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  • Writer's pictureLawrence Cummins

Layered Structure of Blockchain Technology

Layer 1, 2, 3, 4, and Layer 5 are not universally defined terms in the context of blockchain architecture. Regarding the different components or functionalities within a blockchain system, we will discuss some common components and algorithms found in those layers.



Layer 1 - Consensus and Blockchain Protocol:

Consensus algorithms: Layer 1 typically includes the consensus algorithm, which determines how the network agrees on the order and validity of transactions. Examples of layer 1 consensus algorithms are Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS). Blockchain data structure: Layer 1 involves the core blockchain data structure, which organizes transactions into blocks and links them using cryptographic hashes to form an immutable chain.


Layer 2 - Scalability and Off-chain Solutions:

Scalability solutions: Layer 2 focuses on improving the scalability of Layer 1 blockchains. Solutions like state channels (e.g., Lightning Network), sidechains, or sharding can be implemented in Layer 2 to handle a larger number of transactions off-chain.

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Off-chain computation:

Layer 2 may involve off-chain computation frameworks, where certain parts of the transaction processing or smart contract execution are done outside the main blockchain. Plasma and Rollups are examples of layer 2 frameworks.


Layer 3 - Smart Contracts and Decentralized Applications (DApps):

Smart contract platforms: Layer 3 usually includes the infrastructure and programming frameworks for writing and executing smart contracts. Examples include Ethereum, which uses Solidity for writing smart contracts, or more recent networks like Polkadot or EOS. Virtual machine and scripting languages: Layer 3 may utilize virtual machines like Ethereum Virtual Machine (EVM) to execute smart contracts, along with related scripting languages.


Layer 4 - Crypto-economics and Tokenization:

Crypto-economic models: Layer 4 involves the design and implementation of incentive structures and economic models that encourage desirable behavior within the blockchain network. Tokenomics and mechanisms like staking, inflation, or slashing are part of Layer 4. Token standards: Layer 4 may define token standards like ERC-20 (Ethereum), BEP-20 (Binance Smart Chain), or others, which provide guidelines for the creation and exchange of tokens on the blockchain.


Layer 5 - User Interfaces and Applications:

User interfaces: Layer 5 encompasses user-friendly interfaces, wallets, and applications that interact with the blockchain. Examples can be web or mobile-based wallets, dApps, or blockchain explorers.


It's worth noting that the categorization of layers and the specific architecture and algorithms within each layer can vary depending on the blockchain platform or framework being considered.

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