A unique synthesis of modern technologies like encryption, game theory, etc. is blockchain technology. Blockchain technology therefore has a broad range of applications, including the most recent finance fad, cryptocurrencies.
For those who are unfamiliar with the words cryptography and game theory, cryptography simply refers to the encrypting and decrypting of data, while game theory refers the analysis of mathematical representations of intelligent decision maker interacting strategically.
Blockchain technology improves productivity, lowers operating costs, and does away with middlemen to provide advantages like transparency and impenetrable security. You may have heard individuals discuss the many levels of blockchain while discussing Web 3.0, Decentralized Ledger Technology (DLT), and particularly blockchain. But what are they specifically, and why are they so important?
What is Blockchain?
Imagine living in a society where you can transmit money to someone without the need of a bank in seconds as opposed to days and without having to pay expensive bank fees.
This is not the world of the future; rather, it is the world in which a sizable but increasing number of early adopters now reside. And these are just a handful of the crucial blockchain technology use cases that are revolutionizing how we trade money and build trust.
The idea or protocol that underpins the operation of the blockchain is known as blockchain technology. Cryptocurrencies like Bitcoin are made feasible by blockchain technology, just way email is made possible by the internet.
Beyond cryptocurrencies, the blockchain is a distributed digital ledger (a digital record of transactions or data held in several locations on a computer network) that is immutable (unchangeable, meaning a transaction or file recorded cannot be modified).
Blockchains should be incredibly secure since there is no central authority, hence they must be. They also need to be very scalable in regards to accommodate growing user counts, transaction volumes, and other information. Layers were developed due to the requirement for scalability when preserving the highest level of safety.
What is “scability” in blockchain?
In blockchain platform, the word “scaling” relates to a rise in the rate of system throughput, expressed measured in processes per second. Nowadays, blockchain levels are required due to the growing use of cryptocurrencies in daily life to enhance network security, recordkeeping, and other features.
“Throughput” is the quantity of transactions processed by a mechanism per second. Its foundation of a decentralized ecosystem is mainly the blockchain. When layer one and layer two are combined, the amount of nodes plus, the platform throughput, are increased. There are several layer 2 blockchain technology in use currently. These systems automate transactions via the use of smart contracts.
The blockchain trilemma
The commonly accepted notion that decentralized systems can only provide 2 of the 3 advantages of decentralization, safety, and scalability is known as the “blockchain trilemma.”
Computer engineers developed the continuity, accessibility, and partition endurance (CAP) hypothesis throughout the 1980s to symbolize among the most important of these problems. The CAP theory states that only 2 of the 3 above assurances may be provided simultaneously via decentralized file storing, including like blockchain.
This theory has developed towards the blockchain paradox in the dispersed networks of the present. It’s a common misconception that accessible blockchain infrastructure should give up scalability, openness, or security.
Therefore, the ultimate goal of blockchain innovation is to build a system with impenetrable security over a worldwide decentralized ecosystem while yet providing internet-scale operational throughput.
Before delving into trilemma’s characteristics, let’s first describe scalability, safety, and decentralization.
- Scalability of the blockchain is the capacity to accommodate a larger number of transactions.
- Security is the capacity to protect information on the system from different forms of attacks and the capability of the blockchain to prevent double-spending.
- Decentralization is a sort of network vacancies that makes sure the network isn’t controlled by just a few people or organizations.
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Understanding the layers of blockchain technology
Upon this distributed network of the blockchain design, each network user keeps track of, OKs, and modifies new records. Blockchain system is made up of blocks that contain operations in a certain sequence. These lists might be kept in a simple document or a simple system (in txt format). The blockchain’s structure may be open, secret, or consortium-based. The 5 levels of blockchain’s layered architecture are separated.
Infrastructural layer for hardware.
The content of the blockchain usually kept on a database at a computer system somewhere on our beautiful planet. The client-server design is used when users browse the internet or use any programs to request information or input from software servers. Now, users may communicate with one another and exchange data.
A vast network of machines that exchange data is known as a peer-to-peer (P2P) connection. Blockchain is indeed a peer-to-peer electronic network that processes, verifies, and meticulously records activities in a public log. As a consequence, all of the information, activities, and other important data are stored in a decentralized system. A unit inside a P2P ecosystem is a device.
Data layer
It defined a cryptocurrency data framework as a connected list of frames where transactions are organized. Two fundamental elements make up the data architecture of the blockchain: the interconnected list and addresses. A linked array is made up of many linked elements that include information and connections to earlier blocks. The tied array is a collection of interconnected blocks that include data as well as parameters that relate to the unit before them in the listing.
A binary hashing structure is called Merkle tree. This Merkle tree’s base hash, the preceding block’s hash, a date, its nonce, the transaction version id, and the present difficulty goal are all included in each session. For blockchain networks, the Merkle tree provides security, stability, as well as irrefutability. The core components of its blockchain system include consensus methods, encryption, and Merkle trees.
Since this is the earliest in the network, the genesis piece, or initial block, doesn’t contain the link. To guarantee the confidentiality and stability of the records on the network, they electronically signed operations. A secret key is used to sign contracts, and anybody with access towards this signer’s public address may do so.
Information modification is detected via the electronic signatures. Digital signs guarantee unity by encrypting and signing the encrypted information. Therefore, any tampering will invalidate the signature. Since the information is protected, it can’t be found. However if they discovered it, this can be altered with second time. The giver’s or host’s identity was additionally safeguarded by a digital verification. A sign is thus irrevocably connected to its creator and can’t be ignored.
Network layer.
Inter-node connectivity is dealt with by the network tier, sometimes referred simply a P2P layer. Interactions, block transportation, and discovery all fall within the purview of its network level. This level is often referred to as the dispersion tier.
The P2P tier ensures that nodes can find each other, communicate, share information, and coordinate in essential to preserve the integrity of the blockchain ecosystem. The peer-to-peer (P2P) system is a kind of computer network where nodes are dispersed and distribute the burden in attempt to achieve a common objective. Blockchain transactions are executed by nodes.
Convergence layer.
The consensus tier is essential for the existence of blockchain platforms.Cconsensus level serves as the most significant and vital layer, regardless of whether that blockchain is based on Eth, Hyper-ledger, or alternative platform. The consensus level is in charge of confirming, arranging, and making sure that everybody is in agreement.
Application layer
The application level consists of decentralized applications, smart contracts, as well as chaincode (DApps). Application tier protocols are distinct from the software and implementation levels. The application level includes user applications that communicate using the blockchain system. It consists of foundations, user interactions, and APIs. This backend mechanism, or APIs, are how these applications communicate using the blockchain system.
The execution level consists of chaincode, fundamental principles, and smart transactions. Even when a transaction moves from the service level to the implementation level, it is checked and executed at the conceptual layer. Applications provide instructions to the implementation layer, which carries out transactions and maintains the deterministic character of the blockchain.
There you have it—the five blockchain layers that make up the system. However, you may have already run across terminologies like layer-0, layer-1, and layer-2 if you’ve been reading about blockchains. Let’s examine what these layers are now.
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Layer 0
The elements that enable establish blockchain a possibility are included in layer 0 of the network. Bitcoins, Ether, as well as other blockchain systems are operated by code. Every layer 0 elements, including the web, equipment, and connectivity, are necessary for layer 1 to function effectively.
Layer 1
This tier serves as the basis, and its privacy is guaranteed by its irreversibility. When someone talks about Ethereum, they’re talking about the Ethereum platform, also known as layer 1. This layer manages consensus mechanisms, programming dialects, block timing, dispute settlement, and the guidelines that maintain a blockchain system operational. An alternative term for this is the application level. One instance is a level 1 blockchain, like Bitcoin.
Layer 2
The overlaying layers that sit on highest point of the foundation layer are known as L2 systems. By segregating certain exchanges from the foundation layer, layer 2 helps protocols scale better. Therefore, the main blockchain program’s smart contracts solely handle transfers and disbursements and make sure that off-chain activities follow the regulations. One illustration is really a layer 2 blockchain, like the Lightning Network for Bitcoin.
What distinguishes layer one from layer 2 blockchains, then? The foundation of a decentralized ecosystem is the blockchain. When layer one and layer two are combined, the amount of nodes and, therefore, the system throughput, are increased. Currently, several layer 2 blockchain technology are in use.
Layer 3
The application level is referred to as L3, or tier 3. These L3 initiatives act as a consumer experience while hiding the technical components of the data channel. L3 applications, which are essentially gives blockchains its real-world usability, are discussed in the tiered design of its blockchain architecture.
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Is it possible to solve the trilemma?
Blockchains received the issues with dispersed data retention that gave rise to their creation. It was decided to group these challenges and related problems under the umbrella phrase “blockchain trilemma” in effort to comprehend them properly. The phrase “trilemma” has persisted, however the crypto trilemma is merely an assumption. This theory seems to be true based on early evidence, but it hasn’t been verified or disproven yet. While layer 1 and layer 2 methods have achieved some results, further research is still required.
Blockchain is the future?
Blockchain technology is here to remain because to its many potential real-world applications, like speedier cross-border payments and smart contracts.
More businesses will invest new time, money, and resources in the technology as they become aware of how the blockchain may benefit them, leading to the emergence of even more use cases. Although we are aware that for many people, blockchain technology will continue to be a hard subject, it doesn’t have to be for you.
The fact that this technology is fundamentally altering how we trust one another and trade value is what we most want you to take away from it.
Final thoughts
Scalability is significant preventing mainstream crypto adoption in this blockchain industry today. As demand for cryptocurrencies increases, so will the drive to build blockchain technology. Building a scalable system is the only way to solve the scalability trilemma since each crypto level contains its unique set off limitations.
To better understand the idea, it would be helpful to divide the many underlying elements that make up a blockchain into technical levels. We hope that by demystifying and simplifying a sometimes intimidating subject, our psot provided you the courage to talk about the blockchain with colleagues and acquaintances. When you need to review any blockchain principles, refer to it.
