CIA -1 

INTRODUCTION TO BLOCKCHAIN 

BY: 
YASH KHANDELWAL (20212666)  
                           LAKSHAY DABAS (20212630)
                           VISHAL KUMAR (20212665)
                            ISHIKA MISHRA(202126        

SUBMITTED TO 

Prof. TARUN KUMAR SINGHAL

SCHOOL OF MANAGEMENT 
2022-2023 
BLOCKCHAIN

Blockchain is a decentralized, distributed ledger that records transactions across

a network of computers. It allows for secure and transparent verification of
transactions without the need for a central authority.

It allows for secure, tamper-proof, and incorruptible storage of data without the
need for a central authority or intermediary. This makes it ideal for use in
financial transactions, supply chain management, and many other applications
where the security and transparency of data are important.

The technology uses cryptography to maintain the integrity of the stored data
and to ensure that once a block of information is added to the chain, it cannot be
altered. The most well-known example of a blockchain is the Bitcoin
blockchain, but the technology has since been adapted for other uses, such as
supply chain management and voting systems.
What are Blockchain layers ?
Blockchain technology can be broadly divided into three layers:

1) The application layer: This is the layer where end-users interact with the
blockchain and its applications. Examples include cryptocurrency
exchanges, wallet apps, and other applications that allow users to interact
with the blockchain.

2) The protocol or network layer: This is the layer that defines the rules and
protocols for how transactions are validated and added to the blockchain.
This layer is responsible for maintaining the integrity and security of the
blockchain network.

3) The consensus layer: This is the layer that ensures that the transactions
recorded on the blockchain are legitimate and secure. This is achieved
through a consensus mechanism, such as proof-of-work or proof-of-stake,
that allows multiple participants to agree on the state of the blockchain.

4) Network layer: This layer is responsible for maintaining the peer-to-peer

network and allowing communication between nodes on the network.

5) Data layer: This layer stores the data on the blockchain, such as transactions,
balances, and smart contract data.

Each layer is built upon the layer below it and helps to provide the overall
functionality and security of the blockchain system.
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DIFFERENCE

Layer 1 and Layer 2 refer to different layers in the blockchain technology

stack, with Layer 1 being the base or foundational layer and Layer 2 being built
on top of it. The main differences between these two layers are:

Scalability: Layer 1 blockchains are often limited in terms of scalability due to

their decentralized nature and the need to reach consensus among all nodes in
the network. Layer 2 solutions, on the other hand, aim to increase the scalability
of the underlying Layer 1 blockchain by offloading some of the computational
work to separate nodes or networks.

Security: Layer 1 blockchains are considered to be highly secure due to their

decentralized nature and the use of cryptographic algorithms to secure the data.
Layer 2 solutions may compromise security to some extent by relying on
centralized nodes or solutions to handle certain aspects of the network.

Functionality: Layer 1 blockchains provide the basic infrastructure for the

blockchain network, including the consensus mechanism, network
communication, and data storage. Layer 2 solutions add additional functionality
to the underlying Layer 1 blockchain, such as smart contracts, decentralized
exchanges, and payment channels.
IMPORTANCE OF LAYER 1
BLOCKCHAIN

Layer 1 blockchain is considered to be the foundation of the blockchain

technology stack, and it plays a critical role in ensuring the security and
decentralization of the blockchain network. The following are some of the key
reasons for the importance of Layer 1 blockchain:

Security: Layer 1 blockchains use cryptographic algorithms and decentralized

consensus mechanisms to secure the network and prevent any single entity from
controlling it. This makes Layer 1 blockchains highly resistant to hacks, fraud,
and censorship.

Decentralization: Layer 1 blockchains are decentralized, meaning that there is

no central authority or intermediary controlling the network. This ensures that
all participants have equal power and control over the network, which is crucial
for maintaining the trust and integrity of the blockchain.

Transparency: Layer 1 blockchains provide a transparent and open ledger of

transactions that can be viewed by anyone on the network. This transparency
helps to build trust in the blockchain and reduces the risk of fraud or
manipulation.

Immutability: Once data has been added to a Layer 1 blockchain, it cannot be

altered or deleted, providing a permanent and unalterable record of transactions.

In conclusion, Layer 1 blockchain is critical for the security, decentralization,

transparency, and immutability of the blockchain network, making it an
essential component of the blockchain technology stack.
CHARACTERSTICS
Layer 1 blockchain refers to the foundational layer of the blockchain technology
stack, which provides the basic infrastructure for the blockchain network. The
following are some of the key characteristics of Layer 1 blockchain:

1) Decentralized: Layer 1 blockchains are decentralized, meaning that there

is no central authority or intermediary controlling the network.

2) Secure: Layer 1 blockchains use cryptographic algorithms and consensus

mechanisms to ensure the security of the network and prevent any single
entity from controlling it.

3) Transparent: Layer 1 blockchains provide a transparent and open ledger

of transactions that can be viewed by anyone on the network.

4) Immutable: Once data has been added to a Layer 1 blockchain, it cannot

be altered or deleted, providing a permanent and unalterable record of
transactions.

5) Distributed: Layer 1 blockchains are distributed, meaning that the data is

stored across many different nodes in the network, reducing the risk of
data loss or corruption.

6) Consensus-based: Layer 1 blockchains use consensus mechanisms, such

as proof-of-work or proof-of-stake, to validate transactions and maintain
the integrity of the network.
CHALLENGES
Layer 1 blockchain is the foundational layer of the blockchain technology stack
and provides the basic infrastructure for the blockchain network. Despite its
many benefits, there are also some challenges associated with Layer 1
blockchain that limit its scalability and adoption. Some of these challenges
include:

Scalability: One of the biggest challenges of Layer 1 blockchain is scalability.

The decentralized nature of the network and the need to reach consensus among
all nodes can limit the number of transactions that can be processed in a given
time period.

Complexity: Layer 1 blockchains can be complex and difficult to understand,

especially for non-technical users. This can limit the adoption of the technology
and make it difficult to develop new applications and use cases.

Slow transaction times: Due to the need for consensus and the limited number
of transactions that can be processed in a given time period, Layer 1 blockchain
can have slow transaction times, especially for large or complex transactions.

High energy consumption: Some Layer 1 blockchain, such as Bitcoin, use

proof-of-work consensus mechanisms, which are energy-intensive and can
contribute to environmental concerns.

Interoperability: Layer 1 blockchain can be difficult to integrate with other

systems and technologies, which can limit their use in certain industries and
applications.

Cost: Running a node on a Layer 1 blockchain can be expensive, as it requires

significant computing resources and storage.