January 28, 2021
Blockchain Structure and Layers

what is Blockchain Structure and Layers

By on May 12, 2019 0 1476 Views

Blockchain Structure and Layers

Blockchain Structure (Bitcoin example)

Each blockchain is structured slightly differently. However, Bitcoin is a great blockchain to study because it was used as a template for most subsequent blockchains. The data on Bitcoin is structured so that each full node (the computers running the network) contains all the data in the network. This model is compelling from a data persistence point of view. It ensures that the data will stay intact even if a few of the nodes become compromised. However, because every node has:


A list of transactions recorded into a ledger over a given period. Thsize, period, and triggering event for blocks is different for every blockchain.

Not all blockchains are recording and securing a record of the movement oftheir cryptocurrency as their primary objective. But all blockchain do recordthe movement of their cryptocurrency or token. Think of the transaction as simply being the recording of data. Assigning a value to it (such as happens in a financial transaction) is used to interpret what that data means.


A hash that links one block to another, mathematically “chaining” them together. This is one of the most difficult concepts in blockchain to comprehend. It’s also the magic that glues blockchains together and allows them to create mathematical trust.

The hash in blockchain is created from the data that was in the previous block.

The hash is a fingerprint of this data and locks blocks in order and time.

Although blockchains are a relatively new innovation, hashing is not. Hashing was invented over 30 years ago. This old innovation is being used because it creates a one-way function that cannot be decrypted. A hashing function creates a mathematical algorithm that maps data of any size to a bit string of a fixed size. A bit string is usually 32 characters long, which then represents the data that was hashed. The Secure Hash Algorithm (SHA) is one of some cryptographic hash functions used in blockchains. SHA-256 is a common algorithm that generates an almost-unique, fixed-size 256-bit (32-byte) hash.

For practical purposes, think of a hash as a digital fingerprint of data that is used to lock it in place within the blockchain.


The network is composed of “full nodes.” Think of them as the computer running an algorithm that is securing the network. Each node contains a complete record of all the transactions that were ever recorded in that blockchain.

The nodes are located all over the world and can be operated by anyone. It’s difficult, expensive, and time-consuming to operate a full node, so people don’t do it for free. They’re incentivized to operate a node because they want to earn cryptocurrency. The underlying blockchain algorithm rewards them for their service. The reward is usually a token or cryptocurrency, like Bitcoin.

Blockchain Layers

Blockchain technology Structure and Layers

Enter the blockchain. There are no agreed global standards yet that would clearly segregate the blockchain components into distinct layers. A layered heterogeneous architecture is needed, but for now that is still in the future. So, we will try to formulate blockchain layers to be able to understand the technology better and build a comparative analogy between hundreds of blockchain/Cryptocurrency variants out there in the market. Take a look at the high-level, layered representation of blockchain in Figure (Various layers of blockchain) bellow

Application Layer

This is the layer where you code up the desired functionalities and make an application out of it for the end users. It usually involves a traditional tech stack for software development such as client-side programming constructs, scripting, APIs, development frameworks, etc. For the applications that treat blockchain as a backend, those applications might need to be hosted on some web servers and that might require web application development, server-side programming, and APIs, etc. Ideally, good blockchain applications do not have a client–server model, and there are no centralized servers that the client’s access, which is just the way Bitcoin works.

Execution Layer

The Execution Layer is where the executions of instructions ordered by the Application Layer take place on all the nodes in a blockchain network. The instructions could be simple instructions or a set of multiple instructions in the form of a smart contract. In either case, a program or a script needs to be executed to ensure the correct execution of the transaction. All the nodes in a blockchain network have to execute the programs/scripts independently. Deterministic execution of programs/scripts on the same set of inputs and conditions always produces the same output on all the nodes, which helps avoid inconsistencies.

Semantic Layer

The Semantic Layer is a logical layer because there is an orderliness in the transactions and blocks. A transaction, whether valid or invalid, has a set of instructions that gets through the Execution Layer but gets validated in the Semantic Layer. If it is Bitcoin, then whether one is spending a legitimate transaction, whether it is a double-spend attack, whether one is authorized to make this transaction, etc., are validated in this layer.

In this layer, the rules of the system can be defined, such as data models and structures. There could be situations that are a little more complex compared with simple transactions. Complex instruction sets are often coded into smart contracts. The system’s state gets updated when a smart contract is invoked upon receiving a transaction. A smart contract is a special type of account that has executable code and private states.

Propagation Layer

The Propagation Layer is the peer-to-peer communication layer that allows the nodes to discover each other, and talk and sync with each other with respect to the current state of the network. When a transaction is made, we know that it gets broadcast to the entire network. Similarly, when a node wants to propose a valid block, it gets immediately propagated to the entire network so that other nodes could build on it, considering it as the latest block. So, transaction/block propagation in the network is defined in this layer, which ensures stability of the whole network. By design, most of the blockchains are designed such that they forward a transaction/block immediately to all the nodes they are directly connected to, when they get to know of a new transaction/block.

Consensus Layer

The Consensus Layer is usually the base layer for most of the blockchain systems. The primary purpose of this layer is to get all the nodes to agree on one consistent state of the ledger. There could be different ways of achieving consensus among the nodes, depending on the use case. Safety and security of the blockchain is accertained in this layer. In Bitcoin or Ethereum, the consensus is achieved through proper incentive techniques called “mining.” For a public blockchain to be self-sustainable there has to be some sort of incentivization mechanisms that not only helps in keeping the network alive, but also enforces consensus. Bitcoin and Ethereum use a Proof of Work (PoW) consensus mechanism to randomly select a node that can propose a block.

Leave a comment

Your email address will not be published. Required fields are marked *