What is blockchain?

• Layer 1: Consensus layer which makes sure that everybody sees the same data
• Layer 1.5: on the top of the consensus layer we have Compute layer (blockchain computer) this is the operating system of the blockchain on which applications are written
• Layer 2: Applications layer where the applications exist and they’re written in the languages like solidity, move, etc.
• Layer 3: User Interface

Why we have Layer 1 & Layer 1.5 is because there are two issues consensus issue and computing issue.

Layer 1: Consensus layer (Informal)

A public data structure (ledger) that provides:

• Persistence: once added, data can never be removed (caveat is 51% attack)
• Consensus: all honest participants have the same data (true but other than the last few blocks that were added)
• Liveliness: honest participants can add new data
• Open: anyone can be a participant (no authentication) (but this is variable and depend on the network to network)

Consensus problem but also existed in the 1980s (namely state machine replication i.e. different organization’s servers need to see the same data.). In the traditional world, there are a known number of servers and all the data servers are pre-authorized.

They have been provided with cryptographic material that allows them to talk to each other. On the other hand in the open consensus world, anyone can write new data to the blockchain and the number is unknown. And there exists an impossibility proof that shows that unless you don’t have the authentication and don’t know how many participants are there in the network you can’t show the same data to everyone. Satoshi Nakamoto’s innovation is a way to bypass the lower bound using proof-of-work.

How blocks are added?

1. Each participant sign a transaction using their secret key and send it to the miners
2. Consensus protocol chooses the random leader amongst the miner & and that random miner orders the transaction in the block & the block gets posted over the blockchain
3. The leader gets paid by the native currency (e.g. ether) of the blockchain & other miners verify the block

<aside> 🔑 Impossibility result states that if you don’t have proper authentication and know the number of participants you’re vulnerable to Sybil Attack

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