Understanding the Fundamentals of Blockchain Infrastructure

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Danny Soifer

Jordan Park

8 min read



Blockchain technology has become a major interest in countless industries over the recent years with major companies like Starbucks, KKR, supply chains, various sports leagues and so many others starting to get involved. Rather than a brand-new technology, blockchain technology should be viewed as an additional layer on top of the internet as we know it as today. This is why it is termed Web3 or the third generation of the Web.


The foundation of this technology is blockchain infrastructure, which includes the systems and technology needed to create, operate, and maintain blockchain networks. This infrastructure consists of hardware, software, and networking elements to ensure the seamless operation of the blockchain.


Blockchain infrastructure relies heavily on networking and cloud computing. That's why Nirvana Labs has built Nirvana Cloud, a cloud environment designed for optimal blockchain utilization and performance. This article will focus on the blockchain aspect of infrastructure, rather than conventional networking or cloud computing.



Key Elements of Blockchain Infrastructure


Blockchain infrastructure fundamentally relies on three main elements: 

  1.   The protocol - the network's constitution and rules.
  2.   The nodes - the executors of this protocol.
  3.   The network - everything put together plus the ledger which is the transaction history.



The Blockchain Protocol: The Rulebook


The blockchain protocol is like the rulebook of the blockchain network that is used to govern the blockchain network. This includes consensus algorithms for reaching agreement among network participants, reward structures for motivating behavior, and governance mechanisms for orderly network management.



Nodes: The Enforcers of Rules


The nodes serve as the operators of the blockchain network. Nodes can be individual computers, server farms, or just about anyone with compute, memory, and storage resources to run the necessary software for the specific blockchain. In order to participate in the network. Nodes install the blockchain protocol software, and sync all the data of previous blocks which is called the ledger. Once the node is synced up to the head of the chain, it can begin to verify and record transactions that will be logged in the blockchain ledger.


The blockchain network is created from the interactions between blockchain protocol, the nodes, and the series of transactions or blocks which are better known as a ledger. Each blockchain network has different protocols and node requirements, which make them all unique to each other.
Further Understanding Blockchain Layers



Understanding the Layers of Blockchain Infrastructure


There are currently three primary layers of blockchain infrastructure: 

  1.   Layer 1 (L1s) networks are the base fundamental layers that are not reliant on other networks. 
  2.   Layer 2 (L2s) networks are built on top of L1s to enhance throughput and are dependent on L1s. 
  3.   Layer 0 (L0s) networks are either interoperability ecosystems or cross chain communication protocols.



Layer 1: Fundamental Layers


A layer-1 (L1) blockchain refers to a blockchain where the underlying protocols and nodes are not dependent on any other blockchain network. Some popular examples of L1 blockchains include Bitcoin, Ethereum, BNB Chain, Avalanche, and many other popular blockchains.



Layer 2: Enhancers of Scalability


Layer 2 (L2s) solutions are built atop of Layer 1 blockchains and are typically designed to address scalability issues. These L2s facilitate off-chain processing of transactions, batch numerous transactions into one block and then post the results back to the L1.


Some of the most popular L2 solutions are Side-Chains, Zero-Knowledge Proofs (ZK), and Optimistic Rollups. These tools provide extra processing capabilities, relieving network congestion and enhancing the performance of the base blockchain.




A sidechain is a separate blockchain that runs in parallel to the main L1 chain and is connected by a two way bridge. While sidechains may look very similar to the L1, they have some very distinct features with the most important one being different security protocols. allowing for asset transfers between the two. It enables faster and more flexible protocol modifications without compromising the security or functionality of the main chain. The goal is to shift some workload from the main chain to the side chain, thereby increasing the overall network capacity and speeding up transactions.




Rollups bundle (or ’roll up’) hundreds of transactions into a single transaction onto an L1 blockchain. This distributes the L1 transaction fees across everyone in the rollup, making it cheaper for each user. Rollup transactions get executed outside of layer 1 but the transaction data gets posted to layer 1, which means rollups inherit the security of Ethereum. There are two different approaches to rollups, optimistic rollups, and zero-knowledge rollups. They differ primarily on how this transaction data is posted to L1.


Zero-Knowledge Proofs:


Zero-Knowledge Proofs (ZKPs) are encryption protocols that allow one party to prove to another that they know certain information without revealing any details about it. There are currently two types of Zero-Knowledge Proofs used in blockchain, namely zk-Snarks and zk-Starks.


Optimistic Rollups:


Optimistic rollups are considered “optimistic” because they assume off-chain transactions are valid and don't publish proofs of validity for transaction batches posted on-chain like ZK proofs do. Rather, Optimistic rollups rely on a fraud-proving mechanism to detect blocks where transactions were not calculated correctly.



Layer 0 Ecosystems: Interoperability Layers


Layer 0 refers to an infrastructure layer that enables interoperability and connectivity between various individual blockchains, ultimately allowing different blockchains to transfer data and assets across various blockchain networks. 


There are two main types of Layer 0 protocols: 

  1.   Layer 0 ecosystems.
  2.   Layer 0 communication protocols.


Layer 0 Ecosystems:


A Layer 0 ecosystem refers to an interconnected network of L1 blockchains that occupy different “zones” within a specific Layer 0 ecosystem. The two most popular examples of this type of Layer 0s are Cosmos and Polkadot. Both ecosystems have their own specifics of how they accomplish this, but they are similar due to the fact that they both share the same underlying security mechanisms or underlying infrastructure; the Inter-Blockchain Communication protocol for Cosmos, and the Polkadot Relay Chain for Polkadot.


Layer 0 Communication Protocols:


Layer 0 communication protocols refer to omni-chain interoperability protocols that permits users to move assets and data across networks that were not natively built on top of any shared security infrastructure like Layer 0 ecosystems are. The two most popular communication protocols are LayerZero and Axelar. While both solutions have different mechanisms on how they enable interoperability, it is done through a series of varied endpoints, gateways, and consensus mechanisms that rely on oracles or validators.



Different Permissions for Blockchain Infrastructure




Public blockchains are the most popular and are permissionless networks that anyone can utilize as long as they have an internet connection. They rely on a distributed set of nodes that anyone can run and are known for their transparency and lack of intermediaries, anyone can look up the ledger transaction history. An example of a public network is Ethereum.




Private blockchains are closed ecosystems that operate in a closed network. They are typically run by a single organization that wants to use the blockchain network for internal purposes. Private blockchains prioritize privacy and control, ensuring transaction and data visibility only to authorized participants. An example of a private network is MultiChain.




Consortium blockchains are a hybrid between public and private blockchains and are sometimes called Federated blockchain networks. They are controlled by a select group of entities, rather than one individual entity like a private blockchain. They combine features of decentralization and control, and are popular in industries that require collaboration and secure information sharing across participants. An example of a consortium network is Corda.


To conclude, understanding the basic elements and various types of blockchains is crucial for building a solid blockchain infrastructure. Each component plays a distinct role in maintaining the integrity, efficiency, and security of the overall network. This guide hopes to provide a knowledgeable basis for the construction and operation of your blockchain project.





In conclusion, the inherent complexities and immense potential of blockchain infrastructure make it a vital technology to comprehend. With the foundational elements comprising the blockchain protocol, nodes, and the network, we can create a robust and secure environment for transactions. The multiple layers in the blockchain ecosystem, namely Layer 1, Layer 2, and Layer 0, offer scalability, interoperability, and enhanced performance, essential for modern businesses to stay competitive in a digital economy.


The myriad types of blockchains, including public, consortium, and private, offer flexibility and control to cater to different industry needs, whether it's transparency, collaboration, or data privacy. With each variant providing unique advantages, the choice depends on the specific demands of your blockchain project.


As we navigate the future of Web3, it becomes evident that knowledge about the architecture and components of blockchain infrastructure is not just beneficial—it's crucial. Through a deeper understanding, organizations can harness the power of blockchain technology, ensuring a more secure, efficient, and interconnected digital world.


The pace of innovation within the blockchain infrastructure space is rapid, with new enhancements and optimizations continually emerging. To stay abreast of these developments, look to leaders like Nirvana Labs, who are at the forefront of blockchain solutions. As we delve deeper into the era of Web3, following Nirvana Labs will offer insights and updates on critical blockchain infrastructure topics, empowering you to leverage this revolutionary technology to its fullest potential.