some interactions and directly uses the base layer. In fact, this layer is a third-party integration in connection with layer one, and adding nodes increases the system’s throughput.
In fact, this protocol is the best solution to solve the scalability problem in blockchain layers, which we will provide explanations about its different layers.
Different structures in the second layer
Nested blockchain: In this case, layer one performs the settings and layer two executes the procedures. Suppose the manager receives a project portfolio. Divides the project into small parts and provides them to the employees. After completing each section, the employee delivers the project along with a report to the manager. As a result, the manager’s workload is reduced and the speed increases significantly.
Channel Status: Due to its nature, the status channel can improve the speed of transactions. Verification of transactions in this channel does not require the immediate participation of miners. Instead, a network-adjacent resource with a multi-signature mechanism or smart contract is used to confirm transactions. After the transactions are confirmed and finalized, all of them are sent to an underlying blockchain.
Side chains: The side chain runs alongside the blockchain layers and is mostly used to confirm mass transactions. Sidechains have their own execution mechanism and use data transfer between main and sidechains to increase speed and scalability.
Roll ups: This part of the layering is actually a layer two blockchain scalability solution for transactions that take place outside of the layer one network. Users (nodes) benefit from rollups; Because they increase the operational capacity of the network and reduce its costs.
Among the most important projects of this layer, the following can be mentioned.
- Bitcoin Lightning Network
- Omega Plasma
- Lum Network
- Polygan
- Ethereum Raiden Network
What is the third layer of blockchain?
The third layer is the final layer of the blockchain ecosystem, which users use for the projects mentioned in the previous two levels. In addition to providing a user interface, this layer can also provide intra-chain and inter-chain functions such as liquidity provision, decentralized exchanges and applications. Thanks to this layer, blockchain technology can also be used in real world interactions.
Among the most important projects of this layer, the following can be mentioned.
- UniSwap Decentralized Exchange
- Binance
- Coinbase
- Avae liquidity management protocols
Blockchain layers; A solution to network problems
Undoubtedly, the only available way to solve the triple problems is to use blockchain layers. The simultaneous use of these layers makes it possible for networks to experience scalability in addition to security and decentralization. Such an event can create a great revolution in the crypto market and double its appeal.
The introduction of the layers of the blockchain and the review of the characteristics of each layer was written for the first time on the Wallex blog. appeared.
