Layered structure of the blockchain ecosystem.

Gepubliceerd op 8 mei 2022 om 11:12

To better understand the blockchain network, it is important to know what layers exist on the blockchain network. If we zoom in further on the blockchain network, we can see roughly 5 layers. In this blog I will discuss the layers that together make the blockchain.

Why do we need to have layers?

When we talk about blockchain, it is not 1 technology on which everything works. Blockchain contains different technologies and techniques that are applied simultaneously. These different techniques together make the blockchain. At its core, blockchain uses peer-to-peer technology and cryptography.

Not every blockchain contains the same techniques. Which techniques a blockchain network uses depends on the application of that particular blockchain. A blockchain that is used purely for payments has different techniques than a blockchain that only stores data - for example, via a cloud.

I think you can imagine that if we use all these different techniques interchangeably, it can become a mess. The great thing about blockchain is that it is open source. This means that anyone can modify and improve the underlying code. But this code needs to be organized. If the code is not well-organized, then developers can actually do little with this code, let alone improve it. It is therefore important that the underlying code/technologies are written in a clear and well-organized way.

The code should not only be clear and well-organized. This code must also be secure. A blockchain that can be hacked is not a blockchain that people want to invest in. In addition, you don't want third parties to have access to (sensitive) information. Hackers can - with insecure code - create transactions that should not exist or modify older transactions.

It is therefore very important that the various techniques are able to communicate with each other. Communication plays a major role in this. Without this communication, a blockchain network simply cannot exist.

This why we need layers...

To ensure that the various techniques can communicate with each other in a safe and orderly way, different blockchain layers are used. These layers contain certain rules that apply universally to the blockchain. Because these layers apply universally, communication is always guaranteed.

If every blockchain develops its own communication code, it will become a mess. To avoid this, the blockchain in its core uses a standard number of layers that every blockchain uses.

Each successive layer is connected to the previous layer. These layers communicate and work together.

The 5 blockchain layers

  • Network/hardware layer

The very first layer is the network layer. This layer allows the participants of the blockchain network to communicate with each other. Therefore, this layer is crucial because without it, no blockchain network can exist at all. The participants are the nodes. The nodes ensure that the blockchain network can exist. For this it is important that these nodes can communicate with each other. This layer takes care of this.

So this layer makes sure that nodes can communicate with each other, but this layer is also important for new nodes. If nodes want to participate in the blockchain network, then these nodes need to download the code and the associated transactions. The code that is downloaded will be run on the corresponding node. Without this code, nodes cannot set up their blockchain network. So even for starting nodes, it is important that this layer works properly. Because through the code they download, they can participate in the network which also allows them to communicate with the other nodes.

  • Protocol layer

Within the protocol layer falls the consensus mechanism, or consensus algorithm. This also includes the sidechains.

The consensus mechanism is essential to the operation of the blockchain. Through the consensus protocol, transactions can be verified on the blockchain. Each blockchain has a different consensus mechanism. Bitcoin, for example, has the proof of work. In addition, there are numerous consensus mechanisms that can be used. Such as the proof of stake or the proof of elapsed time.

If the main blockchain also has a sidechain, then the main chain should also be able to communicate with this sidechain. This is done through a 'federation'. This federation ensures that when you send crypto from the main chain to the sidechain - the amount of crypto on the sidechain is correct. The federation ensures that the main chain communicates with the sidechain.

  • Data layer

The blockchain consists of blocks that are linked together. The next block is linked to the previous block. This creates a blockchain. Each block also organizes the transactions/data.

The components that exist in this layer are firstly the Merkle tree. Each block contains a Merkle tree with a Merkle root. The Merkle tree is a tree of all the hashes that eventually result in a single hash. Each block contains a Merkle root such as the information stored in that specific block, but also the hash of the previous block (so that all the blocks are linked together).

In addition, this layer contains the a timestamp, nonce, version number of the block and the difficulty to verify a transaction on the blockchain.

This layer also consists of the digital signature. The private key is used to sign transactions. This signature is crucial. Thus, the digital signature is important for the security of the transaction. 

  • Service layer/application layer

At the service layer, we look at the techniques required to run certain applications on the blockchain. This includes, for example:


Smart Contracts



Multi signatures


Through this service layer, users can use the wallet, or developers can build applications through smart contracts, or developers can process information outside the blockchain into the blockchain (oracles). Thus, this layer is very important because without it, no products (such as the wallet and Decentralized Applications) can be offered to the wider public.

  • Application layer

This layer is actually visible to users. For example the wallet or the website of Sushiswap. These are the products that you can actually use. So this layer is the visible layer.

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