Updated on July 12, 2023 11:11 AM
Blockchain has transformed the way information is stored and transferred. Blockchain's layers make it a full solution, from data management at the back end to enabling user-facing applications at the front end. This article will explain the numerous blockchain layers (0,1,2,3), how they work, and how scalability gives rise to these layers. Let's get started.
Blockchain technology doesn’t need any introduction in this world of Web3. However, Blockchain layers are increasing in popularity as many protocols switch from Layer 1 to Layer 2.
So what are Blockchain layers? Is it like an onion or something like a filter? Let’s discuss a bit about Blockchain Layers.
One of the key features of blockchain technology is its layered architecture, which separates different components into different layers to provide a secure, decentralized, and transparent platform.
Blockchain technology can be divided into several layers, each serving a different purpose. Blockchain layers can be thought of as building blocks that together make up a complete blockchain solution. Together, Blockchain layers create a secure, decentralized, and transparent platform that has the potential to disrupt various industries.
Do you want to know what are Blockchain layers and why they exist? In this article, we will explain the Blockchain layers 0,1, 2, and 3, the scalability issue of blockchains, and how they work. Let's get this discussion started!
Each layer has a distinct purpose. These layers, when combined, form a complete solution that ranges from data administration at the back end to enabling user-facing apps at the front end. Let's delve into the layers of Blockchain technology and how they work.
Hardware infrastructure layer
A data server securely stores blockchain data. When we surf the web or use blockchain apps, our computers ask the server for access to this data. The structure that permits this data interchange is the client-server architecture.
Blockchains are peer-to-peer (P2P) networks that connect clients to "peer clients" in order to speed up and simplify data transfer. It is simply a massive network of devices connecting and exchanging data. This is the birth of a distributed ledger. A node is any network device that communicates with another device. Each node checks transactional data at random.
Blockchains are just a long chain of 'blocks' that contain transaction data. When a particular amount of transactions are authenticated by nodes, the data is bundled into a 'block,' uploaded to the blockchain, and connected to the previous data block.
Because it is the first block in the chain, the 'Genesis Block' does not need to be linked to any earlier blocks. Instead, the block after that is linked to the Genesis block, and the procedure is repeated for each subsequent block. This is how a blockchain appears and grows over time.
Every transaction is 'digitally signed' with the sender's wallet's private key. This key is only accessible to the sender, ensuring that no one else may access or tamper with the data. This is referred to as 'finality' in blockchain language. The digital signature also safeguards the identity of the owner, which is encrypted for optimal protection.
The P2P design allows many nodes to send transaction data in order to reach an agreement on the legality of a transaction. This means that in order for the network to communicate quickly, each node must be able to discover other nodes on the network.
This 'inter-node communication' is facilitated by the network layer. This layer is also called the 'Propagation Layer,' because it manages node identification, block production, and block addition.
The foundational layer of blockchain activities. This layer is in charge of transaction validation; if it fails, the system as a whole fails. This layer manages the protocol, which requires a specific number of nodes to validate a single transaction.
As a result, each transaction is processed by a huge number of nodes, all of which must reach the same conclusion and agree on the authenticity of the transaction. Because no node has sole control over any transactional data, and the role is dispersed, this technique maintains the blockchain's decentralized nature. This is referred to as the consensus mechanism.
Due to a large number of nodes processing transactions, packaging them, and adding them to the blockchain, many blocks may be generated at the same time, resulting in a blockchain branch. However, a single chain block addition is required at all times, and the consensus layer assures that this debate is resolved.
This layer is where smart contracts and decentralized apps live (dApps). Contract expiration periods, spot price attainment, and other factors all have an impact on smart contract decisions. dApps carry out the operations that result from these decisions. All of this occurs at the application layer.
dApps also make it easier for consumer devices to communicate with the blockchain. As a result, the application serves as the front end for users, while the main blockchain serves as the back end, where data is safely stored.
This layer contains the hardware, protocols, and other fundamental components.
Its scaling capabilities are superior to those of Layers 0 and 1. It is capable of integrating with third-party systems.
This layer is where dApps and other user-facing apps are hosted.
Blockchain layer zero is made up of components that aid in the implementation of blockchain. This is the technology that enables the operation of Bitcoin, Ethereum, and other blockchain networks. Layer 0 components include the internet, hardware, and connections that allow Layer 1 to function properly.
Layer 0 protocols provide compatibility between Layer 1 projects. This is a huge issue with Layer 1; once you're in the ecosystem, it's difficult to leave - Layer 0 solves this. Not all blockchains built on the same Layer 0 will be designed in the same way. They can employ various consensus mechanisms, block parameters, and so forth. Layer 0 tokens are frequently used as an anti-spam filter, requiring you to stake the Layer 0 token in order to access their ecosystem.
The most well-known example of a Layer 0 protocol is Cosmos. They offer open-source tools like Tendermint, Cosmos SDK, and IBC to allow developers to design their own blockchains that can communicate with one another. Their mission is to develop the "Internet of Blockchain". Cosmos was used to construct projects such as Binance, Crypto.com, and Polygon.
The foundation layer's security is predicated on its immutability. When individuals talk about Ethereum, they're talking about the Ethereum network, also known as layer one. This layer is in charge of consensus mechanisms, programming languages, block time, dispute resolution, and the rules and parameters that ensure the essential functionality of a blockchain network.
Layer One Challenges
These scaling approaches, when used in tandem, boost network throughput. In contrast, layer one appears to be falling short as the number of blockchain users grows. On the layer one blockchain, the outdated and wasteful proof-of-work consensus technique is still in use.
This method takes longer than others, but it is more secure. Miners need computational power to solve cryptographic algorithms. As a result, in the long run, more processing power and time are required. Furthermore, the demand for layer one blockchain grows in tandem with the number of users. As a result, processing rates and capacity have both decreased.
Possible solutions include
Proof-of-stake is an alternate consensus method that will be used by Ethereum 2.0. This consensus process verifies fresh transaction data blocks based on the staking collateral of network participants, resulting in a more efficient operation.
Sharding is a method of dealing with the layer one blockchain burden problem. Simply put, sharding breaks down the task of validating and authenticating transactions into smaller, more manageable parts.
As a result, the strain may be dispersed across the network to take advantage of more nodes' computing power. Because the network processes these shards in parallel, many transactions can be processed sequentially as well as concurrently.
Above the base layer, the blockchain Layer 2 solution is an overlapping network. Protocols employ layer two to increase scalability by segregating some interactions from the base layer. As a result, smart contracts on the main blockchain protocol only manage deposits and withdrawals, while off-chain transactions are governed by regulations. Bitcoin's Lightning Network is an example of a layer two blockchain.
So, what is the distinction between blockchain layers one and two? The blockchain is the initial layer of the decentralized ecosystem. Layer two is a third-party integration that collaborates with layer one to increase the number of nodes and hence system throughput. Many layer-two blockchain solutions are being implemented at the moment.
Layer Two Scaling Solutions
Layer two protocols have gained popularity in recent years, and they have proven to be the most effective approach for tackling scalability concerns in PoW networks in particular. The parts that follow go over several layer two scaling methodologies.
Layer two blockchains are placed one on top of the other. Layer one specifies the settings, while layer two performs the procedures. Many blockchain layers can exist on a single mainchain. Consider it a typical corporate structure.
Rather than having one person (for example, the manager) do everything, the manager delegated duties to subordinates, who then reported back to management when they were accomplished. As a result, the manager's workload is reduced, and scalability improves. The OMG Plasma Project, for example, serves as a level two blockchain for Ethereum's level one protocol, allowing for cheaper and faster transactions.
A state channel boosts total transaction capacity and speed by facilitating two-way communication via various techniques between blockchain and off-chain transactional channels. The miner does not need to be actively involved in order to validate a transaction over a state channel.
It is instead a network-adjacent resource protected by a multi-signature or smart contract approach. When a transaction or batch of transactions on a state channel is completed, the channel's eventual state and all its inherent transitions are broadcast to the underlying blockchain.
State channels are used in Bitcoin Lightning and Ethereum's Raiden Network. State channels provide some decentralization in exchange for enhanced scalability in the trilemma tradeoff.
A sidechain is a transactional chain that runs alongside the blockchain and is used for large-scale bulk transactions. Sidechains have their own consensus method, which can be tweaked for speed and scalability, and a utility token is usually used as a data transfer mechanism between the side and main chains. The mainchain's primary duty is to provide general security and dispute settlement.
Sidechains are distinct from state channels in several ways. For starters, sidechain transactions are not secret between participants; instead, they are completely recorded on the ledger. Furthermore, sidechain security breaches have no effect on the mainchain or other sidechains. Building a sidechain from scratch takes a tremendous amount of time and work.
Rollups are layer two blockchain scaling strategies that perform transactions outside of the layer one network before uploading the results to the layer two blockchains. Because the data is on the foundation layer, layer one can keep rollups safe.
Rollups benefit users by increasing transaction throughput, increasing participation and lowering gas expenses.
Layer three, or L3, is another name for the application layer. The L3 projects act as a user interface while keeping the technical specifics of the communication channel hidden. L3 apps, as indicated in the layered structure of the blockchain architecture, are what give blockchains their real-world applicability.
In most circumstances, adding a Layer 3 switch minimizes the number of network devices that must be monitored, managed, and maintained.
By shifting the Layer 3 function to either the firewall or the Layer 3 switch, you can decrease or remove the requirement for dedicated routers in your network.
While Layer 3 switches are often reasonably priced, if you have a limited budget, you may not have many options when looking for Layer 3-capable switches.
If your network is tiny, adding a Layer 3 switch may add complexity without giving much in the way of additional benefits.
Blockchain technology is a one-of-a-kind combination of various existing technologies — cryptography, game theory, and so on — with numerous potential applications, including cryptocurrency. By offering openness and security, blockchain removes intermediaries, decreases costs, and increases efficiency.
Distributed ledger technology (DLT) maintains information verified by cryptography among a group of users who agreed through a predetermined network protocol without the oversight of a central authority. The combination of these technologies creates trust amongst people or parties who would not otherwise have a reason to do so.
They enable blockchain networks to safely exchange value and data between users.
Blockchains must be extremely secure due to the lack of a centralized authority. They must also be incredibly scalable in order to accommodate growing numbers of users, transactions, and other data. Layers arose as a result of the need for scalability while maintaining top-notch security.
In blockchain technology, "scaling" refers to a rise in system throughput rate, as measured by the number of transactions executed per second. With the growing popularity of cryptocurrencies in everyday life, it is now necessary to create a blockchain layer for increased network security, recordkeeping, and other objectives.
Throughput is the number of transactions handled by a system per second. While Visa's VisaNet electronic payment network can manage over 20,000 transactions per second, Bitcoin's (BTC) main chain can only handle seven.
The initial layer of the decentralized ecosystem is blockchain. Layer 2 is a third-party integration that is used in conjunction with Layer 1 to increase the number of nodes and system throughput. Many Layer 2 blockchain solutions are being deployed right now. In these systems, smart contracts are utilized to automate transactions.
As Bitcoin becomes a more powerful commercial force, blockchain developers are striving to widen the scope of blockchain administration. By creating blockchain layers and enhancing layer two scalability, they intend to cut processing times and improve TPS.
The term "scalability" is defined differently by different specialists. However, blockchain scalability, at its core, refers to the system's ability to provide a rich experience to every user, independent of the overall number of users at any particular time.
The number of transactions processed by the system per second is referred to as throughput. While Visa's VisaNet electronic payment network can handle more than 20,000 transactions per second, the primary chain of Bitcoin can only handle 3 to 7 transactions per second.
The capability disparity is striking, but it is easily explained. VisaNet is a regulated system, whereas Bitcoin is a decentralized system. The former requires more processing power and time to protect its clients' privacy. Each data transaction must go through several processes, such as node network acceptance, mining, dissemination, and validation.
With cryptocurrencies on the verge of taking over the commercial world, blockchain developers are working to broaden the scope of blockchain administration. They want to cut processing times and improve TPS by developing blockchain layers and improving Layer 2 scalability.
Blockchain technology is difficult to grasp, but with a little effort, its utility and applications can be realized. This field of technology is advancing at a rapid pace. Several governments and organizations are interested in blockchain and are applying it in a variety of domains. At this time.
Scalability is one of the reasons why crypto mainstream acceptance is now unachievable in the blockchain industry. The urge to develop blockchain protocols will increase as the demand for cryptocurrency grows. Because each blockchain level has its own set of constraints, the ultimate solution will be to create a system that can overcome the scalability trilemma.
Layer one is essential since it is the foundation for decentralized systems. Layer two protocols solve the underlying blockchain's scalability difficulties. Unfortunately, the majority of layer three protocols (DApps) now operate solely on layer one, skipping layer two. It's not surprising that these systems aren't working as well as they should.
Blockchain is made up of five layers: the hardware infrastructure layer, the data layer, the network layer, the consensus layer, and the application layer.
The base blockchain protocol is known as Layer 1. Layer 2 is a third-party solution that is integrated with layer 1 to improve scalability. This article will explain the differences between layer 1 and layer 2 cryptography in detail.
Solana is a layer 1 Blockchain designed for mass adoption.
A blockchain needs 5 main layers in its architecture: Application Layer, Protocol (Consensus) Layer, Network Layer, Data Layer, and Hardware/Infrastructure Layer.
Layer 5 is the user layer, which comprises end users interacting with the blockchain network via wallets, browsers, and other applications.
Popular cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) operate on base or layer-1 blockchain networks.