In the trading industry, Blockchain offers a range of benefits for data exchange, including enhanced transparency and unbeatable security. It also improves efficiency, reduces operational costs, and eliminates the need for intermediaries. In this blog post, we will delve into the organisation and functioning of blockchain, exploring its layers and how they work.
Diving into Blockchain’s Architectural Strata
Comprehending blockchain technology can be dissected from two perspectives: the network protocol, comprising four layers, and the architectural layers themselves.
Architectural Layers
Data Layer
Blockchain operates as a block-based system where transactional data is securely stored through a robust hashing process. It begins with the Genesis block, forming the bedrock upon which subsequent blocks are continuously appended, creating an ever-expanding chain. Each transaction is digitally signed with the sender’s private key to ensure security and confidentiality.
Hardware Layer
The backbone of blockchain technology relies on resilient data servers to maintain backups, guaranteeing the security and accessibility of blockchain data. This system operates using a client-server structure and a peer-to-peer network, facilitating seamless data exchange and monitoring across a network of interconnected devices. Within this network, every node is authorised to monitor transactional data randomly.
Consensus Layer
The network’s rules are upheld at this layer to maintain consistency throughout the blockchain. It’s important to note that a single node cannot single-handedly operate the blockchain; consensus from all nodes within the network is an absolute necessity.
Application Layer
The versatility of blockchain is harnessed through the application layer, rendering it more user-friendly. This layer acts as the interface between users and the blockchain network, allowing interactions with decentralised applications (dApps), facilitating transaction exchanges, and more.
Network Layer
Within the blockchain’s P2P framework, numerous nodes exchange transaction data to ensure the legitimacy of transactions. Swift and seamless communication among nodes is paramount, and the network layer, also called the “Propagation Layer,” plays a pivotal role by identifying nodes, generating blocks, and integrating them into the network.
Protocol Layers are the building blocks of the blockchain.
- Layer 0 serves as the foundation where network hardware and devices coexist. It enables secure information exchange and trustless consensus between nodes.
- Layer 1 includes blockchain networks like Bitcoin, TRON, and Cardano, ensuring secure transactions through mechanisms like proof-of-work and proof-of-stake.
- Layer 2, also known as the execution layer, supports scalability by implementing off-chain solutions to handle increased transaction loads while preserving the features of Layer 1.
- Layer 3, the application layer, hosts various blockchain-based applications such as dApps and DAOs. It offers tailored services for decentralised networks, transactions, and data storage.
Final Remarks
After exploring the different layers and components of blockchain, it becomes clearer how this technology functions. Blockchain is a sophisticated system where each layer plays a crucial role in ensuring efficient, secure, and reliable transfer of data or value between individuals. By comprehending these layers, developers can design advanced decentralised applications and innovative products applicable in various areas of life.