Exploring the Different Layers of Blockchain

2022.7.19 • 4 min read

Blockchain is a layered, modular, Lego-like world. This poses a big challenge to many newcomers who are just beginning their adventure into this world.

As users first get to grips with this world they are met with ideas of mining and Bitcoin, then come different blockchains like Ethereum, BNB Chain and other public chains. Alongside this, users are met with all sorts of applications such as wallets, DEX, Play-to-earn games among a host of other offerings.

This new world is certainly dazzling, and our series of articles will try to unravel the mysteries of this world with concise language that helps make complex ideas easy to understand.

Blockchain as a Big Data Sheet

What exactly is blockchain? Described in the simplest terms, blockchain is a big data sheet with global interconnectivity. Therefore, data lies at the bottom of the blockchain architecture.

Transaction data is stored in blocks. Blocks are then organized in a chain structure. At this level, nodes use consensus algorithms to maintain the consistency of data, asymmetric encryption and hashing algorithms in cryptography to ensure that this distributed database is tamper-proof and traceable.

Because blockchain data is open and transparent, this fundamentally defines the blockchain world as different from the traditional world. Data is no longer in the hands of large companies, but in the hands of each individual. This, in the meantime, gives rise to many innovation opportunities, such as the use and analysis of on-chain data, the decentralized identity as well as privacy protection technologies, to name just a few.

Making Data Available

The transaction data is available, but how can we make it known to the entire network and pack it into blocks? In a centralized system it is recorded in a centralized ledger, in a blockchain the data is broadcast through a peer-to-peer(P2P) network.

The P2P network is an integral part of blockchain technology. In contrast to centralized networks where clients request information from centralized servers, the P2P networks allow nodes to communicate directly with one another and broadcast transactions across nodes.

So Many Nodes Here, Who Should I Listen To?

There are many similarities between blockchain governance and national or city-state governance. Is it a direct or indirect democracy, and if the latter, how large should the parliament be? A reasonable, reliable consensus mechanism is needed to coordinate the views of so many residents, to make final decisions and to ensure consistency.

While we won't delve too deeply into the different consensus algorithms such as Proof of Work (PoW) and Proof of Stake (PoS), we do need to know that these are representatives of the consensus layer, and their main role is to ensure the consistency of data across the nodes, so that participants can agree on a proposal in a distributed system.

Different consensus algorithms have different advantages and disadvantages. PoW is often considered to be the most decentralized and secure, but it is also the least efficient and most energy consuming.

PoS greatly reduces energy consumption, despite worries that it will be more beneficial to “whales”. This is why continuous attempts are made to make optimizations and improvements to the consensus algorithm trying to balance fairness and the ease of use.

As for BNB Chain, it is using Proof of Staked Authority (PoSA), which allows holders of its native token, BNB, to vote for 41 validators. Our consensus algorithm allows us to maintain efficient operation with low gas fees and makes it affordable for everyone to participate.

Time to Run the Code

The execution layer is where the magic of “smart contracts” happens. Ordered by application layer, the instructions are executed on all the nodes in the blockchain network. These instructions could be in the form of a smart contract, a set of multiple instructions or simple instructions.

Layer 2, a term we've been hearing a lot recently, is actually an additional execution layer. In a traditional monolithic blockchain design, all data is stored in the underlying data layer which has sometimes resulted in inefficiencies: if a block producer does not broadcast all the data in a block, then no one can detect if there is a malicious transaction hidden in that block. If it does, this requires significant resources and hundreds of gigabytes of disk space to download all the data.

To tackle this issue, a structure of “consensus-execution-data availability” has begun to take shape in recent years. Followed by a separate data availability layer, additional execution layers or the so-called ‘L2s’ are deployed to solve the transaction speed and scaling difficulties that are being faced by the major cryptocurrency networks.

Blockchain for Every User

When all the relevant infrastructure is ready, we can finally build applications on it. If the previous layers act like a country's voting system, communication network, judicial system, road infrastructure, these applications are like stores in a city: restaurants, banks, playgrounds, gyms...in the blockchain world they’re DeFi, GameFi, SocialFi and so on.

BNB Chain now has 1300+ Dapps with the largest active community and continuous innovation. Apart from the likes of Pancake Swap, Venus Protocol, Celer Network, which are already quite popular among blockchain users, projects with creative features and unique market fit are emerging all the time, such as EX Sports, an NFT-collectible protocol that focuses on exciting niche sports, or Web3Auth, which provides a seamless onboarding experience for Web2 users to join crypto world..

There is also an API layer prior to the application layer, which offers application interfaces on top of the blockchain and a mechanism for third-party apps to communicate with the ledger and smart contracts. One of BNB Chain Project Stars in June - Go+ Security, offers this Infrastructure providing various API services to build a safer environment.

Unlike traditional Internet applications, blockchain applications do not hold user data. As a result, blockchain applications tend to provide a single service rather than a super app. The more decentralized a network is, the harder it is to provide a whole set of services through a single interface.

So, the various types of applications in the blockchain world will be built independently of each other on top of multiple combinable protocols. This is where the beauty of blockchain lies: in a big modular world, each layer contains many small pieces, which we will continue to dismantle in subsequent articles.

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