1. Data layer: Comprises the underlying data blocks, together with associated messages (encrypted) and the timestamps.
4. Incentive layer: The individual nodes in a decentralised network are incentivised with rewards to contribute to the overall network goal(s).
2. Network layer: The layer of the Peer-2-Peer (P2P) communications protocol that connects notes without using a centralised controller.
5. Contract layer. The layer that contains the scripting/programming language that is used to create the smart contracts that achieve specific purposes.
3. Consensus layer: The layer that compensates for having no overall controller by seeking agreement between all network nodes.
6. Application layer: The layer that supports Decentralised Applications (Dapp), often written in conventional languages.
Web3 is a new paradigm and represents the third generation of the Internet.
In Web3, nodes are connected to create decentralised networks. Each node maintains a complete copy of blockchain transactions. Each account on the network may contain a smart contract (complete with its data), which produces a certain financial or legal result.
Web3 design improves on traditional Web2 design in the following ways:-
1. Is as decentralised as the Internet itself
2. Respects privacy.
3. Resists censorship.
4. Reduces risk of funds being hacked.
5. Tends to reduce trading fees.
CyberTrade is bringing the advantages of Web3 to its financial instruments.
Users of CyberTrade financial instruments use web applications known as Decentralised Applications (dApps) that utilise the 'Web3' interface to communicate to the Ethereum blockchain.
Smart Contracts are comprised of Scenario-Response rules and logic.
Parties agree to contractual terms, breaches of contract, breach liability and external verification (Oracles).
Smart contracts are deployed to the blockchain in the form of bytecode, along with specific status and data value(s). The bytecode is executed within the Ethereum Virtual Machine (EVM).
Contracts are triggered by events. For example, human/website interaction, machine interaction (IoT) or scheduled events, etc.
Specific transactions are carried around the blockchain in blocks . For example, a transaction to sell currency a and buy currency b at a specific decentralised exchange (DEX).
The Ethereum blockchain can be regarded as comprising of six logical layers.
The layered approach helps understanding and maintainability.
Ongoing innovation takes place within each layer. Occasionally, if there is a major innovation, an entire layer may be replaced by a new version of the layer. Done properly, the other layers of the blockchain should be largely unaffected by each innovation.
For example, the Ethereum network consensus layer mechanism was originally Proof-of-Work, but a decision was made to move to the Proof-of-Stake mechanism.
In the Ethereum architecture, the top layer is the Application Layer. This layer supports Decentralised applications (Dapp).
Typically, a Dapp comprises a combination of one or more smart contracts (residing on the blockchain), together with supporting web artefacts such as web pages, content, code etc, residing on the (Web2) Internet.
Dapp 'front-ends' are built using common web technology such as Java, Python, Node.js, libraries and associated application building frameworks.
The contract layer of the Ethereum blockchain holds the deployed program code (bytecode form) and algorithms which constitute smart contracts.
Code written in high-level languages such as Solidity, incorporate flow-control (loops and conditional statements) which enable developers to create sophisticated smart contracts.
Multiple smart contracts are often combined to create comprehensive applications.
Within Decentralised Ledger Technology (DLT), Consensus nodes are designed to maximise revenue, while participating in verification and accounting activities.
Generally speaking, incentives are orientated towards delivering the security, reliability and performance of network operation.
For example, the incentive in Bitcoin's Proof-of-Work consensus mechanism comprises both mining rewards and transaction fees.
Within the Ethereum, ecosystem, the incentive is currently being migrated from mining rewards, to Proof-of-Stake rewards (Staking).
The staking fees available from networks using 'Proof-of-stake' consensus has given rise to 'Yield farming' activities.
The consensus layer is responsible for maintaining agreement on anything between a single data value and the state of an entire decentralised network.
Typically, on a popular decentralised network there may be hundreds of thousands of nodes that have to maintain agreement. Furthermore agreement has to be maintained when there is a fault on the network.
There are several different families of consensus mechanism, each with advantages and disadvantages,
There are several different types of consensus mechanism, each with advantages and disadvantages.
Common consensus mechanisms use algorithms such as Proof-of-Work and Proof-Of-Stake.
DLT/Blockchain networks have nodes that are connected using a topography that does not have a centralised node(s)..
Decentralised networks usually use a Peer-to-Peer protocol (P2P), which can survive points of failure, within the network.
In general, the nodes within the network layer have the properties of equality, autonomy and distribution.
The data layer provides the blockchain data structure and physical storage.
The blockchain data layer contains data blocks, Merkle trees, asymmetric encryption, and a blockchain of linked transactions.
Blocks are data structures which bundle sets of transactions to be distributed to all nodes on the network.
Transactions are stored as part of a Merkel tree structure, which creates an overall digital fingerprint.
Asymmetric encryption protects the transmission of blockchains across the network.
The blockchain consists of the transactions created by users, as linked together by storing the hash of the previous block, where each block stores the root hast of the Merkle tree where the actual transactions are stored.