Brianna White

Staff member
Jul 30, 2019

Blockchain technology has brought about a significant revolution in the way data is stored and transferred. It is considered one of the most groundbreaking innovations of the 21st century. However, due to the seeming complexity of its 5 technology layers, many users remain unaware of its fundamental structure.

At its core, the blockchain is a decentralized and distributed ledger that ensures secure, transparent, and immutable transactions. It functions through a network of computers that verify and record each transaction in a series of encrypted blocks, which are then linked together to form a chain. While cryptocurrencies like Bitcoin and Ethereum have popularized this technology in recent years, its applications extend far beyond digital currencies alone.

To fully comprehend the capabilities and potential of blockchain technology, it is essential to understand the multiple layers that enable its functionality and effectiveness. Businesses and investors who wish to leverage blockchain for their operations or investments must acquire a comprehensive understanding of these underlying components.

The key advantages of blockchain technology include transparency, enhanced security, increased efficiency, reduced operational costs, and the elimination of intermediaries. With the emergence of Web 3.0 and Decentralized Ledger Technology (DLT), understanding the different layers of blockchain becomes crucial. These layers play a vital role in the overall architecture of blockchain systems, enabling the seamless functioning and organization of decentralized networks. In the following sections, we will explore the importance of these layers and how they contribute to the workings of blockchain technology.

Components of blockchain technology​

Node Application: A node application allows any internet-connected computer to participate in the blockchain ecosystem. Examples of node applications include Bitcoin wallets and blockchain platforms. In certain cases, such as a bank chain, participation may be restricted to specific entities like banks.

Distributed/Shared Ledger (Database): The blockchain system employs a distributed ledger that enables participants to access shared databases and content. The ledger contains a set of regulations that must be followed. For instance, in a bitcoin node application, compliance with the program code’s regulations is necessary.

Consensus Algorithm: Consensus algorithms are vital for the functionality and security of a blockchain network. They ensure the integrity and consistency of the blockchain data. The consensus algorithm determines how network nodes agree on which transactions to accept. Additionally, the blockchain’s tamper resistance is achieved by the requirement to regenerate all subsequent blocks if any change is made to a block.

Virtual Machine: A virtual machine is a software representation of a machine, real or hypothetical, that can be controlled through instructions in a specific language. It abstracts physical objects or entities into virtual counterparts on a computer. For example, a graphical application’s button on the screen triggers a change in the program’s state inside the computer.

Peer-to-Peer (P2P) Network: A peer-to-peer network is a decentralized model where multiple peer nodes communicate without relying on a central server. In blockchain networks, each node acts as both a client and a server, collectively providing and managing data. This peer-to-peer architecture enhances data availability and reduces the risk of information loss.

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