Blockchain Layers: The Layered Structure of The Blockchain Architecture

tl;dr Blockchain is a complex building with several components and is a secret key to so many doors. Simply put, it’s like an onion with many layers! Breaking down the different parts of blockchain into technology layers aids us to make it simpler and have a better perception of the complex blockchain structure. Keep scrolling to be informed of the layered architecture of blockchain and its inseparable layers.

Layered Architecture Of The Blockchain Ecosystem

Blockchains bring immutability, transparency, efficiency, auditability, and security, resulting in lower costs across a wide range of industries, companies, and applications. Recently, academics have identified six layers of technology, including data transfer, network, consensus, incentive, contract, and application. Keep reading to find out more.

Data Transfer Layer

The data transfer layer is the bottom layer among blockchain protocols and components. Data layer components include the Internet, hardware, and connections that will enable layer one to run smoothly. The data layer operates as the blockchain data structure and comprises two primary elements: pointers and a linked list. The linked list is a chain of blocks with their data and pointers to the previous blocks. Also, the data layer consists of the following components: Merkle Tree and Hashing Function.

Merkle Tree

The transactions in a blockchain are stored as part of a tree called a Merkel tree. A Merkle tree provides security, integrity, and irrefutability for blockchain technology.

Hashing Function

In order to convert a large amount of input into a smaller size hash function is used. You can learn more about Hash Function with one click!

Network Layer

The next layer above the data layer is the network layer and could be described as the hardware aspect of the blockchain. This layer is also called a propagation layer or peer-to-peer layer. A peer-to-peer layer involves all the blockchain nodes and doesn’t have someone in charge as a centralised administration to coordinate transactions. All the nodes are interconnected and share data, create blocks, and broadcast transactions to each connected party in the network. Each block and its information should be authenticated, and the block is officially connected to the blockchain once most of the nodes in the network have authenticated the block.

Consensus Layer

In the blockchain, the third layer refers to the consensus layer that mainly includes consensus algorithm mechanisms like proof of work and proof of stake. The consensus layer provides a certain set of agreements between nodes across the distributed peer-to-peer network to reach a consensus about the broadcasted transactions. It also deals with the production and verification of blocks.

To achieve a consensus, more than half of the participants (nodes) need to validate the transactions before it is permanently recorded in the blockchain ledger. Once a transaction is permanent, no one, not even the system administrator, can delete the transactions from the ledger. The type of the consensus algorithm and the number of nodes determine how much cost and time are required to reach consensus. PoW and PoS are two common consensus mechanisms across the blockchain. More to learn just by one click!

The Incentive Layer

As a matter of fact, incentives are everywhere, from elementary school to sports competitions and even on the blockchain platform, to encourage nodes and participants to cooperate and develop the platform. An incentive layer determines the variant types of incentives that are available on the network and how these incentives are delivered to the network nodes. Additionally, the incentive layer defines the minimum amount of transaction fees needed to perform actions on the blockchain. The capabilities of the incentive layer include the distribution of rewards and transaction fees.

Reward Distributions

To run a successful blockchain platform and develop the transactions, we need some incentive programs for individuals to get more nodes involved in the blockchain for validating transactions. Depending on the type of consensus mechanism, each node receives a particular reward. For instance, In PoW, the node receives an amount of cryptocurrency for solving the puzzle.

Transactions Fees

In the blockchain, miners not only receive rewards but also get transaction fees. To verify a transaction successfully, you need to calculate the amount of the fee you need to pay. The more fee you pay, the quicker your transaction will be included by a miner in one of the next blocks.

Contract Layer

The contract layer provides various components and services like smart contracts, digital wallets, state channels, data feeds, DAOs in order to create a bridge between blockchain platforms and other technologies.

Application Layer

The application layer is the final and uppermost layer in blockchain architecture presented to the users and provides applications on top of the blockchain.

The capabilities of the application layer include programmable smart contracts, APLs, and dApps. For instance, a programmable blockchain like Ethereum, various advanced features, and dApps work together to make up the application layer.

What Is API?

API stands for Application Programming Interface. With API, blockchain nodes or client services will easily interact and communicate with an application or website. Additionally, API as an interface provides tools between two or more applications to interact with each other.

As you read, we investigated the six layers of blockchain technology architecture, and now we are one step closer to decoding the intriguing world of the blockchain. Our educational reports on are helpful guides for improving every aspect of your knowledge. We focus on educating you since we wish to help you make confident crypto decisions!




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