Layers of Blockchain

• Infrastructure or hardware layer

• Data layer
• Network layer
• Consensus layer
• Application and presentation layers

However, blockchain technology layers can also be categorized as:

• Layer 0
• Layer 1
• Layer 2
• Layer 3
 Infrastructure or hardware layer
• A data server securely backs up the blockchain data.
• Computers seek access to this data from the server when we surf
the web or use any blockchain apps.
• Blockchain platforms rely on P2P, i.e., peer-to-peer network
architecture, where one node connects with other nodes to share
data quickly and easily.
• The client-server architecture is the structure that allows for this
data exchange.
• It is nothing more than a large network of devices connecting with
one another and exchanging data and information.
• A distributed ledger is constructed in this manner.
• A node communicates with another device on the network where
each node is authorized to monitor the transactional data randomly.
 The Data Layer
• A blockchain is a series of hashed blocks carrying transactional
records.
• The first block of the blockchain is the Genesis block.
• After that, every new block added to the blockchain is linked to the
Genesis block through an iterative process. And thus, in this way, the
blockchain keeps on expanding.
• Every transaction is ‘digitally signed’ using the sender’s wallet
private key.
• The owner’s identity is further protected by the digital signature,
which is encrypted, assuring utmost security.
• In blockchain terminology, this is referred to as ‘finality.’
• In the case of data access, tampering it is nearly impossible.
• A digital signature also protects the sender’s or owner’s identity.
• As a result, a signature is legally associated with the person who
signed it and cannot be ignored.
 The Network Layer
• The P2P framework allows several nodes to communicate
transaction data in order to reach an agreement on the transaction’s
legitimacy.
• This implies that every node on the network must be able to
discover other nodes in order to communicate quickly.
• This ‘inter-node communication’ is made possible by the network
layer.
• This layer is also known as the ‘Propagation Layer’ since it manages
node detection, block generation, and block addition.
 The Consensus Layer
• One of the most important layers in blockchain functionality, this
layer is responsible for transaction authentication.
• This layer implements the protocol, which needs a specific number
of nodes to validate a single transaction.
• As a result, each transaction is processed by numerous nodes, all of
which must reach the same conclusion and agree on its legitimacy.
• Because no node has exclusive authority over any transactional data,
and the role is dispersed.
• It is also referred to as a consensus mechanism and maintains the
blockchain’s decentralized characteristic.
• Multiple blocks may be formed concurrently, resulting in a branch in
the blockchain due to a large number of nodes processing
transactions, bundling them, and adding them to the blockchain.
• However, a single chain block addition is required at all times, and
the consensus layer guarantees that this dispute is addressed.
 Application and presentation layer
• The application layer consists of the programs that end-users take
advantage of to establish blockchain network communication. 
• Smart contracts, Dapps (decentralized applications), chaincode,
scripts, UIs (user interfaces), APIs (application programming
interfaces), and frameworks constitute the application layer.
• The application layer and the execution layer are subdivisions of the
application layer’s protocols.
• The blockchain network acts as the back-end mechanism for the
applications and communicates with the help of APIs. However,
smart contracts, chaincode, and underlying protocols form the
execution layer.
• The constituting applications instruct the execution layer for the
proper execution of transactions while ensuring the deterministic
aspect of the blockchain platform.
 Layer-0
• Comprising hardware, protocols, connections, and other
components that form the foundation of a blockchain ecosystem,
Layer-0 acts as a network architecture underlying the blockchain.
This layer may be thought of as a “network of blockchains.”
• Inter-chain operability is also enabled by Layer 0, which allows
blockchains to communicate with one another. It provides a critical
backbone for addressing future layer scalability difficulties.
• Layer 0 often employs a native token to enable participation and
development.
• Polkadot, Avalanche, Cardano, and Cosmos are some examples of
Layer 0.
 Layer-1
• Layer-1 is responsible for carrying out the bulk of tasks that maintain
a blockchain network’s fundamental operations like dispute
resolution, consensus mechanism, programming languages,
protocols, and restrictions.
• Layer-1 symbolizes the actual blockchain.
• The large number of jobs that this tier must manage frequently
causes scalability problems. As more individuals enter a blockchain,
the amount of computational power required to solve and add
blocks to the chain grows, resulting in higher fees and longer
processing times.
• The scalability concern is somewhat mitigated by improved
consensus techniques such as proof-of-stake and the advent of
sharding (the division of computing operations into smaller parts).
However, history has shown that they are insufficient.
• Ethereum, Binance Smart Chain, Bitcoin, and Solana are all examples
of Layer 1.
 Layer-2
• To enhance the blockchain’s productivity, extra processing power is
required. However, this necessitates the inclusion of extra nodes, which
clogs the network. Although adding nodes is essential for sustaining a
blockchain’s decentralized character, fiddling with scalability,
decentralization, or throughput will affect the others on layer 1.
• As a result, layer 1 cannot be enlarged without relocating all processing to
a second layer created on top of the first that is layer 2. This is made
feasible by allowing third-party solutions to be integrated with layer 1.
• A new network, Layer-2, revamps Layer-1 and manages all the
transactional validations. Layer-2 sits on top of Layer-1 in the blockchain
ecosystem and constantly exchanges information with it. However, Layer-1
is only responsible for managing the addition and creation of new blocks to
the blockchain.
• For instance, consider the Lightning Network as an example of a layer 2
blockchain deployed on the Bitcoin blockchain.
 Layer-3
• The last layer of the blockchain ecosystem and the one visible to the
human eye. Layer-3 is the one where participants will eventually
interact with the user interfaces (UI). When working with L1 and L2,
this layer aims to give simplicity and ease.
• L3 not only provides UI, but also utility in the form of intra- and
inter-chain operability, such as decentralized exchanges, liquidity
provisioning, and staking applications. Decentralized apps (dApps)
are a type of layer 3 interface that provides real-world applications
for blockchain technology.

Other examples include:

• Decentralized crypto exchanges like Pancake Swap and Uniswap.
• Wallet providers like Binance and Coinbase.
• Liquidity management protocols like Compound and Aave.
• Payments mechanisms like Tornado Cash.
Differences Between Layers 0,1,2,3

This layer has the hardware, protocols and other

Layer 0
foundational elements

Maintains the dispute resolution, consensus

Layer 1 mechanism and programming of the blockchain.
Examples: Bitcoin blockchain, Ethereum blockchain

Has better scaling capabilities than Layer 0 and 1. It

Layer 2 has the capability to be integrated with third-party
solutions

This layer is used to host dApps and other user-facing

Layer 3
applications
 Why Blockchain is important?
• Trust issues
• Security issue
• Privacy issue—data sale privacy is being undermined
• Cost and time factor for transactions

Some of the advantages of decentralized systems over centralized

systems could be:
• Elimination of intermediaries
• Easier and genuine verification of transactions
• Increased security with lower cost
• Greater transparency
• Decentralized and immutable
 Public vs Private Blockchain
• Public blockchains are open networks that allow anyone to
participate in the network i.e. public blockchain is
permissionless.
• In this type of blockchain anyone can join the network and read,
write, or participate within the blockchain.
• A public blockchain is decentralized and does not have a single
entity which controls the network.
• Data on a public blockchain are secure as it is not possible to
modify or alter data once they have been validated on the
blockchain. 
 Public vs Private Blockchain
Some features of public blockchain are : 
 
High Security –  It is secure Due to Mining (51% rule). 
 
Open Environment –  The public blockchain is open for all. 
 
Anonymous Nature –  In public blockchain every one is anonymous.
There is no need to use your real name, or real identity, therefore
everything would stay hidden, and no one can track you based on
that. 
 
No Regulations –  Public blockchain doesn’t have any regulations
that the nodes have to follow. So, there is no limit to how one can
use this platform for their betterment 
 Public vs Private Blockchain
Some features of public blockchain are : 
 
Full Transparency – Public blockchain allow you to see the ledger
anytime you want. There is no scope for any corruption or any
discrepancies and everyone has to maintain the ledger and
participate in consensus. 
 
True Decentralization –  In this type of blockchain, there isn’t a
centralized entity. Thus, the responsibility of maintaining the
network is solely on the nodes. They are updating the ledger, and it
promotes fairness with help from a consensus algorithm . 
 Public vs Private Blockchain
Some features of public blockchain are : 
 
Full User Empowerment – Typically, in any network user has to
follow a lot of rules and regulations. In many cases, the rules might
not even be a fair one. But not in public blockchain networks. Here,
all of the users are empowered as there is no central authority to
look over their every move. 
 
Immutable – When something is written to the blockchain, it can
not be changed. 
 
Distributed – The database is not centralized like in a client-server
approach, and all nodes in the blockchain participate in the
transaction validation. 
 Public vs Private Blockchain
• A private blockchain is managed by a network administrator and
participants need consent to join the network i.e., a private
blockchain is a permissioned blockchain.
• There are one or more entities which control the network and
this leads to reliance on third-parties to transact.
• In this type of blockchain only entity participating in the
transaction have knowledge about the transaction performed
whereas others will not able to access it i.e. transactions are
private. 
 Public vs Private Blockchain
Some of the features of private blockchain are :

Full Privacy – It focus on privacy concerns. 

 
Private Blockchain are more centralized. 
 
High Efficiency and Faster Transactions –  When you distribute the
nodes locally, but also have much less nodes to participate in the
ledger, the performance is faster. 
 
Better Scalability –  Being able to add nodes and services on
demand can provide a great advantage to the enterprise.  
 Public vs Private Blockchain
Basis of Public BlockChain  Private BlockChain
Comparison
In this type of blockchain anyone In this type of blockchain
can read, write and participate in a read and write is done upon
Access blockchain. Hence, it is invitation, hence it is a
permissionless blockchain. It is permissioned blockchain.
public to everyone.
Network Actors Don’t know each other Know each other
Decentralized Vs A public blockchain is A private blockchain is more
Centralized decentralized. centralized.
The order of magnitude of a public
blockchain is lesser than that of a The order of magnitude is
Order Of Magnitude private blockchain as it is lighter more as compared to the
and provides transactional public blockchain.
throughput.
 Public vs Private Blockchain
Basis of Public BlockChain  Private BlockChain
Comparison
Native Token Yes Not necessary
Speed Slow Fast
Transactions per Transactions per second are lesser Transaction per second is more as
second in a public blockchain. compared to public blockchain.

A public network is more secure

due to decentralization and active
A private blockchain is more prone to
participation. Due to the higher hacks, risks, and data breaches/
number of nodes in the network, it
Security manipulation. It is easy for bad actors
is nearly impossible for ‘bad to endanger the entire network.
actors’ to attack the system and
gain control over the consensus Hence, it is less secure.
network.

A public blockchain consumes

more energy than a private
blockchain as it requires a Private blockchains consume a lot
Energy Consumption significant amount of electrical
less energy and power.
resources to function and achieve
network consensus.
 Public vs Private Blockchain
Basis of Public BlockChain  Private BlockChain
Comparison
Some are proof of work, proof of
Consensus
stake, proof of burn, proof of space
algorithms etc.
In a public blockchain, no one knows
who each validator is and this
Attacks increases the risk of potential collision
or a 51% attack (a group of miners
which control more than 50% of the
network’s computing power.).
Potential to disrupt current business
models through disintermediation.
There is lower infrastructure cost. No
Effects need to maintain servers or system
admins radically. Hence reducing the
cost of creating and running
decentralized application (dApps).
Bitcoin, Ethereum, Monero, Zcash,
Examples Dash, Litecoin, Stellar, Steemit etc.
Proof of Elapsed Time (PoET), Raft, and
Istanbul BFT can be used only in case
of private blockchains.
In a private blockchain, there is no
chance of minor collision. Each
validator is known and they have the
suitable credentials to be a part of the
network.
Reduces transaction cost and data
redundancies and replace legacy
systems, simplifying documents
handling and getting rid of semi
manual compliance mechanisms.
R3 (Banks), EWF (Energy), B3i
(Insurance), Corda.
 Uses and Usecases
Applications Usecases
Smart Contracts BurstIQ (healthcare)
Propy (real estate)
Internet of Things HYPR (IoT/Cybersecurity)
Xage (IoT/Cybersecurity)
(IoT)
Money Transfer Circle (FinTech)
Chainalysis (FinTech/Cybersecurity)
Personal Identity Civic (FinTech/Cybersecurity) 
Security Evernym (IT)
Logistics DHL (Supply chain management, Logistics)
Maersk (Supply chain management, Logistics)
 Uses and Usecases
Applications Usecases
Digital Media MadHive (Media & Advertising)
Steem
Education University of Nicosia in Cyprus
Medical Field Ambrosus
ConnectingCare
Entertainment Plague Hunters
Beyond the Void
Real Estate Propy
Harbor
StreetWire